REMEDIES FOR

BREACH OF CONTRACT

CONTRACT LAW II
CIL 221

Dr Ihuoma K. Ilobinso
Faculty of Law, University of Lagos
[email protected]
 Introduction
• Breach of contract occurs where a party fails to perform contractual obligations,
completely and precisely according to the terms of contract.

• Ubi jus ubi remedium- where there is a right, there is a remedy

• There are basically 2 types of remedies available to a parties in contract:

1. Common Law Remedies

2. Equitable remedies
Common Law Remedies
Definition of terms
Damages are the monetary compensation (amount of money) awarded by a court or tribunal to a successful
party in an action for breach of contract.

Special damages– specific, peculiar (unique) and capable of being assigned specific monetary value because
these are compensation for the expenses actually incurred. Special damages must be pleaded and proved.

General damages - losses that the law will presume are the natural and probable consequence of a breach
of a contract. Thus it is assumed that the plaintiff must have suffered some inconvenience. General damages
can be recovered without proof that the plaintiff has in fact suffered any inconvenience..

Nominal damages- awarded when the plaintiff has established a breach of contract but failed to present
evidence of any or substantial losses.

Liquidated damages – claim or award of a specific and ascertainable sum

Unliquidated - claim of an unspecific and unascertainable sum which will not be known or certain
until a judgement is delivered in the case.

Incidental - expenses incurred by a plaintiff in order to avoid other direct and consequential losses
of breach. For example, hiring and paying an agent a commission to sell damaged good.

Consequential – claim or award for probable consequences or losses contemplated by the parties at
contract formation. In contrast, normal loss (or direct loss) naturally arising from a breach.

Agreed damage - parties agree in advance to fix the sum payable as damages in the event of a
breach.

Punitive/Exemplary - awarded to punish the defendant and prevent him from engaging in the same
conduct at any point in the future.
Common Law Remedies: Damages
• Common law remedies are available as of right whereas equitable remedies are discretionary.
• Damages is a monetary compensation for loss suffered by an innocent party.
• It is the most common form of remedy granted by courts. Most breaches are best dealt with by
an award of damages.
• Damages is available as of right once it is established that there is a breach of contract and a
party has suffered loss.
• Damages for breach of contract is designed to put the injured party, so far as money can
do it, to the position, in which he would have been if the contract had been performed
in accordance with the terms.
Robinson v Harman (1848)

• The aim of damages is not to punish the party in breach or to enrich the party who
suffered loss.
Limitation on the Award of Damages
Though the award of damages is as of right once breach is established, the law
places limits on the award of damages through the following rules:

• Causation- Causation restricts the sum payable as compensation in

breach of contract.
• Remoteness- This rule places tight limits on recovery of consequential losses
that are indirect/unanticipated/beyond the reasonable contemplation of the
defendant
• Mitigation- The law imposes a duty on injured parties to take reasonable steps
to mitigate the loss caused by the breach of contract
 Causation
• Damages is designed to compensate aggrieved party and not to provide gratuitous
benefit for him, or to punish the defaulting party
• Causation restricts the sum payable as compensation in breach of contract
• The claimant has to show that he had suffered loss as a result of breach, if the claimant
has suffered no loss, he is only entitled to nominal damages
• Loss can be classified as Pecuniary (Financial) Loss and Non-Pecuniary Loss
The general rule is that Pecuniary losses are recoverable, whereas Non-Pecuniary
losses are not recoverable in contract.

Exception- where the sole purpose of the contract is pleasure/leisure.

