Claims for Breach of Contract

A breach of contract usually results in damages. These are sought by the party that has been breached (the Claimant) to be put in the position he would have been in had the contract been performed correctly in accordance with the terms.

The Test

The main test for loss in contract is expectation loss – i.e. to put the injured party in the position he would have been in had the contract been performed satisfactorily (Robinson v Harman (1848) 1 Ex 850). However, in some cases the tests of ‘reliance loss’ or ‘restitutionary damages’ may be used.

What damages can be claimed?

Sometimes losses will be viewed as too remote to be recoverable, as there will not be a sufficiently strong casual connection between the breach and the loss suffered. Consideration must also be given to whether the claimant has failed to mitigate his loss or he may have suffered loss partly as a result of his own fault. Remoteness, causation, mitigation and contributory negligence are all factors by which damages may be limited or in some cases, significantly reduced.

Remoteness

The test of remoteness is set out in the case of Hadley v Baxendale (1854) 9 Ex 341. Under this test, the claimant will be able to recover:

Losses arising naturally, according to the normal course of things, from the breach of contract itself or such loss as may reasonably be supposed to have been in the contemplation of the parties at the time they made the contract, as a probable result of the breach.

The issues of remoteness and limitation on liability in damages were discussed in a recent House of Lords decision (Jackson v Royal Bank of Scotland [2005] UKHL 3). In this case, the court confirmed that for the purposes of the test in Hadley v Baxendale it is the date of making the contract and not the date of breach which is the relevant date for applying the test, because at the point of making the contract the parties have the opportunity to limit their liability in damages. If, when entering a contract, a party has set no limit on its liability in damages for breach of contract, there is no arbitrary limit that can be set to the amount of the damages once the test of remoteness according to one or other of the rules in Hadley v Baxendale has been satisfied and the only limit to its liability come when the question whether any loss has been sustained has become too speculative to permit the making of any award of damages.

If you have any issues relating to a breach of Contract then get in touch with a member of our Commercial or Litigation team who will be happy to advise.

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