Discharge of contract and remedies - Injunctions

Learning Outcomes

This article explains injunctions as a remedy for breach of contract, including:

• The nature, purpose, and classification of injunctions in contract law, distinguishing clearly between prohibitory and mandatory relief.
• How courts decide whether to grant an injunction instead of, or in addition to, damages, with emphasis on adequacy of damages and the need to protect contractual and proprietary interests.
• The key equitable principles governing injunctions—clean hands, delay (laches), practicality, and public interest—and how they influence judicial discretion.
• The American Cyanamid test for interim (interlocutory) injunctions, focusing on serious issue to be tried, adequacy of damages, balance of convenience, and preservation of the status quo.
• The role and consequences of undertakings in damages, penal notices, and contempt powers when enforcing injunctive orders.
• The treatment of negative covenants, including exclusivity and restraint of trade clauses, and when courts regard prohibitory injunctions as the primary remedy.
• The stringent approach to mandatory injunctions, particularly where orders would require ongoing supervision, running a business, or compelling personal services.
• How courts may award damages in lieu of an injunction where equitable relief would be oppressive or impractical yet loss can still be compensated.
• Application of these principles to typical SQE1-style problem questions, enabling accurate issue-spotting, structured analysis, and reasoned conclusions in exam answers.

SQE1 Syllabus

For SQE1, you are required to understand injunctions as a remedy for breach of contract, including their types, the equitable principles governing their grant, and the factors influencing the court’s discretion, with a focus on the following syllabus points:

• the distinction between prohibitory and mandatory injunctions
• the equitable nature of injunctions and the main principles applied by the courts
• the circumstances in which an injunction may be granted instead of damages
• the main factors affecting the court’s discretion, including adequacy of damages, balance of convenience, clean hands, delay, and practicality of enforcement
• interim (interlocutory) injunctions, the American Cyanamid criteria, undertakings in damages, and enforcement for contempt
• injunctions in restraint of trade and negative covenants (including when adequacy of damages is not decisive)
• limits on mandatory injunctions where orders would amount to ongoing court supervision or require running a business
• specialist interim orders often used in litigation practice (freezing injunctions, search orders, and preservation orders)

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is the main difference between a prohibitory injunction and a mandatory injunction?
2. In what circumstances will a court refuse to grant an injunction for breach of contract?
3. What is meant by the “clean hands” principle in the context of injunctions?
4. Why might a court prefer to award damages rather than an injunction?

Introduction

Injunctions are a key equitable remedy available for breach of contract. They are court orders requiring a party to do, or refrain from doing, a specific act. Injunctions are discretionary and are only granted when damages would not provide an adequate remedy. Understanding the types of injunctions, the equitable principles that apply, and the factors influencing the court’s decision is essential for SQE1. Courts also consider whether the order would, in substance, achieve specific performance where that remedy would be refused; if so, an injunction will not be granted. Interim injunctions are commonly used to preserve the status quo pending trial and can have immediate practical effects.

Key Term: injunction
A court order requiring a party to do, or refrain from doing, a specific act. Injunctions are an equitable remedy and are discretionary.

Types of Injunctions

There are two main types of injunctions relevant to contract law: prohibitory and mandatory.

Key Term: prohibitory injunction
An order restraining a party from doing a particular act, usually to prevent a breach or continuation of a breach of contract.

Key Term: mandatory injunction
An order compelling a party to take positive steps to undo a breach or perform a contractual obligation.

Key Term: equitable remedy
A remedy granted at the discretion of the court, based on principles of fairness, rather than as of right.

Key Term: negative covenant
A contractual promise not to do a specific act (for example, not to compete or not to disclose confidential information).

Prohibitory Injunctions

A prohibitory injunction restrains a party from committing a breach of contract or continuing a wrongful act. This is the most common form of injunction in contract law. Where the claimant seeks to restrain breach of a clear negative covenant, courts often grant prohibitory relief, sometimes “as a matter of course,” unless it would be oppressive or cause particular hardship. Illustratively, in a rider retainer context, an interim injunction was granted to stop a jockey breaching a promise not to ride for a rival on the day of a major race. In these cases, the uncertainty of assessing damages (for example, who would have won a race) and the voluntary nature of the undertaking support equitable relief.

Key Term: balance of convenience
A comparative assessment of the likely harm to each party if an injunction is granted or refused, used especially at the interim stage.

Mandatory Injunctions

A mandatory injunction compels a party to take positive action, such as restoring property or performing a contractual obligation. Courts are cautious in granting mandatory injunctions, especially if ongoing supervision would be required. A clear, specific obligation can be enforced by mandatory order when damages are inadequate and compliance can be assessed without protracted oversight. However, where an order would effectively require the defendant to run a business or conduct continuous activity under vague terms, courts will refuse mandatory relief. The distinction often turns on whether the order is to achieve a defined result versus compelling ongoing activity.