Jarvis v Swans Tour Ltd (1973) 1 All E. R. 71.
Ruxley Electronics and Construction v Forsyth [1995] 3 All ER 268
 Remoteness
The Rule in Hardley
v
Baxendale

Damages is not too remote and

Damages is not too remote and therefore recoverable from losses
therefore recoverable for losses that arises from special/unusual
that flows naturally (according to circumstances where they were
the usual cause of things) from the communicated to the parties at the
breach time of the contract
(normal losses) (abnormal losses)
 The rules laid down in Hadley v Baxendale have been affirmed in
the cases of
• Victoria Laundry Ltd v Newman Industries Ltd [1949] 1 KB 528
• C Czarnikow Ltd v Koufos [1969] 1 AC 350 (The Heron
II)
• Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd
in Ogwu v Leventis Motors Ltd- Plaintiff entered into a hire purchase agreement for a lorry, the lorry was
which was supposed to be about a year old, turned out to be 4/5years old. The lorry broke down
severally. Plaintiff brought an action for breach of contract and made the following claims:
(a) Loss of earnings for 51 days at £5 a day.......... £255.00.0
(b) Vehicle Licence (1 quarter) - £ 22.10.0
(c) Stage carriage licence..£ 6.10.0
(d) Driver's salary (2 months)..£20.00.0
(e) Mates' salaries (2 months)...£ 16.00.0
(f) New top cylinder-£ 24.10.0
(g) Repairs- £ 15.15.6
(h) Petrol- £ 10.17.6
(D) Hotel bills- £ 22. 6.6
Trial court awarded damages for items (f) and (g)
appeal court awarded all, except item (h)
which items should be considered normal losses and abnormal losses
 Mitigation
● The law imposes a duty on injured parties to take reasonable steps to mitigate the loss
caused by the breach of contract
● the rule was derived from the case of British Westinghouse Electric and Manufacturing
Company v Underground Electric Railways Co of London (1912)
● In assessing the damages for breach of contract , the court will take into consideration
the plaintiffs action to reasonably minimize his loss. Any loss that results from his failure
to mitigate is not recoverable from the defendant
● The claimant is not expected to make enormous efforts to mitigate the loss; he only needs to
do what is reasonable. What is ‘reasonable steps’ is a question of fact.
● The burden of proof is on the defendant to demonstrate that the loss was mitigated. If he fails
to discharge the burden, the damages proved by the claimant will be awarded.

Brace v Calder (1895)

Tanko v Kaduna North Local Government (2002) Court of Appeal, Law pavilion
 Measure of Damages
• How much will be adequate to compensate the claimant
for loss suffered?

There are two main ways in which the losses are

calculated:
1. The expectation loss and
2. The reliance loss.
 Measure of Damage

• Methods used by the court to calculate the amount of damages

to be awarded – how much will be adequate to compensate the
claimant for loss suffered?

• There are two main ways in which the losses are calculated:
1. The expectation loss and
2. The reliance loss.
 Expectation Loss
• The aim of damages is compensate the party who suffered a breach and
put him in the position he would have been in if the contract had been
performed.
• Expectation loss refers to the profit they expected to receive had the
contract been performed as agreed
• The general rule as to time of performance is that the calculation of
damages should be done according to what is known at the time of the
breach. This rule is not absolute.
• Section 50 and 51 of the Sale of Goods Act 1893 gives effect to the
rule.
 Reliance Loss
• Reliance loss seeks to refund the plaintiff for all
expenses incurred as a result of the defendants breach.
• It is also referred to as Wasted Expenditure
• It seeks to put the claimant in the position they were in
before the contract was made.
In the Ogwu v Leventis Motors Ltd claims, which items are expectation
losses and which are reliance losses:
(a) Loss of earnings for 51 days at £5 a day.......... £255.00.0
(b) Vehicle Licence (1 quarter) - £ 22.10.0
(c) Stage carriage licence..£ 6.10.0
(d) Driver's salary (2 months)..£20.00.0
(e) Mates' salaries (2 months)...£ 16.00.0
(f) New top cylinder-£ 24.10.0
(g) Repairs- £ 15.15.6
(h) Petrol- £ 10.17.6
(D) Hotel bills- £ 22. 6.6
 Types of Damages
Liquidated Damages and Unliquidated Damages
• Liquidated damages are predetermined amounts which the parties have agreed upon
at the time of the contract as recoverable in the event of a breach
• For liquidated damages to be recoverable, it has to be construed as a genuine
pre-estimate of loss the party is likely to suffer.
• The predetermined amount should not be excessively high, else the court will consider
it a penalty or exemplary damages Ford Motor Co (England) v Armstrong (1915) 31
TLT 267.
• The aim of liquidated damages is to facilitate recovery of damages, not to punish or
deter parties from breaching the contract.
• Where damages are unliquidated, the court determines the amount recoverable as
damagees
Irrespective of the expression used to label the agreed sum in a contract, the court examines the
circumstances of the contract, including the language of the parties, in order to interpret whether it
is liquidated damages or penalty.
The court in Dunlop Pneumatic Tyre Co Ltd v New Garage Motor Co. Ltd [1915]
AC 79 suggested some rules that could be used to determine whether the agreed
sum is Liquidated Damages or a penalty.
1. It will be held as a penalty if the sum provided for is extravagant in
comparison to the greatest possible loss.
2. there is a presumption that it is a penalty when a single lump sum is payable
for the occurrence of one or several events. Irrespective of the degree of the
loss.
3. the fact that a case is difficult to assess with precision the damages/loss
suffered by the parties, is an indication that the pre- estimate represents a
genuine attempt to estimate and overcome the challenge of proving it in court.
 General and Special Damages
General damages refer to losses suffered, which flow naturally from the breach, but difficult
to put a clear price on. This is in contrast to special damages.
special damages’ are ‘damages that are alleged to have been sustained as a consequence of
the breach
Special damages can be calculated directly by adding the wages lost due to the breach, and
the future bills and lost wages a plaintiff will experience. That’s because special damages pay
for things like medical bills, loss of wages and loss of earning power due to injuries, property
damage

