Pennant Hills Restaurants v Barrell Insurances
(1981)
Robinson v Harman (1848) 1 Exch 850
Ruxley Electronics and Construction Ltd v
Forsyth [1996]
The judicial approach to assessment of
damages is to a great extent a pragmatic one.
In many cases, the amount awarded is “no
more than an approximation lacking in
mathematical precision or economic accuracy
or sufficiency”
The basic principle of contractual damages is
that of restitutio in integrum, or full restitution,
which involves putting the innocent party into
the position it would have been in had the
contract been performed. This principle can
be traced back to Robinson v Harman. As a
general rule, “[w]here a party sustains a loss
by reason of a breach of contract, he is, so far
as money can do it, to be placed in the same
situation as if the contract had been
performed”
The category of expectation interest refers to
those benefits which the innocent party would
have received, had the contract been
performed properly. For example, in Ruxley
Electronics and Construction Ltd v Forsyth
[1996] AC 344, the House of Lords held that
where a pool had not been built to agreed
specifications, the cost of the cure, i.e. the cost
of rebuilding the pool was too high and, thus,
the injured party could only claim damages for
loss of amenity.
Reliance interest refers to those losses which
an innocent party incurred in out-of-pocket
expenses ‘in reliance’ on the contract.
Expenses incurred both before and after the
contract are recoverable. The defendant was
an actor who are agreed to appear in a
production staged by the plaintiffs. The actor
cancelled his participation and the television
company had to abandon the production. The

Payzu Ltd v Saunders,
British Westinghouse Electric and
Manufacturing Co Ltd v Underground Electric
Railways Co of London Ltd [1912]
television company sued for expenses
incurred both before and after the contract
was signed. The court held in favour of the
plaintiffs and established that both pre-
contractual and post-contractual costs are
recoverable so long as they were reasonably
in the contemplation of the parties as likely to
be wasted if the contract was broken.
However, the court also held that there was no
‘double recovery’. This means that a plaintiff
can either recover for lost profits or for
expenses incurred, not for both.
doing nothing may have an impact on the
amount of damages that may be recovered.
An injured party who does not take steps to
minimise its losses cannot claim damages for
losses that could have been avoided, had
mitigation taken place. In Payzu Ltd v
Saunders, the plaintiffs had failed to make
prompt payment for an instalment of goods.
The defendants had, in breach of contract,
then refused to deliver unless the plaintiffs
agreed to pay cash with
each order. It was held that the plaintiffs
should have accepted this offer, which
would have reduced their loss (since the
market value of the goods in question
was rising above the contract price).
In this case, two important principles for
assessing damages were laid down, the
second of which speaks to mitigation: “The
first is that, as far as possible, he who has
proved a breach of a bargain to supply what
he contracted to get is to be placed, as far as
money can do it, in as good a situation as if
the contract had been performed. The
fundamental basis is thus compensation for
pecuniary loss naturally flowing from the
breach; but this first principle is qualified by a
second, which imposes on a plaintiff the duty
of taking all reasonable steps to mitigate the
loss consequent on the breach, and debars
him from claiming in respect of any part of the
damage which is due to his neglect to take
such steps.”
The contract was for the sale of turbines. The
defendants subsequently supplied turbines
with less power than previously agreed. The
plaintiffs accepted the deficient turbines but
retained their right to claim for damages. They
later replaced the deficient turbines with more
powerful ones and claimed the cost of the
replacement turbines as damages. However,
the replacement turbines were more powerful
than the turbines originally contracted for. The
court held in favour of the defendants as the
savings brought about by the replacement
turbines exceeded their cost.
The owners of a mill asked a common carrier
to deliver a broken crankshaft to repairers by a
certain date. The defendant carrier failed to
deliver the crankshaft in time. In the meantime,
the mill remained idle and the mill owners
sued the carrier for all loss of profit during the
period of delay caused by the carrier. The
court found that a mill owner must be
expected to have a spare crankshaft and
therefore it was not necessarily the case that
the mill had to remain idle. The court also
found that the mill owner had not told the
carrier that timing of was the essence as the
mill would have to remain closed while the
crankshaft was being repaired.
The test of determining whether damage is

Victoria Laundry v Newman Industries [1949]
too remote was laid down in the case of
Hadley v Baxendale (1854) 156 ER 145.
The applicable test is the test of foreseeability
and contains two principles:
(1) A party in breach of contract is liable for
all loss which is likely to flow from the breach
in the ordinary course of things. (In Hadley v
Baxendale, no damages could be recovered
under this principle, because a mill would
usually have a spare shaft and would not
usually have to be closed because a shaft was
broken).
(2) Where the loss is not an ordinary loss,
as in the first principle, the party in
breach is liable for such a loss only if they
actually knew at the time of contracting what
the consequences of a breach would be. (In
Hadley v Baxendale, loss was not recoverable
under the second principle because the
carrier did not know that the mill did not have
a spare shaft).
In Victoria Laundry v Newman Industries
[1949], Victoria Laundry entered into a contract
with Newman Industries to build two large
boilers to replace the small boilers in the
laundry. Newman Industries were delayed in
delivering the replacement boilers. Victoria
Laundry claimed damages under two heads.
First, for the loss of profit the laundry would
have made with the larger boilers, had they
been delivered on time. This loss was
recoverable under the first principle in Hadley
v Baxendale. Secondly, the laundry had
entered into a lucrative contract with a third
party for dyeing, which could not be
performed due to the delay. Thus, they also

