Contracts form the basis for many transactions for both businesses and individuals. If you are a party to a contract, you have the right to expect the other side to comply with the agreement you have made. This could be providing goods or services, carrying out work to an acceptable standard or complying with the terms of the contract, such as taking a particular action by a specific deadline.
Where a contract has been breached, you may be entitled to certain remedies. We take a look at the different ways in which a contract can be breached and the remedies that may be available to you.
Summary
This article covers:
- Minor Breach of Contract
- Major Breach of Contract
- What are Remedies for Breach of Contract?
- Anticipatory Breach of Contract in the UK
- Legal Principles Governing Remedies for Contract Breaches
- How Our Breach of Contract Solicitors Can Help
- FAQ
A Minor Breach of Contract
A minor breach of a contract occurs when the breach is not significant or is only a partial breach of the terms you have agreed to. An example is where a part of a product is substituted, but the product as a whole is just as effective.
A Material Breach of Contract
A material breach of a contract is more serious and will have an effect on the item or service that is being supplied, to the extent that you would not have entered into the contract had you known from the start that this is what you were to receive. For example, a lower-quality product might be supplied to you, or an inexperienced person might provide the service when you have paid for someone with a higher level of experience.
What are Remedies for Breach of Contract?
When a contract is breached, causing loss to one of the parties, that party can ask the court for a remedy. One of the main options is damages, which is usually a sum of money that aims to put the party in the financial position they would have been in, but for the breach.
Other remedies are also available, depending on the nature of the contract and the breach, as follows:
| Remedy | Outcome | When Used | Limitations |
| Damages | Monetary | Most breaches | Loss must be proven |
| Specific Performance | An order to carry out the contract | Land, unique goods | Not always suitable and in the Court’s discretion |
| Injunction | An order requiring one party to stop or take a particular action | When restrictive covenants are breached | Rarely used |
| Rescission | The contract is cancelled | Misrepresentation/ fundamental breach | Restitution needed |
Damages
The courts’ aim in awarding damages is to put the parties in the position they would have been in, had the breach not occurred. You will need to provide evidence of the losses you have sustained, which could be financial losses, such as a loss of profits, as well as non-quantifiable losses, such as damage to your reputation.
You will need to prove that the losses were caused by the breach of contract. This is referred to as causation. You also have a responsibility to mitigate your losses wherever reasonable. For example, if a part was not supplied to you, you could reasonably be expected to try and source it elsewhere.
Different types of damages are available, depending on the circumstances of the case, as follows:
- Compensatory Damages: Aims to put the claimant in the financial position they would have been in if the contract had not been breached
- Consequential/Special Damages: Payment for losses beyond the direct financial loss, for issues such as loss of profits or loss of amenity
- Nominal Damages: An inconsequential sum, acknowledging that the claimant has won their case; this option can allow a costs order against the defaulting party
- Liquidated Damages and Penalty Clauses: Financial sums set out in the contract to be paid in certain situations, for example, breach of contract owing to late delivery; penalty clauses may not be enforceable if the penalty is excessive
- Restitution Damages: Stripping the defendant of any benefits they may have gained due to the breach of contract
- Aggravated Damages: Compensation for emotional distress or injury to feelings
- Exemplary Damages: A payment intended to punish the defaulting party and deter others from carrying out similar breaches
Specific Performance
In some cases, the court can be asked to make an order for specific performance. This is an order requiring the other party to carry out their obligations under the contract.
This option is not commonly used, as the courts are reluctant to insist that a party carry out a particular action; however, it can be useful when financial compensation would be inadequate, for example, where the case involves property or unique goods, such as art. An order for specific performance could require one party to transfer ownership to the other in accordance with the terms of the contract.
Injunctions
The court can impose an injunction on the party to a contract preventing them from taking certain action, or requiring them to do something. It can be used when a breach of contract is continuing and the harm caused cannot be adequately financially compensated.
Rescission
When a contract is rescinded, it is cancelled, and the situation is treated as though the contract never existed. It is used when one party commits a repudiatory breach, that is, a breach that is fundamental and so serious that most of the benefit of the contract is not delivered.
A repudiatory breach means that you will be entitled to end the contract if you wish. Also referred to as a fundamental breach of contract, a repudiatory breach goes to the root of the contract and will be substantially inconsistent with the terms of the agreement to the extent that you could not reasonably be expected to continue with the contract.
This is the only type of breach that ends the contract. An example is if someone completely stopped carrying out the agreed work.
It is important to note that with the other types of breach, you will not be released from the contract. This means that even if the other party has breached the contract, you must take care not to breach it yourself, or you could also be liable for losses incurred by the other party.
