UNIVERSITY OF LUSAKA

SCHOOL OF LAW
UNIT 21: LEGAL REMEDIES FOR
BREACH OF CONTRACT
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 Introduction
• If a party to a contract fails to perform his
contractual obligations, the courts, at the request
of the aggrieved or injured party, will impose
conditions upon the defaulting party.
• These conditions are aimed not at punishing the
party in default but to provide a remedy for the
injured party.
• In this respect, therefore, the law of contract is
quite unlike criminal law, as remedies are
designed to compensate, and not to penalize.
 Introduction
• The remedies that are available for the break of
contract fall into two groups namely common
law remedies, and equitable remedies.
• The common law remedies are
• (1) Repudiation of the contract
• (2)Action for the price or agreed sum
• (3) Quantum meruit
• (4) Damages
• The equitable remedies are specific performance,
Rescission and injunction.
 (1) Repudiation of the contract
• Where there has been anticipatory breach or breach
of a vital condition of the contract, the injured party
has the option of repudiating the contract that is
treating it as ended or terminated.
• The injured party has however the right to decide not
to exercise this option, as was the case in White and
Carter (councils) Ltd V. McGregor, discussed earlier.
• Where the injured party opts to repudiate the contract
he will do nothing further on the contract. Besides he
will escape from all further contractual obligations and
in addition will sue for damages.
(2)Action for the price or agreed sum
• If one party has performed his contractual obligations and the
other party’s breach consists of a failure to pay the contractual
price or other agreed sum, the performing party can claim this
agreed (liquidated) sum rather than damages.
• For example, in relation to an action for the price in a contract for
the sale of goods, section 49 (1) of the sale of goods Act provides:
• “Where, under a contract of sale, the property in the goods has
passed to the buyer, and the buyer wrongfully neglects to pay for
the goods according to the terms of the contract, the seller may
maintain an action against him for the price of the goods.
• Since an action for an agreed sum is a liquidated claim, the
remoteness rules and duty to mitigate do not arise or apply.
 (3) Quantum meruit

• The common law provides a convenient remedy when the

injured party seeks, not a precise sum alleged to be due to
him, but a reasonable remuneration for services
rendered. He is then said to sue on a quantum meruit.
• Quantum Meruit is classified as a claim in quasi-contract.
• In some circumstances where there is no contract the law
seeks to achieve a just result by treating the person
concerned as if they had entered into a contract on the
appropriate terms.
• Quasi-contract relates only to the payment of money on
the ground that retention of certain funds would be
unjustified enrichment.
 (3) Quantum meruit
• The term ‘Quantum Meruit’ literally means ‘how
much it is worth’. It is a measure of the value of
contractual work, which has been performed.
• The aim of such an award is to restore the
plaintiff to the position he would have been in if
the contract had never been made. It is a
restitutory award.
• By contrast an award of damages aims to put
the injured party in the position he would have
been in if the contract had been performed. It is
a compensatory award.
 (3) Quantum meruit

• Quntum Meruit may be claimed in the following circumstances:

• (i) Where one party has already performed part of his contractual
obligations and the other party then repudiates the contract.
Provided the injured party elects to treat the contract as
terminated, he may claim a reasonable amount for the work
done.
• In De Bernardy V. Harding [1853], 8 Exch. 822, the defendant
proposed to erect and let seats to view the funeral of the Duke of
Wellington. He agreed that the plaintiff should advertise the seats
outside England and sell tickets, and that he should receive
commission on all the tickets thus sold. the plaintiff prepared
advertisements and paid printers, but, before he had sold any
tickets, the defendant wrongfully revoked his authority.
• It was held that the plaintiff could sue in quantum meruit for the
work already done
 (3) Quantum meruit

• (ii) Where the claimant or injured party is prevented

from completing his side of the bargain by the other
party’s conduct and repudiation. The claimant may have
done a lot of work, but not yet earned or received any
fee. He may be entitled to claim on a quantum meruit
basis for what he has done.
• In Panché V. Coldurn [1824-34] ALL ER Rep 9481, the
plaintiff was commissioned by the publisher, defendants, to
write a book on customes and armour for £100. After he
had done the necessary research and written part of the
book, the publisher repudiated the contract.
• It was held that the plaintiff was entitled to £50 as
reasonable remuneration on a quantum meruit basis.
 (3) Quantum meruit