The Equitable Nature of Injunctions

Injunctions are not available as of right. They are granted at the court’s discretion and are subject to equitable principles. The court will only grant an injunction if it is just and fair to do so, considering the conduct of both parties and the practicalities of enforcement. Equitable relief is withheld where the claimant has acted improperly, delayed unreasonably, or seeks an order that would be unworkable or unduly harsh.

Key Term: clean hands
An equitable principle requiring an applicant to act fairly and honestly in relation to the dispute; improper conduct may bar relief.

Key Term: laches
The equitable doctrine that unreasonable delay in seeking relief can defeat a claim for an injunction.

Key Term: undertaking in damages
A promise given by an applicant (usually for an interim injunction) to compensate the respondent for loss caused by the injunction if it later proves unjustified.

When Will an Injunction Be Granted?

The court will only grant an injunction if damages would not be an adequate remedy. The following factors are considered:

• Adequacy of damages: If damages would fully compensate the claimant, an injunction will usually be refused. However, in negative covenant cases, restraining future breach is often appropriate even where damages are difficult to quantify.
• Balance of convenience: The court weighs the potential harm to each party if the injunction is granted or refused, including maintaining the status quo and whether the defendant can be compensated later under the claimant’s undertaking.
• Clean hands: The applicant must have acted fairly and in good faith. Material non-disclosure in a without-notice application or trickery in the transaction can bar relief.
• Delay (laches): Unreasonable delay in seeking an injunction may bar relief. Prompt applications are favored, especially to restrain imminent or ongoing breach.
• Practicality: The court will not grant an injunction if it would be difficult or impossible to enforce. Orders requiring constant supervision or lacking precision are disfavored.
• Public interest: The court may refuse an injunction if it would harm the public interest or enforce a restraint of trade that is unreasonable.

A court can award damages in lieu of an injunction where equitable factors counsel against an order but compensation can fairly address the harm.

Worked Example 1.1

A company agrees not to compete with a former business partner for two years. Six months later, the company starts soliciting the partner’s clients. The partner seeks an injunction to stop the solicitation.

Answer:
The court may grant a prohibitory injunction restraining the company from soliciting clients in breach of the agreement, provided damages would not be adequate and the partner has acted promptly and fairly. In negative covenant cases, prohibitory relief is often granted unless it would be oppressive or the restraint is unreasonable in scope.

Worked Example 1.2

A landlord covenants to provide a resident porter in a block of flats but fails to do so. A tenant seeks an injunction requiring the landlord to appoint a porter.

Answer:
The court may grant a mandatory injunction if damages would not be sufficient and the obligation is clear and specific. However, if ongoing supervision would be required, the court may refuse the injunction. If the covenant specifies a discrete, assessable duty (for example, to employ a resident porter with defined tasks), relief may be more likely than where the order would require running a wider enterprise under vague terms.

Worked Example 1.3

An actress contracts to act exclusively in a studio’s productions for two years and not to work for competitors. She refuses to perform for the studio and signs with a rival. The studio seeks an injunction.

Answer:
The court will not order her to perform for the studio (specific performance of personal services is refused), but it may grant a prohibitory injunction restraining her from acting for competitors during the contractual period if the restraint is reasonable. This enforces the negative covenant without compelling personal performance.

Worked Example 1.4

A petrol retailer has a supply contract with an oil company. During a nationwide shortage, the oil company threatens to cut off supplies in breach of contract. The retailer applies for an injunction.

Answer:
A prohibitory or mandatory injunction may be granted to prevent the cut-off or require continued supply where damages would be inadequate due to scarcity. In exceptional market conditions, equitable relief can preserve the status quo because substitute supply is unavailable and damages cannot restore trading capacity.

Worked Example 1.5

A technology developer licenses its platform to a distributor under a contract with strict confidentiality and non-use provisions. The licensor learns the distributor is about to disclose proprietary information to a competitor and seeks urgent relief.

Answer:
An interim prohibitory injunction restraining disclosure is likely, provided there is a serious issue to be tried, damages would be inadequate (irreversible loss of confidentiality and competitive harm), and the balance of convenience favors the applicant. The applicant must give an undertaking in damages and provide full and frank disclosure if applying without notice.

Interim (Interlocutory) Injunctions

An interim injunction is a temporary order made before trial to preserve the status quo and prevent irreparable harm. The court will only grant an interim injunction if there is a serious issue to be tried, damages would not be adequate, and the balance of convenience favours the applicant. This approach reflects the well-known American Cyanamid principles. The court also considers whether it can compensate the respondent by the applicant’s undertaking in damages, and often prefers to maintain the status quo until trial. Interim orders usually take effect immediately and include penal notices warning of contempt consequences for breach.

