Summary of Contractual Damages in English Law

Contractual damages in English law are designed to compensate the injured party for the loss incurred due to a breach of contract, ensuring they are put in the position they would have been if the contract had been performed.

Key Principles of Damages

Below are the key principes regarding the damages an injured party can claim for breach of contract.

Expectation Damages

These damages cover what the injured party expected to receive from the contract. The goal is to put them in the position they would have been in had the contract been performed as agreed.

Reliance Damages

These damages cover expenses incurred by the injured party in reliance on the contract being performed. They aim to restore the injured party to the position they were in before the contract was made.

Restitutionary Damages

These aim to prevent the breaching party from being unjustly enriched at the expense of the injured party.

Example: If a party pays in advance for a service that is not provided, they can recover the payment.

Liquidated Damages

Liquidated damages are pre-agreed sums specified in the contract, payable on breach. They must represent a genuine pre-estimate of loss and not be punitive. Any punitive clauses are likely to be regarded as “penalty clauses”, which are generally unenforceable.

Practical Considerations

Below are practical considerations when assessing damages.

Double recovery

The general rule is that Expectation Damages and Reliance Damage are mutually exclusive so as to prevent double recovery – in other words, you cannot claim both.

Mitigation

The injured party has a duty to mitigate their losses. They cannot claim for losses that could have been avoided with reasonable efforts.

Foreseeability

Damages that result from the breach must have been reasonably foreseeable at the time the contract was made, following the rule in Hadley v Baxendale.

Causation

 There must be a direct causal link between the breach and the loss incurred.

Conclusion

The above principles ensure that the calculation and awarding of damages in English contract law are fair and reflective of the actual loss suffered by the injured party. Understanding these elements helps parties involved in contracts to better navigate potential breaches and the resulting claims for damages.

If you require any assistance with a breach of contact claim, please do not hesitate to contact us.