• (iii) Where work done has been done under a void contract. The
injured party cannot recover damages for breach, because no
contract exists, but he may recover on a quantum meruit basis.
• In Craven Ellis V. Canons Ltd [1936] 2 K.B.403, the plaintiff was
appointed managing director of a company by an agreement under
the companies seal which provided for his remuneration. By the
articles of association each director was required to obtain certain
qualification scores within two months of his appointment. Neither
the plaintiff nor the other directors ever obtained these scores. The
plaintiff none the less, purporting to act under the agreement
rendered services for the company and sued for the five specified in
the agreement , or alternatively, for a reasonable remuneration on
quantum recruit.
 (3) Quantum meruit

• It was held that the agreement was void, since the persons purporting to act as
directors had no authority and could not bind the company. The claim in
contract must therefore fail. But, as services had in fact been rendered whereby
the company had benefited, the alternative claim on the quantum meruit could
succeed.
• Likewise, In British Steel Corporation V. Cleveland Bridge & Engineering Co Ltd
[1984] ALL ER 504, the plaintiff supplied steel to the defendants while still
negotiating terms of the contract. Negotiations failed and there was, therefore, no
contract. It was held that as the parties had not reached agreement it was
impossible to say what the material terms were. Consequently there was no
formal contract. Since there was no contract, the work performed under the letter
of intent was not referable to any contractual terms as to payment and
performance. However, as the defendants had requested the plaintiffs to deliver
the steel, and therefore received a benefit at the expense of the plaintiffs, it would
be unjust for them to retain that benefit without recompensing the plaintiff for
the reasonable value of the steel. The plaintiff was, therefore, entitled to a
quantum meruit payment.
•  
 (4) Damages
• Damages are a common law remedy and are
primarily intended to restore the party to whom has
suffered loss to the same position he would have
been in if the contract had been performed or carried
out properly.
• Consequently, the injured party should not be
awarded damages when the result would be to put
him in a better financial position than would have been
the case if the contract had not been broken.
• Thus the injured party can never get more in damages
than the extent of his loss.
 (4) Damages
• In C & P Haulage V. Middleton [1983] 3 ALL ER 94: The court of appeal refused to
grant damages to an engineer, who was evicted from the business premises he
occupied before the contractual licence he held had expired. The reason for the
refusal was that the damages would make the engineer better off.
• The facts of the case were that C& P had granted Mr. Middleton, an engineer, a
six-month renewable licence to occupy a garage which he used to carry on his
business. Mr. Middleton spent some money equipping the premises, but the
terms of his agreement prevented him from removing such equipment at the end
of the licence. The parties quarreled and, as a result, Mr. Middleton was
unlawfully evicted from the garage 10 weeks before the end of a six-month
period. Mr. Middleton’s local council allowed him to use his own garage for more
than 10 weeks, which meant that he did not have to pay rent. He sued C& P
Haulage for the cost of equipping the premises.
• The court of appeal held that he was entitled to nominal damages only. The cost
of equipping the garage would have been lost even if the contract had been
carried out as agreed. It is not the function of the courts to put the injured party
in a better financial position than if the contract had been properly performed.
 Remoteness of Damages
• It is important to note the distinction between damage and
damages. Damage is the loss suffered a party, whilst damages are
the financial compensation awarded to the party.
• The consequences of a contractual breach can often extend well
beyond the immediate, obvious losses. For example, failure to
deliver goods may result in the buyer being unable to complete the
work on a particular job, which will in turn put him in breach with
the party who had contracted him to carry out the job. That party
may in turn suffer consequences, thus the original breach leads to a
chain of events which become increasingly remote from it.
• The courts take the view that it is unfair to make a party in default
responsible for damages caused as a result of circumstances of
which he was not aware. In other words the injured party cannot
be compensated for all the consequences that logically result from
the other party’s breach, other wise there might be no end to
liability. Some losses therefore will be too remote.
 Remoteness of Damages
• In Hadley V. Baxendale [1843-60] ALL R.R Rep 461: The plaintiff owned a
mill at Gloucester which came to a standstill because the main crankshaft
had broken. They made a contract with the defendant, a carrier, for the
transport of the broken shaft to the makers at green which to serve as a
pattern for making a new shaft. Delivering was to be made at Greenwich
the following day. Owing to neglect by the defendant delivering was
delayed and the mill was out of action for a longer period than would
have resulted if there had been resulted if there had been no delay. The
defendant did not know that the mill would be idle during the interval. He
was merely aware that he had to transport a broken millshaft from the
plaintiffs’ claimed for loss of profits of the mill during the period of delay.
• The court held that this loss was not recoverable as it was too remote.
The possible loss of profit was a circumstance of which the defendant
was unaware at the time of the contract. The result would have been
different however had the plaintiff expressly made the defendants
aware that this loss of profit was the probable result of a breach of
contract.
 Remoteness of Damages
• The court in Hadley V. Baxendale, laid down two tests,
which still form the basis of the rules covering remoteness
of damage.
• ALDERSON, B delivering the judgment of the court rule
governing remoteness of damage states “where two
parties have made a contract which one of them has
broken, the damages which the other party out to receive
in respect of such breach of contract should be such as
may fairly and reasonably be considered either arising
naturally, that is, according to the usual course of things,
from such breach of contract itself, or such as may
reasonably be supposed to have been in the
contemplation of both parties, at the time they made the
contract, as the payable result of the breach of it .”
 Remoteness of Damages
• The rule laid down in Hadley V. Baxendale has been applied to
many subsequent cases and is well settled.
• The following cases further illustrate the application of this rule.

