Understanding Damages in Contract Breaches: Your Guide to Claims and Compensation

In English law, the primary remedy for a breach of contract is an award of damages to compensate for losses suffered due to another party's failure to fulfil their contractual obligations. In this article, we'll cover what you can claim, how losses are calculated, and what must be proven to secure compensation.

What Can You Claim?

If someone has breached a contract that you had with them, you may be eligible to claim damages. These damages aim to place you, as the claimant, in the position you would have been in if the contract had been performed correctly. It's important to note that damages serve to compensate the claimant and not penalise the breaching party.

Generally, damages cover financial losses. However, if the core purpose of the contract was to provide enjoyment, relaxation, or peace of mind, you may also be able to claim for non-financial losses. For example, if a holiday experience is spoiled due to construction works at the hotel, you may have grounds for compensation beyond monetary losses.

How Are Damages Calculated?

Damages are calculated by assessing the losses caused by the breach. The aim is to accurately reflect the harm you have experienced without inflating the claim.

In most cases, a claimant can seek a third-party remedy for the breach (known as a "cure") to restore their position as if the contract had been performed as agreed. Even if you choose not to pursue this option, you can still claim damages for losses.

Proving Your Losses: The 'But For' Test

As the claimant, it's your responsibility to prove your losses. You need to demonstrate the losses using what is known as the "But For" test. Here, you must show both your actual position and the hypothetical position you would have been in "but for" the breach.

In commercial contracts, it's typically presumed that "but for" the breach of contract the claimant would have at least recovered their initial expenditure if not for the breach. While the breaching party can challenge this, they must demonstrate that the claimant could not have broken even or made a profit if the contract had been fulfilled.

When Must the Loss Have Occurred?

Generally, losses are recoverable if they meet the legal principles of causation, remoteness, and mitigation:

• Causation: The loss must result directly from the breach.
• Remoteness: The loss should have been reasonably foreseeable as a consequence of the breach.
• Mitigation: The claimant must have taken reasonable steps to minimise the damages.

Timing of the Loss

Usually, losses incurred after the breach are considered avoidable and, therefore, irrecoverable. However, there are exceptions where the date of assessing losses can be postponed:

• No Market for Replacement: If replacement goods or alternative customers are unavailable, the assessment can be deferred (e.g., seasonal goods like Christmas decorations hold limited purchasing and selling opportunities).
• Undetected Faults: If an issue with goods purchased becomes apparent only after use, damages may be calculated from the discovery date rather than the initial breach.
• Reasonable Attempts to Resolve: If the claimant has reasonably pressed the defendant to rectify the breach, damages might be assessed from the point when it's clear the defendant won't remedy the situation.

The Limitation Period

Be mindful that you have six years from the date of a breach or the date you discovered the breach to issue a claim for damages.

Seek Expert Advice

If you need further guidance on contract breach claims or help to quantify your losses, Mollie Leak and our expert Commercial Litigation and Dispute Resolution team are here to assist. Reach out to our team on 023 8063 9311 or email enquiries@warnergoodman.co.uk to explore your options and seek a favourable resolution.