Remedies

A contract is formed when two or more parties enter into the agreement. All the parties in
the contract will be bind. The action that amount to the breach of contract is when the party
failed to carry out what they have been promise to do in a contract. If the contract breached,
there are three types of remedy which are common law remedy, equitable remedy and the
agreed remedy that available to the innocent party. When a contract breached by the guilty
party, you may be able claim compensation for your damages and ‘affirm’ the contract
according to the common law remedy. The restitution is by the damages alone when there is
a breach of a warranty in the contract.

The aim of the common law remedy is to compensate the loss of the innocent party which
suffered the damages when the contract is breached. There are two aspects that related to
the damages which are expectation measure and the reliance measure. For expectation
measure the compensate coverage is based on the promisee expectation from the contract
that are welly perform. Promisee may claims compensation for the expectation loss from the
act of breach of contract by the guilty party which cause the result deviated. In Bunge v Nidera,
the common law remedy compensatory principle has been affirmed. While in Robinson v
Harman, Robinson manage to recover damages for the loss of bargain and expenses incurred
from the contract. When a party does not hold the full title of a good but still agree to lease
the good in full knowledge, this is triggered point that may allow the other party in the
contract to recover damages under the situation of the contract is well perform. For reliance
measure, the focus is on the promise position before enter into the contract. The damages
eligible to recover under this remedy is based on the actual expenses incurred. From the
Anglia TV v Reed case, only the reliance expenses can be recovered but not the loss of profit
to avoid the possible of double compensation for the same loss. When the common law
remedy is not suitable for the case, the equitable remedy might take into consideration by the
court the court. The equitable remedy is regard to performance, rescission, injunctions,
restitutions and quantum meruit.

For the damages that don’t have the monetary value is very hard to quantify which is the non-
pecuniary loss such as mental distress, impairment of life and others. Non pecuniary loss are
not recoverable under normal circumstances but there is exception as well. Unnecessary
litigation is not encouraging to avoid offering excessive compensation as the main policy
consideration for this of kind loss is to provide fair compensation. In the commercial contract,
the claim for non-pecuniary loss such as mental distress will be rejected. For an example in
Addis v Gramophone, dismissal and loss of reputation damages is unable recovered while the
claimant can only claim for the salary and commission. For some exceptional cases, injury to
feeling and loss of amenity will be compensated depends on the situation. In Moorjani v
Durban Estates, the claimant compensated for the loss of amenity from the lease as the court
held that the owner act of breach is adequate for the cause.

There are other cases of non-pecuniary loss that also will be compensated such as contract
that involve with pleasure, relaxation and peace of mind. In Jarvis v Swan Tours, Jarvis brought
a claim on the holiday company that breach the contract and caused him failed to get the
provision of enjoyment from the company. Since Jarvis already utilised some of the benefits
as the result the judge only awards the half price compensation to him. However, he makes
an appeal about the compensation decision. At the end, the compensation amount is higher
than the initial amount as the court held that the disappointment damage must be
compensated as well as giving back the money alone is not enough. The same principle also
applies in Jackson v Horizon case. In Heywood v Weller, claimant is entitled to recover for the
mental distress after suffered from further harassment as the defendant failed to obey the
injunction. On the other hand in Hayes v Dodd case, the court held if the intention of entering
a contract is to make commercial gain then non pecuniary loss damages will not be awarded
unless the purpose is for achieving freedom from mental distress. The loss of amenity issue
was further discussed in Farley v Skinner, the court held that Farley was allowed to recover
from the distress and inconvenience for 10000 pound. In short, the question of the amenity
was sufficient to form an important part of the contract as the recovery of non-pecuniary loss
was not restricted to physical discomfort.