• In Horne V. Midland Railway Co [1873] LR 8 C P 131: Horne had a

contract to manufacture boots for the French army at a price higher
than the normal market price, provide that he could deliver by a
certain date. The boots were consigned to the Railway Company,
which was informed of the importance of the delivery date but not
the special price. Delivery was delayed, the boots were rejected
and had to be sold else where at below the normal market price.
Horne only recovered the difference between his re-sale price and
normal market price. His claim for the difference between the
contract price and the price on re-sale failed, because the carriers
did not know of the original (higher) contract price.
 Remoteness of Damages
• Similarly, in Victoria Laundry (Windsor) Ltd V. Newman Industries
Ltd [1949] 2 K B 528, the defendants contracted to sell stated as
follows, at p. 539

• “In cases of breach of contract, the aggrieved party is only entitled

to recover such part of the loss actually resulting as was at the time
of the contract reasonably foreseeable as liable to result from the
breach. What was at the time reasonably so foreseeable depends
upon the knowledge then possessed by the parties or, at all events,
by the party who commits the breach. For this purpose knowledge
‘possessed’ is of two kinds; one imputed, the other actual.
Everyone, as a reasonable person, is taken to know the ‘ordinary
course of things’ and consequently what loss is liable to result from
a breach of contract in that ordinary course.
 Remoteness of Damages
• This is the subject-matter of the ‘first rule’ in Hadley V. Baxendale.
But to this knowledge, which a contract-breaker is assumed to
possess whether he actually possess it or not, there may to be
added in a particular case knowledge which he actually possesses
of special circumstances, outside the ‘ordinary course of things,’ of
such a kind that a breach in those special circumstances would be
liable a large boiler to the plaintiff ‘for immediate use’ in their
business of launderers and dyers. Owing to an accident in
dismantling the boiler at its previous site delivery was delayed for
five months. The defendants were aware of the nature of the
plaintiffs were most anxious to put the boiler into use in the
shortest possible space of time. The plaintiff claimed damages of
£16 per week for the loss of profit it would have made on the
planned expansion of the laundry business; and the damages of
£262 a week for the loss of profits it would have made on the
extremely lucrative dyeing contracts”.
 Remoteness of Damages
• It was held that the plaintiff was entitled to
recover damages for the loss of normal profits on
both cleaning and dyeing contracts, but it could
not recover loss of special profits for dyeing
contracts because the defendants had no
knowledge of the dyeing contracts and the
abnormal profits which they would yield.
• ASQUITH, L.J in delivering his judgment of the
court to cause more loss. Such a case attracts the
operation of a ‘second rule’ so as to make
additional loss also recoverable.’’
 Remoteness of Damages
• Also in Koufos V. C. Czarnikow Ltd, the Heron II [1969] 1 AC 350:
Charterers chartered a ship from the owners for the carriage of
sugar from Constanza to Bashrah. The shipowners new that the
charterers were sugar merchants and that there was a sugar
market at Barsrah but did not actually know that the charterers
intended to sell the sugar promptly on arrival at Basrah. In breach
of the charter party, the ship deviated from the voyage, so that
instead of arriving at Basra on 22 November. The market price of
sugar at Basrah had fallen in this period from £32.10 s per ton to
£31.2s 9d per ton.
• It was held that the charterers were entitled to recover the
difference price caused by delay. Knowledge was imputed to them
that it was likely that the sugar would be sold on arrival and that
market prices fluctuate.
 Measure of Damages

