Remedies for breach of contract 153A person who does not accept an anticipatory breach will generally also have to mitigate
losses. However, in the following case the anticipatory breach was not accepted, and the
injured party who continued to perform the contract had no duty to mitigate. The case was
unusual in that the injured party could perform the contract without the co-operation of the
party who committed the anticipatory breach.
Agreed damages
Sometimes, a term of the contract will fix the amount of damages payable in the event of
breach of contract. Damages agreed in this way are classified as being either liquidated
damages or penalties.
If the amount of damages fixed is the amount which the parties genuinely believed that
the loss would be, then the damages agreed are liquidated damages. The amount of dam-
ages fixed by the term will then be the amount of damages awarded, no matter what the
actual loss turned out to be.
If the amount of damages fixed is not the amount which the parties genuinely believed
that the loss would be, but an excessively large amount, then the damages agreed will be a
penalty. A penalty is ignored and damages are calculated as if the term setting out the
penalty had not existed. Penalties are often put into a contract by the party with the greater
bargaining power, to try to terrorise the other party into performing the contract. (Notice
that a penalty clause will not amount to economic duress because it is not pushing a person
into making a contract, it is saying what the damages will be if the contract is breached.)
Example
John, a builder, agrees to build a new shop which is to be completed by 1 March. A term of
the contract states that if the shop is not completed on time then the damages payable by
John will be £500 a week for every week that the shop is not completed. John completes
the work ten weeks late. If, when the parties made the contract, they thought that the actualWhite and Carter (Councils) vMacGregor (1962) (House of Lords)The claimants were advertising agents who agreed to advertise the defendants’ garage for
a three-year period. On the same day that the contract was made the defendants wrote to
the claimants asking them to cancel the contract. The claimants did not accept this anti-
cipatory breach but began to advertise the defendants’ business as agreed. One of the
terms of the contract said that if any of the instalments which the defendants were required
to pay became four weeks overdue, then the claimants could sue for the whole contract
price. The defendants refused to pay any of the instalments. The claimants advertised the
defendants’ garage as agreed for the whole three-year period and then sued for the whole
contract price.
HeldThe claimants were entitled to perform the contract and sue for the whole contract
price. They were not bound to accept the repudiation and sue for damages. Nor did they
have a duty to mitigate their losses.
CommentThe principle in this case is unusual and will apply only where: (a) the contract
can be performed without the co-operation of the other party; and (b) the injured party has
some legitimate interest, other than claiming damages, in carrying the contract on.t