Contract Remedies: A Guide

Introduction

When a contract is broken, the law offers several routes to put things right. In England and Wales, courts aim to put the claimant, as far as money can do it, into the position they would have been in if the agreement had been carried out. That usually means damages, but in some situations the court may order performance, restrain further breach, or set the contract aside.

This guide explains the main remedies—damages, specific performance, injunctions and rescission—along with the limits and practical points that shape outcomes. It is written for students, trainees, and practitioners who want a clear, structured overview backed by leading cases.

What You’ll Learn

• How courts measure damages (expectation and reliance) and when non-pecuniary loss can be recovered
• The rules on remoteness and mitigation, including The Achilleas and British Westinghouse
• When specific performance is available and why courts often refuse it for ongoing obligations
• How injunctions work, especially for negative covenants and confidential information
• What rescission does, when it is available, and the key bars that can defeat it
• How to select and combine remedies, plus common pitfalls to avoid
• Key case law you should know and how to apply it to facts

Core Concepts

Damages: the primary remedy

Purpose

• Compensatory, not punitive. The target is the “benefit of the bargain” (Robinson v Harman (1848) 1 Ex 850).

Types of loss

• Expectation loss: difference in value, loss of profits, or reasonable cost of cure (subject to reasonableness).
• Reliance loss: wasted expenditure incurred in preparing or performing the contract. Not a free-standing windfall; it is an aspect of expectation. The Mamola Challenger [2010] EWHC 2026 (Comm) confirms that reliance cannot put the claimant in a better position than performance would have done.

Non-pecuniary loss

• Generally not recoverable, but exceptions exist where the contract is aimed at pleasure, peace of mind, or freedom from distress (Jarvis v Swan Tours [1973] QB 233; Farley v Skinner [2001] UKHL 49).
• Damages may also be awarded where distress flows from physical inconvenience caused by the breach (Watts v Morrow [1991] 4 All ER 937).
• Cost of cure vs loss of amenity: the court may refuse disproportionate “cost of cure” and award a modest sum for loss of amenity instead (Ruxley Electronics v Forsyth [1996] AC 344).

Remoteness and responsibility

• Hadley v Baxendale (1854) 9 Exch 341: loss recoverable if it arises naturally (in the usual course) or was within the reasonable contemplation of both parties at the time of contracting.
• Transfield Shipping Inc v Mercator (The Achilleas) [2008] UKHL 48: consider whether the defendant can fairly be taken to have accepted responsibility for that type of loss. Applied in Supershield Ltd v Siemens Building Technologies [2010] EWCA Civ 7.

Mitigation

• Claimants must take reasonable steps to limit loss; benefits gained from mitigation are set off (British Westinghouse v Underground Electric [1912] AC 673).
• It is not a strict “duty”, but unreasonable failure may reduce recovery.

Practical points

• Prove causation and quantify loss with credible evidence.
• Choose valuation method: diminution in value, loss of profit, or reasonable cost of cure (if proportionate).
• Consider interest and any contractual limits or agreed damages clauses.

Specific Performance: when money is not enough

Nature of the remedy

• An equitable order requiring performance of contractual duties.
• Available only where damages are inadequate (Co-Operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1).

Common scenarios

• Sale of land: often granted because each parcel is unique.
• Unique goods: may be ordered where substitutes are not readily available.

Why courts refuse it

• Orders needing constant supervision, or requiring a party to run a business, are usually refused (Argyll Stores).
• Personal service: courts do not force ongoing working relationships.
• Hardship, lack of mutuality, delay, and claimant’s misconduct can bar relief.

Injunctions: stopping or requiring action

Types

• Prohibitory: restrains a breach (e.g., non-compete, confidentiality).
• Mandatory: requires a positive act (rare in contract contexts; harder to obtain).
• Interim injunctions: assessed using the American Cyanamid [1975] AC 396 approach (serious issue to be tried, adequacy of damages, balance of convenience).

Personal services and negative covenants

• Courts will not order someone to perform personal services, but may restrain them from working elsewhere if there is a valid negative covenant (Lumley v Wagner (1852) EWHC (Ch) J96; Warner Bros v Nelson [1937] 1 KB 209).
• The caution against forcing personal performance is confined to a limited category of contracts, typically those relying on individual skill (LauritzenCool AB v Lady Navigation Inc [2005] EWCA Civ 579).

Practical focus

• For non-competes, confidentiality, and IP, prohibitory injunctions are often the tool of choice to stop ongoing or threatened breaches.

Rescission: setting the contract aside

Effect

• Treats the contract as if it never existed, with each side restored as far as possible to their pre-contract position.

When available

• Usually for misrepresentation, mistake, duress, or undue influence.

Bars to rescission

• Affirmation: the claimant chooses to continue with the contract after knowing the facts.
• Lapse of time: undue delay defeats the remedy (Leaf v International Galleries [1950] 2 KB 86).
• Impossibility of restitutio in integrum: if the parties cannot be put back (even substantially) to their original position.
• Third-party rights: where an innocent third party has acquired rights.

