Compensatory Damages For Breach Of Contract l Blog l Nelsons (2024)

The general remedy for breach of contract is a monetary sum amounting to the financial loss suffered as a result of the breach.

The common law position is to place the innocent party in the same position as if the contract had been performed, such as accounting for a loss of sales. As well as the financial loss, a claimant may seek to claim compensatory damages as a result of the breach.

Compensatory damages due to a breach of contract

The case of Addis v Gramophone Co sets a general rule that compensatory damages are not normally recoverable in commercial cases. This does not mean compensatory damages cannot be awarded, however, it sets a high bar in persuading a Judge they should be awarded.

Following a contract breach, a claimant can claim compensatory damages for the below:

Punitive damages

Punitive damages is an award, generally of a nominal value, awarded to punish the defendant where the Court believes this is necessary. Punitive damages are rarely claimed and are more common in criminal cases, but such claim in commercial cases has not been prohibited. Case law suggests an award of punitive damages in respect of a contract breach will almost never be awarded.

Damages for loss of enjoyment/amenity

Damages for loss of enjoyment/amenity is again very difficult to succeed in claiming. This is mainly down to a claimant having to demonstrate a further monetary award is necessary and if so, what that sum should be. Damages in this respect are therefore only awarded in limited circ*mstances.

Damages for distress

Damages for distress are awarded with an aim to put the injured party in the same position they would have been in, should the tort not have occurred. The Court will have various guidelines to assess what would be a reasonable sum, however, in cases for breach of contract no award for distress has yet been documented in a case. The Court has noted a claim is possible, as in the case of Shaw v Leigh Day (a firm), but the burden of proof on the claimant is very high. This prevents claims being made and it is unknown when a Court will award such damages and what approach would be taken in respect of calculating the sums due.

Loss of reputation

In order to claim damages for a loss of reputation, the claimant must first have some financial loss as damages for a loss of reputation cannot be claimed on its own. To be successful in such claim, the claimant must show a damage to reputation and subsequent financial loss.

Restitution damages

Restitution damages are claimed when the defendant has profited from the breach. In such cases, the claimant is able to seek the profit obtained providing they can show the profit was a direct result of the breach. The difficulty a claimant will often face is showing the defendant has in fact made a profit, as the defendant is unlikely to alert the claimant to such profit.

This article is for information only and does not constitute legal/financial advice. Please contact us for advice tailored to your specific position. Some of the content presented on our website has been generated with the assistance of Artificial Intelligence (AI). We ensure that all AI-generated content meets our high standards for accuracy and relevance.

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