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    104. Remedies for breach of contract

    A breach of contract occurs when one of the parties fails to comply with one or more of the conditions of the contract. Following a breach, the injured party can take action to seek remedy for the breach. The most common remedy for breach of contract is damages, i.e. financial compensation for any losses incurred. In some cases, it may also be possible to end the contract, i.e. rescission. In addition to these two main remedies, there are also equitable remedies such as specific performance and injunction.

    Damages.
    Damages are financial compensation awarded to the injured party, the precise amount is assessed by the court. This is the only remedy at common law, which means that they are available as of right. The general approach is to put the injured party in the same position they would have been if there had been no breach. Damages are intended to be compensatory, therefore a claimant may be awarded just nominal damages if the financial loss has been minimal. This is in contrast with the rather common American practice of awarding punitive damages, which explains the large sums often awarded.

    Traditionally, damages were only awarded for financial losses under a contract, however, in recent years the courts have also begun to award damages for non financial losses such as distress.

    To determine the sum to be awarded, the court will take into account the losses experienced by the claimant. The amount of loss is not always easy to estimate. The following can be involved:
    • Replacement cost - the cost of replacing the goods that should have been provided.
    • Cost of cure - the cost of putting something right
    • Loss of amenity - loss of enjoyment
    • Lost opportunity - speculative damages in case something may have happened
    • Reliance loss - sums spent in reliance of the other party fulfilling their obligations.

    Where the object of the contract is to provide pleasure or relaxation, non financial damages are recoverable. This generally apply to holidays and entertainment, however, it can also apply to loss of enjoyment or mental distress. Where the breach causes physical discomfort leading to mental suffering, damages are also recoverable.

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    Claiming damages

    To be awarded damages, a claimant must show:
    • that there was a breach of contract;
    • that the breach caused the loss;
    • that the loss was not too remote from the breach; and
    • that the claimant has done their best to mitigate their losses.

    Damages cannot be claimed in compensation for losses not caused by the breach of contract. The party in breach will only be liable for losses which would be reasonably foreseeable as a result of the breach. Any other losses would be regarded as too remote from the breach.

    The claimant is expected to keep their losses to a minimum and cannot claim for any losses that could reasonably have been avoided. The claimant must show that they have acted reasonably.

    Types of damages
    • Ordinary, general or compensatory damages. These are the damages assessed as arising from the breach.
    • Special damages apply to special losses that can be estimated as having been a consequence of the breach, such as loss of earning, travel expenses or damage to a specialist item.
    • Exemplary or punitive damages. Their main objective is to punish the offending party and are seldom awarded. When they are awarded is mostly in cases involving tort rather than breaches of contract.
    • Nominal damages. Awarded where the claimant has suffered minimal loss.
    • Contemptuous damages. Awarded when the court disagrees with the claimant's conduct and awards a very small sum.

    Liquidated and unliquidated damages
    • Liquidated damages are referred to as 'specified amount'. They apply when the amount of damages can be fixed, for example, a debt recovery claim. In some contracts, the amount of damages that has to be paid in the event of a breach has been predetermined. However, if the sum specified is not a true reflection of the expected losses, the court may regard it as a penalty or an attempt to gain an unfair advantage.
    • Unliquidated damages, referred to as 'unspecified amount'. They apply where the amount of damages is not specified within the contract itself and the level of damages cannot be quantified at the time of the claim. The court will decide how much damages are to be awarded.

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    Equitable remedies

    In addition to damages which are the normal remedy at common law, there are other remedies which can be awarded at the discretion of the court. Financial compensation is not always adequate, for example, you may want someone to do or stop doing something rather than paying you compensation. A person who does not comply with a court order for an equitable remedy is in contempt of court and may be imprisoned, as this is a criminal offence.

    The main equitable remedies are:

    Specific performance
    A court can order the performance of a contract, for example, if you bought an item that's unique in nature and the seller refused to hand it over to you, you may prefer it if the court ordered the seller to let you have the item rather than the money. Specific performance is at the discretion of the court and subject to the following:
    1. It will not be ordered where damages would be appropriate. In most sale of goods cases, it is considered sufficient to receive money to buy other goods rather than getting the actual goods. The exception is where the goods are unique, such as a work of art, a classic car or collectors item. It may also apply to the sale of land property.
    2. It will not be granted if it required constant supervision by the court to ensure compliance with the order.
    3. It is not usually available in contracts for personal services such as employment.
    4. It is subject to mutuality, i.e. if the order is available to one party it should also be available to the other.
    5. The party seeking the remedy must have conducted themselves properly.

    Injunction
    An injunction is a court order instructing someone to refrain from doing something. It is an equitable remedy granted at the court's discretion and will not be awarded if damages would be adequate. An injunction won't usually be granted if it would have the effect of forcing the performance of a contract for personal services.

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