152 Chapter 5Discharge of contracts and remedies for breach
contract causes the claimant to pay damages to a third party, these damages paid are also
recoverable.Example
Jerry agrees to service Z Ltd’s oven for £1,000. Jerry knows that Z Ltd need the oven
to operate their bakery. Z Ltd tell Jerry that the service must be finished on time because
otherwise Z Ltd will be in breach of a very profitable contract to do bakery for Y Ltd. Jerry
performs the service so badly that Z Ltd’s oven cannot work at all. Jerry cannot fix the prob-
lem. Z Ltd hunt around for someone else to fix the oven. The only person they can find is
Tom, who fixes the oven one week after Jerry should have fixed it. As Z Ltd could not do the
bakery for Y Ltd they are themselves in breach of contract and will have to pay Y Ltd £2,000
damages. Jerry will have to pay damages to Z Ltd as follows: (i) the cost of Tom putting right
the fault which Jerry caused; (ii) the amount of ordinary business profit lost by Z Ltd as a
consequence of not being able to use the oven for one week; (iii) the profit Z Ltd would have
made if they had been able to perform their contract with Y Ltd; (iv) the amount of damages
which Z Ltd had to pay to Y Ltd.Mitigation
In the above example, Z Ltd might have incurred even more losses if they had not hunted
around to find someone else to fix the oven. However, if they had not hunted around to find
someone else, they could not have claimed more damages. A party who suffers a loss as a
result of breach of contract must take all reasonable steps to mitigate (reduce) the loss. No
substantial damages can be claimed in respect of a loss which could have been mitigated by
taking reasonable steps.Damages are generally not available for injured feelings or disappointment. However,
where the contract was to provide the claimant with enjoyment and relaxation (as in the
case of a holiday) it is possible that damages can be awarded for disappointment and
distress caused by a breach of the contract.Mitigation and anticipatory breach
Earlier in this chapter we considered anticipatory breach. We saw that a person faced with
such a breach can either accept the breach, and regard the contract as terminated, or elect to
keep the contract open. A person who accepts an anticipatory breach must mitigate losses
in the usual way.Brace vCalder (1895)The claimant was employed by a partnership of four people for a fixed two-year period.
The partnership was dissolved when two of the partners left. The two remaining partners
immediately agreed to employ the claimant on exactly the same terms as he had previously
been employed. The claimant refused this offer and sued for breach of contract.
HeldThere had been a breach of contract because the four partners had not employed
the claimant for the full two-year period. However, the claimant was entitled to nominal
damages only from the original partners. He should have mitigated his loss by accepting
the alternative employment.