(a) LOSS OF EXPECTATION

 
• Once the cause for which the injured party may receive damages
has been established the issue to be then determined is the size of
those damages, that is, how to express the loss suffered in terms of
money. As already stated above contractual damages are awarded
to compensate for the injured party’s loss of expectation, that is,
what the inured party would have received had the contract been
properly performed.
• Thus in Robinson V. Harman [1848] 1 Exch 850, Parke B said, at p.
855: ‘the rule of the common law is, that where a party sustains a
loss by reason of a breach of contract, he is, so far as money can do
it, to be placed in the same situation, with respect to damages, as if
the contract had been performed.’
 Measure of Damages
• (i) Difference in value  
• One way in which expectation of loss may be measured is to
determine the difference in value between what the injured party
expected to receive and what he actually did receive. For example,
in relation to defective goods, the measure of the expectation of
loss will be the difference in value between the goods as promised
and the goods actually received. Similar examples are provided by
the sale of goods Act 1893 as regards damages for non-delivery
(section 51).
• Thus section 50 (3) of the sale of goods Act 1893 provides that
where there is an available market for the goods in question the
measure of damages is prima facie to be ascertained by the
difference between the contract price and the market or current
price at the time or times when they ought to have been accepted,
or, if no time was fixed for acceptance, then at the time of the
refusal to accept.
 Measure of Damages
• Furthermore, section 51 (3) of the sale of goods Act 1893 provides
that where there is an available market for the goods in question
the measure of damages is prima facie to be ascertained by the
difference between the contract price and the market or current
price of the goods at the time or times when they ought to have
been delivered, or, if no time was fixed, then at the time of refusal
to deliver.

• In Thompson (W.L.) Ltd V. Robinson (gun makers) Ltd [1955] Ch 177,

the defendant company refused to accept delivery of a ‘Vanguard’
motor car which they had contracted to buy from the plaintiffs,
who were motor dealers. The ‘Vanguard’ car was readily available.
Although the dealers took the car back, the plaintiff contended that
they were still entitled to the lost profit on the repudiated sale,
namely £61. The defendants, relying on section 50 (3) of the sale of
goods Act contended that the plaintiffs’ loss was only nominal.
 Measure of Damages
• It was held that there was no available market for the
goods within section 50 (3), as the supply of the
‘Vanguard’ model exceeded the demand, and therefore
the loss of the bargain meant a loss of profit. 

• In the words of UPJOHN, at p. 183: ‘A part altogether from

authority and statute it would seem to me on the facts
which I have to consider to be quite plain that the plaintiffs’
loss in this case is the loss of their bargain. They have sold
one Vanguard less than they otherwise would. The
plaintiffs, as the defendants must have known, are in the
business as dealers in Motor-cars and make their profit in
buying and selling motor-cars; what they have lost is their
profits on the sale of this Vanguard.”
 Measure of Damages
• This should however, be contrasted with Charter
V. Sullivan [1957] 1 ALL E. R 809.
• The defendant refused to accept delivery of a
‘Hillman Minx’ car that he had bought from the
plaintiff. The plaintiff claimed £97 as loss of
profits. The plaintiffs claim for the recovery of
loss of profits of £97 failed, because the demand
for Hillman Minx cars exceeded the supply. The
plaintiff could therefore sell every car that he
could obtain from the makers and had
accordingly not lost a scale.
 Measure of Damages
• (ii) Cost of cure
 
