Breach of contract: what are my remedies?
2 April 2020 updated 1 Sept 2021
Dispute Resolution & Litigation
It is almost inevitable, when changes in circumstances arise as suddenly and unpredictably as they have done over this last year or so, that contractual arrangements reached between parties may come under strain.
There has been a lot of consideration recently about force majeure clauses in contracts and the common law doctrine of frustration. However, both these recourses are likely to be limited. Many contracts do not have force majeure clauses and those that do may have a restricted definition of what constitutes a force majeure event. The common law doctrine of frustration only applies in limited circumstances where the performance of a contract is rendered impossible or impractical. The old authorities of Krell -v- Henry  2 KB 740 and Steamboat co. -v- Hutton  2 KB 683 are still worth a read in this regard.
If the above principles cannot be applied, an injured party will have various remedies available arising from the breach of contract. The most common of these is damages. Some key points to remember if you are in this unfortunate position are set out below.
Damages are aimed at putting the injured party in the financial position they would have been had the contract been fulfilled. If you are an injured party in such a position it is important to seek early legal advice. It is very important, in particular:
- To be aware that seeking a remedy in damages is designed to put an injured party in the financial position, so far as possible, as it would have been had the contract been fulfilled. The court will not award damages that would unjustly enrich a plaintiff. Damages are almost always compensatory in nature as opposed to punitive. In many scenarios, therefore, a successful damages claim may have the effect of securing reimbursement of monies already expended by the plaintiff as a result of a breach of contract. There is unlikely, therefore, to be a “windfall” paid to a plaintiff at the end of a case.
- Ensure a record of all losses has been maintained (such as invoices, receipts and diary entries). It is perhaps unsurprising that, when faced with stressful circumstances and the need to act quickly, records retained by an injured party which prove the loss sustained can often be less than ideal.
- Take steps to mitigate the losses sustained. A well-established principle of contract law is the duty to mitigate. In simple terms, this means that the injured party cannot just point to a breach of contract, sit idly by, and allow the damage caused to increase exponentially, with the expectation of bringing a damages claim down the line and being awarded a significant sum. It will, rather, be expected by the Court that the injured party will have taken all reasonable steps to reduce the extent of his loss.
- To communicate promptly with the party in breach. Damages claims in the County Court and High Court can, in normal circumstances, take some time before reaching final hearing. In the present circumstances, it may take even longer than usual. It is therefore important that an injured party, either themselves or through solicitors, promptly communicate details of the alleged breach and the extent of damages sustained to the party in breach. The Court rules and pre-action protocols introduced by many courts emphasise the need for prompt pre-action engagement. It is also, however, important to set out the issues clearly at any early stage to avoid any suggestion that an injured party has, for instance, affirmed or acquiesced to a breach. In many cases, early discussion between parties and their advisers can lead to a less costly and more satisfactory solution for all involved.
- Remember to consider the big picture. The current crisis will have put a lot of organisations and individuals under strain. Pursing formal legal proceedings to conclusion can be time consuming, stressful and expensive. It is always important to consider whether a defendant will have the means to satisfy a judgement at the end of it all. For this reason, an approach to breaches of contract needs to be carefully considered and all avenues explored.
If you or your business is affected by any of these issues or require assistance, please contact Jonathan Jackson in the Dispute Resolution & Litigation team at MKB Law