General damages need not be specifically proved whereas special damages must be strictly
itemised and proved.
in UBN Plc v. Omniproducts
Ijebu-Ode L.G. v. Adedeji Balogun & Co.- Supreme court held that it is improper in cases of
breach of contract to categorise damages by the use of the words “general” and “special”.
Despite the pronouncement of the Supreme Court in Ijebu-Ode’s case, it appears that there is
uncertainty in this area, as close examination of some subsequent cases trailing this decision
will reveal.
Dauda V. Lagos Building Investment Company Ltd & Ors. (2010) LPELR-4024(CA)
 General and Special Damages
• In many contract law cases in Nigeria, damages for breach of contract have often been
categorised into general and specific damages.

• This categorization is acceptable in tort cases, but has been criticised in contract cases as
inappropriate, improper, misleading and likely to confuse. As most Judges grant awards
which are excessive, extravagant and unreasonable in comparison with the loss that flows
from the breach. They do so based on the wrong principles or no principles at all.

• The Supreme court in the case of GKFI (Nig) Ltd v NITEL Plc (2009) 15 NWLR (pt
1164) 344 held that: In the law of contract, there is no dichotomy between special and
general damages as is the position in tort. The narrow distinction is often surmised as on
without and difference. In contract it is damages simpliciter for loss arising from the
breach.

• Wahabi v Omonuwa (1976) 4 SC 37,

• ACME Builders Ltd v Kaduna Water Board Corporation (1999) 2 SC 1.
• NRC v Umera (2006),
• Unity Bank Plc v Onwudiwe & Anor (2015),
• Ativie v Kabelmetal Nig Ltd (2008)- can be found in Law pavilion.
 Double Compensation
• The rule against double compensation prevents a party from claiming
under two heads using different names.
• Consequently, once a claimant is fully compensated under one head
of damages he should not be awarded damages under another head.
• The SC has held in numerous cases that an award of damages based
on double compensation is erroneous in law.
• The court should scrutinise the claims so as to avoid double
compensation.

British Airways v Atoyebi

Uman & Anor v Owoeye (2003) 9 NWLR (pt. 825) p. 221,
Soetan v Ogunwo (1975) 6 SC 67,
Armels Ttansport v Transco (nig) ltd (1974) 11 SC p. 237,
 British Airways v Atoyebi
Claims
1. one-way first-class ticket to Lagos on May 7 2000 - $1,500;
2. two return club-class tickets to London on May 10 2000 - $3, 950;
3. one night's stay at a London hotel - £225;
4. taxis for him and his associate - £115;
5. telephone calls and faxes - £73;
6. loss of professional time for travelling to the United Kingdom
(based on his
7. hourly rate of £150) - £6,600; and
8. Damages for stress and inconvenience of travelling - £100,000.

the court held that granting all claims is excessive and results to
double compensation

• which of these claims fall under general and special damages?