• Where the breach of contract consists of defective performance of
a building contract, the courts have sometimes based the award of
damages on the difference between the value of the building
contracted for and the defective building, and sometimes on the
cost of curving the defect.
• Thus in Ruxley Electronics & Construction Ltd V. Forsyth [1996] 1 AC
344: The defendant contracted with the plaintiff company for the
construction of an enclosed swimming pool in his garden. The
contract terms required that the pool should be 7ft 6 in at the deep
end, to allow for safe diving. When the pool was built, it was
discovered that the maximum depth was 6ft 9in and was only 6ft
under the diving board.
 Measure of Damages
• When the plaintiffs claimed the unpaid balance of the purchase
price, the defendant counter claimed for breach of contract. The
trial judge held that even though the pool was not as deep as the
one specified in the contract, it was still safe for diving, and that
there was no difference in value between the swimming pool
contracted for and that supplied. He refused to award the claimed
cost of cure damages of £21,560 so that the specified depth could
be achieved, which meant demolition the pool and build a new one
at the cost of £21,560. The judge was also not satisfied that the
defendant would construct a new pool. Instead the judge awarded
£2500 pounds for loss of amenity. The court of appeal reversed the
decision of the trail judge and awarded the defendant the full cost
of achieving a cure, that is, £21,560.
• The House of Lords reversed the decision of the court of appeal and
confirmed the award of £2,500 for loss of amenity by the trial
court.
 Measure of Damages
• Their Lordships took the view that if the cost of cure was
unreasonable, the measure of damages should be the difference in
value. Though then pool was probably no less valuable. The
defendant was entitled to some compensation for his loss of
satisfaction.
• Lord Jauncey stated as follows: 
• “….. Damages are designed to compensate for an established loss
and not to provide a gratuitous benefit to the aggrieved party, from
which it follows that the reasonableness of an award of damages is
to be linked directly to the loss sustained. If it is unreasonable in a
particular case to award the cost of reinstatement it must be
because the loss sustained does not extend to the need to
reinstate. A failure to achieve the precise contractual objective
does not necessarily result in the loss which is occasioned by a total
failure.”
 Measure of Damages
• Also, in Watts V Morrow [1991] WLR 1421, the
plaintiff purchased a country house for £177,500
in reliance of the defendant’s survey, in which he
stated that overall the dwelling house was sound,
stable and in good condition, although there
were minor defects.
• When the plaintiff took possession, they
discovered that there were substantial defects
not mentioned in the report which required
urgent repair, including renewal of the roof,
windows and floor boards.
 Measure of Damages
• The true value of the house at the date of the purchase was
therefore only £162,500, a difference in value of £15,000.
The plaintiff carried out the repair at a cost of nearly
£34,000 brought an action to recover those costs. At first
instance the cost of repair was awarded.
• It was held by the court of appeal that although it was
reasonable for the plaintiffs to retain the property and
carry out the repairs, the proper measure of damages was
the amount required to put the plaintiffs into the position
that they would have been in had the survey been carried
out properly and the true value of the house paid. If they
would be recovering damages for breach of warrant as to
the condition of the house when no such warrant had been
given.
 Measure of Damages
• (b) Reliance Loss 
• The injured party may claim for reliance loss (wasted expenses),
that is, the expenses incurred in preparing to perform or
performing the contract which have been wasted as a result of the
breach.
• Thus in Anglia Television Ltd V. Reed [1972] 1 QB 60: The
defendant, an American actor, contracted with the plaintiffs to play
the leading male role in a television play from 9 September to 11