Dunlop Pneumatic Tyre Co Ltd v. New Garage
and Motor Co Ltd
Flint v Brandon (1803)
Nutbrown v Thornton (1804)
Stickney v. Keeble [1915]
claimed for loss of profit owing to the lost
contract. This is the kind of damage covered
by the second principle in Hadley v
Baxendale. However, since the Newman
Industries did not know of the contract
for the dyeing, they were not liable for the loss
of contract.
In making its determination, the court looks at
the particular circumstances of the case,
whereby one of the defining tests is whether
parties made a real, pre-breach attempt to
estimate of the loss that could be suffered by
the innocent party. However, if the clause in
questions applies both to breaches with
serious and minor consequences, it is
assumed that it is a penalty clause.
In Flint v Brandon (1803) the court established
that specific performance is only available
where the common law remedy of damages
does not suffice: “This court does not profess
to decree a specific performance of contracts
of every description. It is only where the legal
remedy is inadequate or defective that it
becomes necessary for courts of equity to
interfere”.
Nutbrown v Thornton (1804) concerned the
sale of specialist machinery which was not
available from other vendors. When the
suppliers failed to deliver the machinery, the
buyer tried to obtain them by way of specific
performance. While the usual remedy for
breach of contract is damages, this case
demonstrates that where damages are not an
adequate remedy, the courts may order
specific performance.
As it is an equitable remedy, specific performance will only be
ordered in accordance with the rules of equity; it was held in

Blackett v Bates (1865)
Patel v Ali [1984]
Co-operative Insurance Society Ltd v Argyll
Stores (Holdings) Ltd (1998)188
Lumley v Wagner (1852)
Stickney v. Keeble [1915] that ‘equity will only grant specific
performance if, under all the circumstances, it is just and
equitable to do so’.
"The court does not grant specific
performance unless it can give full relief to
both parties" per Lord Cranworth LC
Specific performance is not available where it
would cause hardship to the defendant The
plaintiff had contracted to sell her house to the
defendant. Before the transaction could be
completed, Mrs Patel, who was healthy at the
time the contract was signed, was diagnosed
with bone cancer and lost her leg. She
became reliant on others and no longer
wanted to move house. Mr Ali sought specific
performance but failed as the court held that it
would cause hardship on Mrs Patel if she was
required to move.
Specific performance is not awarded in
relation to contracts for personal service and
those in which performance cannot be
enforced without constant superintendence of
the court.
Facts: The plaintiffs were seeking specific
performance of a covenant in a lease
of retail premises to keep them open for
business during particular hours. The
defendants had closed the supermarket which
had been run at the premises.
The trial judge refused specific performance,
but this ruling was overturned by
the Court of Appeal.
Held specific performance would not be
ordered. In all but exceptional
cases, an injunction would not be granted
requiring a defendant to carry
on a loss making business.
In Lumley v Wagner (1852), the defendant was

Union Eagle Ltd v Golden Achievement Ltd
[1997]
Barclays Bank Plc v O’Brien [1993]
Leaf v International Galleries [1950]
Cutter v Powell (1795)
engaged by the plaintiff to sing exclusively at a
particular event. When she was offered more
money by another party, the defendant broke
the contract. The court issued an injunction
prohibiting her from performing for other
parties. Note that injunctions are usually not
issued to compel personal performance (Page
One Records v Britton [1968]). That is why Mrs
Wagner was not compelled to perform for Mr
Lumley, but merely prevented from performing
for anyone else.
The case of Union Eagle Ltd v Golden
Achievement Ltd [1997] demonstrates that the
courts will not exercise their equitable
jurisdiction where the common law already
provides for the outcome.
A contract can be rescinded if agreement was
reached under duress or undue influence
Lapse of time may prevent rescission: The
contract was for the sale and purchase of an
oil painting of Salisbury Cathedral that was
innocently represented as being a Constable.
The buyer discovered that it was not a
Constable when he tried to sell it five years
later. His claim for rescission failed and he
appealed. The Court of Appeal rejected his
claim, holding that an action for damages
would have been the appropriate action, and
also that he had delayed too long for
rescission.
In Cutter v Powell (1795), a seaman’s wife was
not able to recover part-payment of his wages
after he died during a voyage. One particular
aspect considered by the court was that the
seaman had agreed to receive a higher sum
than he might ordinarily have expected to be
paid, on condition that the higher sum was
 payable at the end of the contract. From the
employer’s perspective, it could be said that
the employer agreed to pay a higher sum in
order to guarantee that the contract is
performed fully. Had there not been such an
agreement on higher pay, the seaman’s wife
could have recovered on a quanatum meruit
of the voyage.
Sumpter v Hedges [1898] In Sumpter v Hedges [1898], the plaintiff
builder was unable to complete a contract to
build two houses as he had run out of money.
The defendant was able to complete the
project with the help of another builder. In the
event, materials which had been supplied by
the plaintiff were later used by the
replacement builder. It was held that Mr
Sumpter was entitled to a refund of the cost of
the materials, although he was not entitled to
reclaim the cost of his labour
Planche v Colburn (1831) A publisher hired an author to write one of
a series of books on a theme.When the
publisher decided to abandon the whole
series, the author was prevented from
completing the work through no fault of his
own. He was entitled to recover a
fee for his wasted work