 Question
. In November 2020, Sony Nig. Ltd was organizing the Regional Entertainment Award to be
held from the 5th to 7th April, 2021. Sonicy Nig. Ltd contacted Simbi (a popular Nigerian
musician) to make bookings for her to perform at the opening and closing events of the
Regional Entertainment Awards for N1,000,000. During Negotiations, Simbi informed Sonicy
Nig Ltd that their offer was too low but that she will be happy to accept it if they agree to give
her partner Kunta (who was an uprising entertainer) the opportunity to perform at the closing
event, with or without pay, as he needs the publicity. Sonicy Nig Ltd accepted Simbi's
proposition and included it in the contract which was signed by the parties. Kunta was
informed of the opportunity, in excitement he cancelled all the events he had scheduled for
that period. However, on the 4th of April, 2021, Kunta received an email from Sonicy Nig Ltd
informing him that he will no longer be given the opportunity to perform because they just
realized that the time slots at the closing event was limited and would not be available for
him. When Simbi heard of the cancellation, she was furious and informed Sonicy that she will
not perform at the event. Sonicy Nig Ltd plans to sue Simbi for breach of contract.

With the aid of relevant authorities, advice the parties on which form of discharge of contract
will be most applicable in this case and advice Sonicy Nig Ltd on their chances to succeed in
the claim.
Equitable Remedies
 Specific Performance
• The order of Specific performance is an equitable remedy where the court compels a
contracting party to perform their contractual obligations. Disobedience to the order will result in a
party being in contempt.
• At common law, the primary remedy available for breach of contract is damages. However,
there are instances where damages is inadequate.

• The fundamental rule is that: the court will not ordinarily order specific performance or
grant a mandatory injunction where the plaintiff will be adequately compensated by the
common law remedy of damages.

Beswick v Beswick [1968] AC 58

Afrotec Technical Services (Nig) Ltd v Mia & Sons Ltd & Anor (2000) 15 NWLR (Pt
692) 730
Universal Vulcanizing (Nig) Ltd v Ijeesha United Trading & Transport Company
Limited (I.U.T.T.C.)
• Specific performance is an equitable remedy, like all other equitable remedies, it is
discretionary.
Before granting an equitable remedy, the court will take into account:
1. The Inadequacy of damages - Specific performance will not be ordered where damages
is an adequate remedy Harnett v Yielding (1805), Beswick v Beswick,
2. Whether the conduct of the claimant has been inequitable- He who comes to equity
must come with clean hands’ and ‘he who seeks equity must do equity’ Afrotec
Technical Services (Nig) Ltd v Mia & Sons Ltd & Anor (2000) 15 NWLR (Pt 692) 730.
Coker v Ajewole (1976) 10 NSCC 429
3. Overall justice - the court will not award specific performance where it is impossible to
perform or where it will cause undue hardship to the defendant. Taylor v H. B. Russel
(1947) 12 WACA 179 , Patel v Ali (1984) Ch 283, Shell UK Ltd v Lostock Garages Ltd [1976]
1 WLR 1187
Certain types of contracts are generally unsuitable for the order of Specific
performance. For instance,
• Personal contract of services
• Contracts which involve constant supervision by the court- Co-operative
Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1

• Contracts where mutuality is not possible (contract with a minor)

• Ryan v Mutual Tontine Association (1893)- enforce promise to tenants to
provide a porter
 Injunction
• This is a decree by court ordering a person to do or not to do a certain act in accordance
with the contract.

• This remedy is rarely used.

• It is used to enforce express negative (prohibitory- contract not to do something) stipulation

in a contract.

Being an equitable remedy the court will take into account the following before making an
order of injunction:
• The Inadequacy of damages
• The conduct of the parties and
• Overall justice

Warner Bros V. Nelson (1937) 1 KB 209

Whitwood Chemical Co v Hardman [1891] 2 Ch 416

Quantum Meruit
• Where the court orders that the amount proportionate to work done be paid to
the claimant.