October. On 3 September, the defendant repudiated. The plaintiff
could not get a substitute and abandoned the production. The
plaintiffs, instead of claiming the profit they would have made,
sued the defendant for damages of £2,750, being their total wasted
expenditure on the production. The defendant argued that they
could only recover the expenditure incurred after they made the
contract (£854).
 Measure of Damages
• In awarding £2,750, the court of appeal held
that since the plaintiffs had elected to claim
their wasted expenditure instead of loss of
profits, they could also recover pre-contract
expenditure as long as it was reasonably in
the contemplation of the parties as likely to be
wasted if the contract was broken.
 Measure of Damages
• Similarly, in Mc Rea V. Commonwealth Disposal Commission [1951]
84 CLR 377, the Commission invited tenders “for the purchase of an
oil tanker lying on Jourmaund Reef. The vessel is said to contain
oil.” The plaintiff’s tender of £285 was accepted. The plaintiff spent
money in fitting out a salvage expedition but there was no tanker at
the location.
• It was held that the Commission were in breach of contract since
they had promised that there was an oil tanker at the location
given. The amount that the plaintiff was entitled to recover was
£285, being the purchase price, and damages of £3,000 being the
cost of salvage expendition which was wasted in valiance on the
promise that the oil tanker was at the stated location. The salvage
expedition was within the reasonable contemplation of the parties.
However, since the commission had not promised to deliver any oil
or a tanker of any specialized size, the claim for the loss of profit on
the tanker and the oil was too speculative.
 Measure of Damages
• (c) Inconvenience and Annoyance 
• At one time damages could not be recovered for any non-
financial loss arising from the breach of the contract. In
some recent cases, however, damages have been
recovered for mental distress, inconvenience or
annoyance.
• Thus in Jarvis V. Swans Tours Ltd [1973] QB 233: the
plaintiff, a solicitor, paid for a two-week winter sports
holiday in Switzerland. The defendants’ brochure described
the holiday as a ‘House party’ and stated that the hotel had
its own ‘Alphutte Bar’ which would be open several
evenings a week. It was also stated that a welcome party,
afternoon tea and cakes, a fondue party and Yodeller
evening were included in the price.
 Measure of Damages
• The holiday was a considerable disappointment,
and in the second week the plaintiff was the only
guest in the hotel and no one could speak
English. The bar was only open evening and the
skiing did not correspond to the claims in the
brochure.
• It was held that the plaintiff was entitled to be
compensated for his disappointment and distress
at the loss of his holiday and the loss of the
facilities which had been promised in the
brochure.
 Measure of Damages
• Similarly, HEYWOOD v. WELLERS [1976] QB 446, the
plaintiff employed the defendant solicitors to secure a
method of preventing the plaintiff’s former male friend
from pestering her. The solicitors sought a non-Molestation
injunction but were negligent in making the application so
that the injunction was effective, and the plaintiff was
molested on three or four further occasions, causing her
mental distress and upset.
• The court of appeal awarded damages which included a
sum to compensate her for the anxiety and distress she had
suffered in consequence of the continued molestation,
since this was a direct and foreseeable consequence of the
solicitor’s failure to obtain the relief which it was the very
purpose of the contract to secure.
 Measure of Damages
• Also in Perry V. Sidney Philips & Sons [1982] 1
WLR 1297: The plaintiff purchased a house in
reliance on a survey report prepared by the
defendants. This stated that the house was in
good order. After moving in the plaintiff
discovered that the roof leaked and was in poor
condition, and that the septic tank was inefficient
and caused a nuisance by its smell. The court of
appeal awarded damages for discomfort caused
by the repairs since this was foreseeable.
 Measure of Damages
 