Next, pecuniary losses contain monetary value so can be easily measure and the focus point
is to compensate the financial loss. Pecuniary losses include physical harm such as asset losses
and economic injury. Remoteness of damage require claimant to show the loss must be
foreseeable arise from the defendant breach of contract. If a claimant able to prove that the
defendant has breach the contract and cause damages. The damages show by the claimant
must not too remoteness in order to be fair for defendant to make compensation. This rule
was from the case Hadley v Baxendale. The court set out two limbs test where the defendant
will be liable to compensate to the claimant if they breach the contract and causing losses.
Under the first limb, the cause of loss is ‘according to the usual of thing’ from the breach.
Second limb, the loss ‘ as may be reasonably be supposed to have been in the contemplation
of the parties at the time when they made the contract, as the probable result of the breach
of it’. The recovery of loss for first limb is about foreseeable in advance what likely to happen
if breach occur. While in second limb, the loss can only be recovered if the circumstances are
known when the contract is make. In practice, the second limb test found to be most
important in subsequent cases. At the end, the claimant lost of profit doesn’t fit any of the
limbs test. As the mill not able to operate without the equipment so the loss incurred could
not considered in first limb. The claimant also failed to inform the defendant that the mill
could not work without the shaft which cause it not fit the second limb condition. Therefore,
to avoid the loss being too remoteness it is important to inform the contracting party about
the circumstance at time of contracting.

The same principle also applies in Victoria Laundry v Newman. Where the claimant could only
recover losses under the reasonable contemplation of the parties which included is the loss
of profit that foreseeable from the lack of use of the boiler. However, the claimant failed to
recover the loss of the exceptionally lucrative contract since the contract unknown to the
defendant. In Heron II, second limb conditionally can be considered if the reasonable
contemplation of the parties as a possible result of breach. The degree of probability of that
loss arising is not required as the market prices fluctuation is known to the defendant and the
loss would have been in his contemplation if there is a breach of contract. If there is
reasonable action can be taken by the claimant to reduce the losses, then claimant cannot do
nothing and expect for whole amount compensation. Claimant cannot recover for the loss if
they didn’t do their due diligent to mitigate the risk when they can do so. In British
Westinghouse Electric v Underground Electric, the claimant taken the reasonable step to
replace the original turbine with the new turbine to avoid losses. Therefore, the claimant can
only recover the loss for the duration of time when the original turbine is use while the cost
arises from taking reasonable step are not recoverable.

Normally, the liquidated damage will be specified in the commercial contract which is the
amount of damages to be paid by each party in the event of breach. This amount of damages
represents the genuine attempt of both parties try to work out what the loss would be in the
event of the breach. Liquidated damage allowed both parties clear about their liability amount
to and to plan accordingly. The court will allow the claimant to recover the liquidated damage
without proof of actual loss, even if the actual is more or less than the amount stated in the
contract.

If the amount of the liquidated damage specified in the contract is designed to threaten or
penalize a party from breaching the contract is considered as penalty clause. Under the
common law, penalty clause is invalid and the amount of damage to be awarded will be
determining by the ordinary principle. If there is a big difference between the amount of
damages set out in the contract and the amount of damages likely to be suffered, then the
pre estimated damages will be considered to be unreasonable. Thus, when the parties have
comparable bargaining power in the commercial contract, the court reluctant to refer to the
agreed amount of damages to a penalty clause in the commercial contract. Cavendish Square
v Makdessi is the leading case for this. Initially, the Supreme Court held that the rules and
principles of English Law would not be restricted or abolished in this case which cause the
penalty clause to be unenforceable. A landmark judgment was given by the Supreme Court
which amended the test to determine whether the penalty clause was enforceable or not
under the given circumstances. The test assessing the contract obligation is primary or
secondary considerations, the penalty clause able to enforce by the innocent party with the
basis of a secondary obligations. According to Supreme Court after reviewing the fact, the
clauses in Makdessi were not penalties and enforceable by the claimant. According to their
Lordships in ParkingEye, the charge for overstaying was not a penalty and again was
enforceable. In Dunlop Pneumatic Tyre v New Garage, Lord Dunedin found that the damages
in the contract would considered as panel damages if the sum set out was extravagantly
greater than any possible loss might incurred from the breach.