Types of Breach
A breach of contract occurs when a party fails to perform an obligation under the contract without lawful excuse. English law distinguishes between several types of breach, each with different consequences for the innocent party.
Actual breach occurs when a party fails to perform when performance falls due, or performs defectively. Anticipatory breach occurs when a party indicates, before the time for performance, that they will not perform their obligations. In Hochster v De La Tour [1853] 2 E&B 678, the defendant engaged the claimant as a courier for a future date but repudiated the contract before that date. The court held the claimant could sue immediately without waiting for the performance date.
The distinction between conditions and warranties is critical. Breach of a condition entitles the innocent party to terminate the contract and claim damages. Breach of a warranty entitles the innocent party only to damages. In Poussard v Spiers and Pond [1876] 1 QBD 410, an opera singer's inability to perform on opening night was a breach of condition. In Bettini v Gye [1876] 1 QBD 183, a singer's late arrival for rehearsals was merely a breach of warranty.
The innominate term approach from Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26 classifies terms by the seriousness of the breach rather than by pre-classification. If the breach deprives the innocent party of substantially the whole benefit of the contract, they may terminate.
Damages: The Compensatory Principle
The primary remedy for breach of contract is an award of damages, designed to put the innocent party in the position they would have been in had the contract been performed (Robinson v Harman [1848] 1 Ex Rep 850). This is the expectation measure (or loss of bargain).
Alternatively, the reliance measure compensates the claimant for expenditure wasted in reliance on the contract (Anglia Television v Reed [1972] 1 QB 60). This is useful where the expectation loss is too speculative to quantify.
Damages for mental distress are generally not recoverable in commercial contracts (Addis v Gramophone Co [1909] AC 488), but exceptions exist where the contract's purpose was to provide pleasure or peace of mind (Jarvis v Swans Tours [1973] QB 233).
Remoteness of Damage
The test for remoteness in contract was established in Hadley v Baxendale [1854] 9 Ex 341. Damages are recoverable only for losses that:
Limb 1: Arise naturally from the breach in the usual course of things; or
Limb 2: Were in the reasonable contemplation of both parties at the time the contract was made, as the probable result of the breach.
In Victoria Laundry v Newman Industries [1949] 2 KB 528, the Court of Appeal refined the test: the defendant was liable for ordinary profits lost during the delay but not for an exceptionally lucrative government contract, as they had no knowledge of it. The House of Lords in The Heron II [1969] 1 AC 350 confirmed that the test in contract is stricter than in tort: the loss must have been "not unlikely" to result from the breach.
More recently, Transfield Shipping v Mercator Shipping (The Achilleas) [2008] UKHL 48 introduced an element of assumption of responsibility, asking whether the defendant had assumed responsibility for the type of loss in question.
Mitigation and Contributory Negligence
The innocent party has a duty to mitigate their loss. They cannot recover damages for losses that could have been avoided by taking reasonable steps (British Westinghouse v Underground Electric Railways [1912] AC 673). The standard is reasonableness, not perfection — the claimant need not take extraordinary steps.
In Pilkington v Wood [1953] Ch 770, the claimant was not required to embark on a "complicated and difficult piece of litigation" to mitigate. The burden of proving failure to mitigate rests on the defendant.
Contributory negligence under the Law Reform (Contributory Negligence) Act 1945 may apply to reduce damages in contract where the breach also constitutes a tort of negligence (Vesta v Butcher [1989] AC 852).
Equitable Remedies
Specific performance is a discretionary equitable remedy compelling the defendant to perform their contractual obligations. It is available only where damages would be inadequate — typically in contracts for the sale of unique goods or land (Beswick v Beswick [1968] AC 58).
Specific performance will not be granted where: (a) constant supervision would be required (Co-operative Insurance v Argyll Stores [1998] AC 1); (b) the contract is for personal services; (c) the claimant has acted inequitably; or (d) there is undue hardship.
An injunction may be granted to restrain a breach of a negative contractual term. In Warner Brothers v Nelson [1937] 1 KB 209, the court granted an injunction to prevent Bette Davis from working for a rival studio, enforcing the negative aspect of her exclusive contract.
Key Cases
| Case | Key Principle |
|---|---|
| Hochster v De La Tour(1853) | Anticipatory breach allows the innocent party to sue immediately |
| Hong Kong Fir Shipping v Kawasaki(1962) | Innominate terms: effect of breach determines remedy, not pre-classification |
| Hadley v Baxendale(1854) | Two-limb test for remoteness of damage in contract |
| Robinson v Harman(1848) | Expectation measure: put claimant in position as if contract performed |
| Co-operative Insurance v Argyll Stores(1998) | Specific performance refused where constant supervision required |
Exam Tips
Exam Tip
In a remedies question, always work through the hierarchy: (1) identify the type of breach and whether termination is available; (2) calculate expectation damages using the remoteness test; (3) apply mitigation; (4) consider whether equitable remedies are appropriate. Examiners reward students who address all four stages systematically.
Common Mistake
Students often confuse the remoteness test in contract (Hadley v Baxendale — reasonable contemplation) with the remoteness test in tort (The Wagon Mound — reasonable foreseeability). The contract test is stricter because it is assessed at the time of contracting, not at the time of breach.