A claim for damages is always available, as of right, to the claimant when a contractual term has been broken. This means that if the claimant has not suffered any loss the court must still make an award of damages, however in this case, the amount ordered to be paid would be nominal.
Equitable remedies may be awarded by the court where damages alone would not prove an adequate remedy and justice would not be served.
Therefore equitable remedies are at the discretion of the court. Even though there may be a breach of contract or a misrepresentation the court will only award an equitable remedy if it is fair in all circumstances for it to do so.
The purpose of damages in the law of contract
It is to put the injured party in the position they would have been in had the contract been completely performed by the defendant. The court is therefore looking forward to what should have happened.
Remoteness of damage
A breach of contract may have far - reaching consequences and the court has developed a rule to restrict the defendant's liability. As in Hadley v Baxendale, where it was held that a defendant would be liable for losses caused if the victim can satisfy the court of either of the following tests: (i) would a reasonable person foresee the loss as a consequence of the breach of contract (the objective test); or (ii) what potential losses were in the minds of the parties when the contract was made (the subjective test) .
The rules were considered and applied in Victoria Laundry v Newman Industries.The application of the two alternative tests of forseeability is at the time when the contract is made.What the reasonable person or the actual defendant may discover after the contract is made.is irrelevant.
Bases of assessment
Assessment may be classed under three types:
This approach attempts to put the victim in the position they would have been in had the contract been performed, as in Ruxley Electronics and Construction Ltd v Forsyth.
As a rare alternative to the expectation of basic loss, it is possible to claim compensation calculated on the expenses incurred by the victim before the breach, as in Anglia Television v Reed.
Repayment of money or other benefits passed to the defendant before the breach of contract, as in Stocznia Gdanska SA v Latvian Shippin Co.
Quantification of damages
The quantification of damages to be paid is closely related to the basis of assessment. Once the basis for assessment is decided then the quantification of damages may be obvious. However, in some situations the quantification of the loss is complicated or difficult. There are three examples:
On occasions a victim may suffer upset and distress caused by the breach if contract. In general, courts do not award compensation for injured feelings in contract cases, as in Addis v Gramophone Co. Ltd.
The courts have developed some exceptions to this rule, for example, if the contract is based on pleasure,relaxation and peace of mind, as in Hamilton Jones v David and Snape.
Loss of amenity
On some occasions a victim may have suffered a breach of contract but the expectation loss basis of assessment will produce an unfair or absurd result, as in Ruxley
Mitigation of loss
Once a breach has occurred the claimant is not allowed to sit back and allow the losses to increase. There is an obligation on the claimant to take reasonable steps to mitigate the losses. However if there is an anticipatory breach, then there is no duty to mitigate, as in White and Carter v Mcgregor.