This remedy is only available for a major breach of contract.
Quantum Meruit
If a valid contract is terminated or found not to have existed, the court can still order payment for the benefit received by a party. The amount awarded will aim to be a fair sum for the goods or services obtained. This option can be used when goods or services are supplied outside of the scope of the contract.
Anticipatory Breach of Contract in the UK
An anticipatory breach of contract occurs when it is made clear that a contract will not be performed. This could be because one of the parties has stated their intention not to carry out their obligations, or because the situation makes it clear that the contract will not be performed.
If you are certain that the contract will be breached, you can accept the breach and treat the contract as ended. If you have suffered a loss as a result, you can claim damages. It is essential to have evidence that the contract was not going to be performed, or you could face an allegation of breach of contract yourself.
Alternatively, you can wait until the contract is not performed and make a claim for damages or another remedy at that point.
The case of Hochster v De la Tour (1853) held that a claimant can start a claim for anticipatory breach of contract as soon as they discover that the contract will not be performed; they do not have to wait until the date for performance has passed.
It is important to understand when the right time to take action is in an anticipatory breach case, and you are strongly advised to speak to an expert breach of contract solicitor before going ahead. You need to be certain that the contract will be breached and choose the correct course of action to obtain the best remedy.
Legal Principles Governing Remedies for Contract Breaches
Courts apply a number of established principles to ensure fairness and proportionality. Three of the most important are:
1. Mitigation of Loss
A claimant cannot simply sit back and allow losses to accumulate after a breach. The law imposes a duty of mitigation, meaning the injured party must take reasonable steps to reduce or avoid further loss. For example, if a supplier fails to deliver goods, the buyer should attempt to obtain replacements from another source rather than waiting and claiming an inflated amount in damages. Importantly, the claimant is not required to take extraordinary risks or incur unreasonable expense, only what is reasonable in the circumstances.
2. Remoteness of Damage
Not every loss flowing from a breach will be recoverable. The principle of remoteness, established in Hadley v Baxendale (1854), restricts damages to:
- Losses that arise naturally from the breach in the ordinary course of events; and
- Losses that were reasonably within the contemplation of both parties at the time the contract was made, if there were special circumstances.
This rule prevents defendants from being held liable for highly unusual or unforeseeable consequences unless they were made aware of them when contracting.
3. Equitable Discretion
Unlike damages, which are a common law right, remedies such as specific performance (ordering a party to fulfil their contractual obligations) or injunctions (restraining certain conduct) are equitable in nature. These remedies are discretionary; the court is not obliged to grant them and will only do so where damages are inadequate. For example, in contracts for the sale of unique property (such as land), specific performance may be appropriate. However, the courts will refuse such remedies where they would cause undue hardship, require constant supervision, or where the claimant has acted unfairly.
How Our Breach of Contract Solicitors Can Help
If you believe that a contract you have entered into has been breached and you would like to take action to enforce your rights, we will be happy to provide advice and representation.
If you require the expertise of our contract lawyers, feel free to reach out to us via phone at 0330 173 3041 or by emailing us at info@witansolicitors.uk. Additionally, you can fill out our contact form to initiate a discussion about your unique circumstances and the ways in which we can be of help. Our office presence extends across Birmingham, Northampton, and London.
FAQ
What remedies are available for a breach of contract in the UK?
The main remedy is an award of damages, money to compensate for the loss caused by the breach. In some cases, courts may also grant specific performance (ordering the party in breach to carry out their obligations), injunctions (preventing a party from doing something), or allow the contract to be rescinded (set aside) so the parties are released from further obligations.
What is an anticipatory breach of contract?
An anticipatory breach occurs when one party makes it clear, before performance is due, that they will not fulfil their contractual duties. The other party can then choose to treat the contract as immediately terminated and bring a claim, rather than waiting for the breach to occur.
Can you sue for breach of contract if you have not suffered financial loss?
Yes, but the outcome may be limited. If no actual loss is proven, the claimant may only be awarded nominal damages (a small sum to recognise the breach). In rare cases where a clear contractual right has been infringed but no quantifiable loss exists, courts may still make a declaration or grant other appropriate relief.
What is the difference between specific performance and damages?
Damages provide financial compensation for loss, while specific performance compels the breaching party to actually perform the contract (for example, transferring ownership of land). Specific performance is only granted where damages would be inadequate, and it remains at the discretion of the court.
When can a contract be rescinded?
Rescission is available where the breach is serious or fundamental, going to the root of the agreement. It may also be granted where the contract was formed under misrepresentation, mistake, duress, or undue influence. When rescinded, the contract is effectively unwound, releasing both parties from their future obligations.