• (d) Contributory Negligence

• Where a person fails to perform the ‘duty’ to mitigate,

his damages are reduced because it can be argued that
he is at fault in failing to avoid loss. He may also be at
fault in the sense actually helping to bring about the
loss or the event causing it. In the law of tort, such
conduct is called contributory negligence. The law
Reform (Miscellaneous provisions) Act chapter 74 of
the laws of Zambia provides for the apportionment of
liability in case of contributory negligence.
 Measure of Damages
• Section 10 of the Law Reform (miscellaneous
provision) Act provides:
• ‘Where any person suffers damages as the result of
party of his own fault and party of his own fault and
partly of the fault of any other person or persons, a
claim in respect of that damage shall not be defeated
by reason of the fault of the person suffering the
damage, but the damages recoverable in respect
thereof shall be reduced to such extent as the court
thinks just and equitable having regard to the
claimant’s share in the responsibility of the damage….”
 Measure of Damages
• In Barclays Bank plc V. Fairclough building ltd [1955] QB
214: The defendant contractor was in breach of a contract
to clean roofs containing asbestos, in that it had failed to
execute the work in an expeditious, efficient and
workmanlike manner and had failed to comply with
statutory requirements relating to asbestos. The
defendants argued that the plaintiff had failed to supervise
the work and therefore damages should be reduced for this
contributory negligence under the 1945 act.
• It was held that contributory negligence was held not a
defence to claim for damages based on a breach of a strict
contractual obligation, even where the defendant might
have also had a parallel liability in tort.
 Mitigation of Damages
• The law imposes a duty on the injured party to take all reasonable
steps to mitigate the loss caused by the breach of contract, and
prevents him from claiming compensation for any part of the
damage which, may arise due to his negligence.
• Thus in Brace V. Calder [1895] 2 QB 253: The defendants, a
partnership of comprising of four members, agreed to employ the
plaintiff as manager of a branch of the business for two years, five
months two of the partnership was dissolved by the retirement of
two of the members, and the business was transferred to the other
two, who offered to employ the plaintiff on the same terms. He
rejected the offer and sued for breach of contract and claimed as
damages the salary for the remainder of the two year contract
period.
 Mitigation of Damages
• It was held that the plaintiff was entitled to nominal damages only
because it was his duty to mitigate his loss which he could easily
have done by accepting re-employment.
• Similarly, in Darbishire V. Warran [1963] 1 WLR 1067, the plaintiff
owned a car of which he was particularly proud. Though it was old
he maintained it in excellent condition. It had a market value of
about £85. The car was damaged by the defendant’s negligence and
the plaintiff was advised it would cost him £192 to get it repaired.
The plaintiff went ahead with repairs and claimed £192 from the
defendant, less the money he had received from his insurance
company, and plus the cost of hiring a car while the repairs were
carried out. The plaintiffs claim failed.
• It was held that the expenditure on repairs was not justified as the
plaintiff should have mitigated his loss by buying a replacement
vehicle on the open market.
 Mitigation of Damages
• Whether the plaintiff has failed to take reasonable steps to mitigate
the loss in question of the fact dependant upon the particular
circumstances of each case, and the burden of proving such failure
rests upon the defendant.
• In Payzu Ltd V. Saunders [1919] 2 K.B. 581, the parties had entered
into a contract for the supply of goods to be delivered and paid for
by instalments. The plaintiffs failed to pay for the first instalment
when due, one month after delivery. The defendant declined to
make further deliveries unless the plaintiffs paid cash in advance
with their orders. The plaintiffs refused to accept delivery on those
terms. The price of the goods rose, and they sued for breach of
contract. It was held in the first place that the seller liable in
damages, since the circumstances did not warrant his repudiation
of the contract.
 Mitigation of Damages
• On the other hand, it was held that plaintiffs should
have mitigated their loss by accepting the seller’s offer
of delivery against cash payment, and that the
damages recoverable were not to be measured by the
difference between the contract and market price, but
by the loss that plaintiff would have suffered if they
had paid cash and acquired the goods at the contract
price, that is, the loss of one month’s credit which had
originally applied under the contract. The court also
held that the question of whether the steps were
reasonable was a question of fact in each case.
 LIQUIDATED DAMAGES AND
PENALTIES
• Often, parties to the contract may agree beforehand what amount
or sum should be paid by way of damages in the event of breach of
the contract. For example, in the construction contract, parties may
provide that failure to complete a construction job on time will lead
to claim for damages of K50,000.00 per day.
• An amount fixed in this manner falls into one of two classes.
• Firstly the amount may be a genuine pre-estimate of the loss likely
to be caused to or suffered by one party if the contract is broken by
the other party. In this case it is called ‘liquidated damages’ and it
constitutes the amount, no more or less, that the plaintiff is entitled
to recover in the event of the breach without being required to
prove actual damage.
 LIQUIDATED DAMAGES AND
PENALTIES
• Secondly, the amount may be in the nature of a threat held
over the other party in terrorem (to frighten the other
party)-a security to the promisee that the contract will be
performed. A sum of this nature is called a ‘penalty’, and is
designed to compel the other party to perform the
contract.
• Liquidated damages are enforceable, and penalty clauses
are not enforceable beyond the amount of the injured
party’s actual loss. Thus the party who brings an action for
the enforcement of the penalty can recover compensation
only for the damage that he in fact suffered, and as such he
is not entitled to recover the amount stated in the contract
if he has not in fact suffered so much loss.
 LIQUIDATED DAMAGES AND PENALTIES

• Whether a particular sum is a liquidated damages or

penalty is a matter of construction and depends on the
intention of the parties.
• In Law V. Redditch Local Board [1892] 1 QB 127, at p.
132, Lopez J stated: “The distinction between penalties
and liquidated damages depends on the intention of
the parties to be gathered from the whole of the
contract. If the intention is to secure performance of
the contract by the imposition of a fine or penalty,
then the sum specified is a penalty; but if, on the other
hand, the intention is to asses the damages for breach
of the contract, it is liquidated damages.”
 LIQUIDATED DAMAGES AND PENALTIES