Interim applications may be made without notice where urgent, but applicants must then provide full and frank disclosure of all material facts, and the order is typically listed for a “return date” shortly after, at which the respondent can argue for discharge or variation. It is possible to obtain an injunction before proceedings commence, but the applicant must undertake to issue proceedings straight away.

Key Term: interim injunction
A temporary court order granted before trial to prevent harm or preserve the status quo until the case is decided.

Key Term: freezing injunction
A prohibitory interim order restraining disposal or dissipation of assets, to preserve the court’s ability to make an effective judgment.

Key Term: search order
A mandatory interim order requiring the respondent to permit entry to search for and preserve evidence at risk of destruction.

Key Term: preservation order
A mandatory order requiring the respondent to preserve specified property or evidence pending trial.

Breaches of injunctions can result in contempt proceedings, potentially leading to fines, sequestration of assets, or committal to prison, reflecting the seriousness of compliance.

Key Equitable Principles

Adequacy of Damages

If damages would fully compensate the claimant, an injunction will not be granted. In contract cases involving confidential information, unique goods, exclusivity, or scarce supplies, damages often fail to protect the claimant’s interests, supporting equitable relief. In negative covenant cases, restraining future breach is generally appropriate, and the adequacy of damages is not always a decisive factor.

Balance of Convenience

The court considers which party would suffer greater harm if the injunction is granted or refused. This includes practical impacts on business operations, third-party effects, and the ability to compensate loss via the applicant’s undertaking. The status quo is often preserved, especially where rapid changes could irreversibly harm the claimant’s position before trial.

Clean Hands

The applicant must have acted honestly and fairly. If the applicant has acted improperly, the court may refuse relief. Clean hands include obligations of full and frank disclosure on without-notice applications and avoiding misleading conduct in relation to the transaction. Equitable remedies will not assist applicants whose conduct undermines fairness.

Delay (Laches)

If the applicant has delayed unreasonably in seeking an injunction, the court may refuse to grant it. Delay can suggest acquiescence, undermine urgency, and make it inequitable to restrain the respondent’s activities, especially where the respondent has altered position in reliance on apparent inaction.

Practicality and Enforceability

The court will not grant an injunction if it would require ongoing supervision or is otherwise impractical to enforce. Orders must be sufficiently precise to avoid future disputes about compliance. Courts are wary of mandatory orders that effectively compel running a business or continuous activity under vague terms. Conversely, discrete, well-defined obligations are more amenable to mandatory relief.

Public Interest

If granting the injunction would harm the public interest, the court may refuse to grant it. Public interest concerns include unreasonable restraints of trade, impact on essential services, or chilling legitimate competition. An injunction will not enforce a covenant that is unlawfully wide in scope, duration, or geography.

Exam Warning

The court will not grant an injunction if it would require constant supervision or is too vague to enforce. In such cases, damages or specific performance may be more appropriate. For interim relief, ensure there is a serious issue to be tried, consider the adequacy of damages and the balance of convenience, and be prepared to give an undertaking in damages.

Revision Tip

Remember: Injunctions are discretionary. Always consider whether damages are adequate and whether the applicant has acted promptly and fairly. For interim applications, apply the American Cyanamid criteria and think about the status quo and the undertaking in damages. In negative covenant scenarios, prohibitory relief is often appropriate unless oppressive.

Key Point Checklist

This article has covered the following key knowledge points:

• Injunctions are discretionary equitable remedies available for breach of contract.
• Prohibitory injunctions restrain a party from doing an act; mandatory injunctions compel a party to do an act.
• The court will only grant an injunction if damages are inadequate.
• Key equitable principles include adequacy of damages, balance of convenience, clean hands, delay, practicality, and public interest.
• Interim injunctions preserve the status quo before trial and require a serious issue to be tried, consideration of adequacy of damages, and balance of convenience, plus an undertaking in damages.
• In negative covenant cases, prohibitory injunctions are commonly granted unless oppressive or unreasonable in restraint of trade.
• Mandatory injunctions are exceptional; courts are reluctant where orders would require ongoing supervision or running a business.
• Breach of an injunction can lead to contempt, including fines, sequestration, or committal.
• The applicant must act promptly and fairly to obtain an injunction.

Key Terms and Concepts

• injunction
• prohibitory injunction
• mandatory injunction
• equitable remedy
• negative covenant
• interim injunction
• undertaking in damages
• balance of convenience
• clean hands
• laches
• freezing injunction
• search order
• preservation order