150 Chapter 5Discharge of contracts and remedies for breach
Victoria Laundry vNewman Industries (1949) (Court of Appeal)The claimants agreed to buy a boiler from the defendants. The defendants knew that the
boiler was to be used immediately in the claimants’ laundry. They also knew that there was
a big demand for general laundry services at this time. The defendants delivered the boiler
20 weeks late. Two claims for damages were made by the claimants. First, they claimed
£16 a week, which represented the extra profit they could have made by doing more
general laundry work with the new boiler. Second, they claimed £262 a week which had
been lost on account of the claimants not being able to use the boiler to fulfil a very
profitable contract to dye army uniforms.Remedies for breach of contract
Refusal to perform the contract
We have already seen that in some circumstances one party will be able to refuse to further
perform the contract on account of the other party’s breach of contract. We have seen that
this will be possible if the other party repudiates the contract or breaches a condition of the
contract. It will also be possible if the other party breaches an innominate term in such a
way that this deprived the injured party of substantially the whole benefit of the contract.
(See conditions, warranties and innominate terms in Chapter 3.)Damages
Any breach of contract always allows the injured party to sue for damages. Contract
damages are intended to put the injured party into the same position, as far as money
can do this, as if the contract had been performed. It follows that if the injured party has
suffered no loss as a result of the breach only nominal damages will be available. Nominal
damages are damages in name only, perhaps 5p or £1. It is also necessary that the defend-
ant’s breach of contract caused the loss being claimed for.Remoteness of damage
When a contract is breached, substantial damages can be claimed only in respect of losses
which fall within one of the two rules in Hadleyv Baxendale (1854). Other losses are
regarded as too remote.
Rule 1 allows damages for a loss if the loss arose naturally from the breach of contract, in
the usual course of things.
Rule 2 allows damages for a loss if the loss can reasonably be supposed to have been
within the contemplation of the parties when they made the contract.
The rules on remoteness of damage provide an important limit on the amount of contract
damages. A breach of contract can have many unforeseeable consequences. If there were
no rules on remoteness, the person in breach of contract would always be liable for these
consequences. This would make people unwilling to make contracts.
The following case shows how the two rules work.