• In Dunlop Pneumatic Tyre Co Ltd V. New garage and

Motor Co Ltd [1915] A.C. 79, the appellants,
manufacturers of motor tyres, supplied goods to the
respondents under a contract which provided that the
respondents would not sell tyres at less than the
appellants list price. It was further provided that if the
respondent sold a tyre in breach of this agreement
they would pay £5.
• It was held that since the sum was not extravagant, it
was a genuine attempt by the parties to estimate the
damage which price undercutting would cause the
appellants. The £5 would be regarded as liquidated
damages and not as a penalty.
 LIQUIDATED DAMAGES AND PENALTIES

• Lord Dunedin, at p. 86, laid down certain rules for guidance

in the determination of whether an agreed or stipulated
sum is liquidated damages or a penalty.
• (i) The stipulated sum is a penalty if it is extravagant and
unconscionable in amount in comparison with the greatest
loss that could possibly follow from the breach.
• (ii) If the obligation of the promise or under the contract is
to pay a certain sum of money, and it is agreed that he fails
to do so he shall pay a larger sum, this larger sum is a
penalty. The reason is that, since damage arising from
breach is capable of exact definition, the fixing of a large
sum cannot be a pre-estimate of the probable damage.
 LIQUIDATED DAMAGES AND PENALTIES

• (iii) If a single lump sum is made payable upon

the occurrence of one or more or all of several
events, some of which may occasion serious and
others mere trifling damage, there is a
presumption that it is a penalty.
• (iv) Where a precise pre-estimate of the
consequence of the breach is impossible the
court may regard the lump sum as a genuine pre-
estimate, and thus a liquidation damages.
•  
 LIQUIDATED DAMAGES AND PENALTIES

• In Kemble V. Farren [1829] 6 Bing 141, an

actors contract provided that if either he or
the theatre management broke their contract
then the party in breach must pay the other
£1,000 as ‘liquidated damages’.
• This was held to be a penalty clause because it
was disproportionate both to the actor’s daily
fee of £3 6s 8d, and the greatest possible loss
that would result from the breach.
 LIQUIDATED DAMAGES AND PENALTIES

• Similarly, in Ford Motors Co. (England) Ltd V.

Armstrong (1915) 31 T.L.R. 267, a dealer, the
defendant, agreed to sell the plaintiffs motorcars
and, in the event of his selling any car or parts
below list price, to pay £250 for every breach of
such undertaking such sum being the agreed
damages which the manufacturer will sustain.
• It was held that the sum of £250 was a penalty
and not liquidated damages.
 Unlimited Damages
• Unlimited damages are the damages that
are/which are not agreed upon by the parties,
but are assessed by the court.
 EQUITABLE REMEDIES
• Equitable remedies are those remedies, which
are granted at the discretion of the court.
• The following remedies are equitable
remedies :
• (1) Injunction
• (2) Specific Performance
• (3) Rescission
 (1) Injunction

• An injunction is a court order preventing a person from

doing something. It may either be a mandatory or
prohibitive injunction.
• A mandatory injunction is one that orders a person to
undo a breach of contract, for example, an order to
reinstate a dismissed employee.
• A prohibitive injunction, on the other hand, is an order
of the court restraining a person from doing what he
promised not to do. For example, an order against an
ex employee of the plaintiff, not to divulge to the
plaintiff’s business competitor’s confidential business
information or trade secrets belonging to the plaintiff.
 (2) Specific Performance
• Instead of or in addition to claiming damages, the
injured party may ask the court for an order of specific
performance.
• Specific performance is a specific relief, where the
court directs the party in breach to carry out his
promise according to the terms of the contract.
• An order for specific performance is available only at
the discretion of the court.
• It is normally granted only in cases where damages are
not a suitable remedy or not an adequate relief. For
example, contracts for sale of land.
 (3) Rescission

• Rescission may be defined to mean the putting to

an end of a contract. In the context of breach of
contract, it can be said to be the refusal of
further performance of a broken contract.
• The injured party may regard the total breach of
contract as a discharge of the contract and refuse
to do anything under it.
• He may therefore sue to treat the contract as
rescinded so that he is absolved from all of his
obligations under the contract, and also seek
damages for any loss suffered.
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