Adjustments

• Indemnity for necessary expenses incurred under the contract (Whittington v Seale-Hayne (1900) 82 LT 49).
• For misrepresentation, the court may award damages in lieu of rescission under s 2(2) Misrepresentation Act 1967.

Choosing and combining remedies

• Election matters: you cannot both rescind (treat the contract as voidable and set it aside) and also claim for loss of bargain under that same contract.
• Damages can be combined with injunctions where loss has occurred and ongoing breach needs to be restrained.
• Specific performance and an injunction may be pleaded in the alternative to damages, subject to the usual equitable limits.

Key Examples or Case Studies

Robinson v Harman (1848) 1 Ex 850

• Context: A classic statement of the compensatory principle.
• Key point: Put the claimant, so far as money can, in the position as if the contract had been performed.
• Use: Starting point for any damages analysis.

Hadley v Baxendale (1854) 9 Exch 341

• Context: Late delivery of a mill shaft caused lost profits.
• Key point: Loss is recoverable if it arises naturally or was within the parties’ contemplation at the time of contracting.
• Use: Test remoteness before you quantify loss.

Transfield Shipping (The Achilleas) [2008] UKHL 48; Supershield [2010] EWCA Civ 7

• Context: Ship returned late; market loss greater than usual.
• Key point: Ask whether the type of loss is one the defendant can fairly be said to have accepted responsibility for.
• Use: In unusual market losses, examine commercial context and allocation of risk.

Ruxley Electronics v Forsyth [1996] AC 344

• Context: A swimming pool was built too shallow; cost of cure was out of proportion.
• Key point: Court may refuse cost of cure and award modest loss of amenity.
• Use: Choose the valuation method that fits reasonableness and fairness.

Jarvis v Swan Tours [1973] QB 233; Watts v Morrow [1991] 4 All ER 937

• Context: Disappointing holiday; distress and inconvenience from a defective survey.
• Key point: Damages for distress are limited; allowed for contracts aimed at pleasure/peace of mind, or where distress stems from physical inconvenience.
• Use: Only claim non-pecuniary loss where the contract type and circumstances permit.

British Westinghouse v Underground Electric [1912] AC 673

• Context: Breach and replacement turbines that performed better.
• Key point: Claimants must act reasonably; benefits from mitigation are credited.
• Use: Document mitigation steps and account for benefits.

Co-Operative Insurance v Argyll Stores [1998] AC 1

• Context: Tenant ceased trading in a supermarket; landlord sought specific performance to reopen.
• Key point: Courts avoid orders requiring a party to run a business or needing constant supervision.
• Use: Prefer damages for ongoing commercial operations.

Lumley v Wagner (1852) EWHC (Ch) J96; LauritzenCool AB v Lady Navigation [2005] EWCA Civ 579

• Context: Singer bound by a negative covenant; scope of personal services exceptions.
• Key point: Negative injunctions may be granted; courts will not force positive performance of personal services. The personal services caution is confined to particular contracts reliant on specialist skill.
• Use: For non-compete/confidentiality, seek prohibitory relief; avoid claims that amount to forced labour.

Leaf v International Galleries [1950] 2 KB 86

• Context: Painting misattributed as by Constable; action brought after several years.
• Key point: Delay can bar rescission.
• Use: Move promptly where rescission is sought.

The Mamola Challenger [2010] EWHC 2026 (Comm)

• Context: Reliance expenditure claim following a charterparty dispute.
• Key point: Reliance is part of expectation; it cannot put the claimant in a better position than performance.
• Use: Be ready for the defendant to show the deal would have been loss-making.

Practical Applications

How to assess damages

• Step 1: Identify the breach and prove causation.
• Step 2: Choose the measure—difference in value, loss of profits, or reasonable cost of cure (check proportionality).
• Step 3: Add foreseeable consequential losses within Hadley categories or within accepted responsibility (The Achilleas).
• Step 4: Subtract avoided costs and benefits from mitigation (British Westinghouse).
• Step 5: Consider whether non-pecuniary loss fits an exception (Jarvis, Farley, Watts).
• Step 6: If expectation is uncertain, consider reliance—subject to The Mamola Challenger.
• Step 7: Check for contractual clauses affecting damages (exclusions, caps, agreed damages).
• Step 8: Add interest where appropriate.

When to seek specific performance

• Use for unique assets, especially land.
• Avoid where performance involves running a business, complex supervision, or personal services.
• Anticipate equitable bars: delay, claimant’s conduct, hardship.

When to seek an injunction

• Use prohibitory orders to stop ongoing or threatened breach of confidentiality, IP, or non-compete covenants.
• Prepare evidence on adequacy of damages and the balance of convenience for interim relief.
• Do not frame relief to compel personal service.

Planning for rescission

• Confirm a ground exists (misrepresentation, mistake, duress, undue influence).
• Check the bars: affirmation, delay, impossibility, third-party rights.
• Consider whether damages in lieu under s 2(2) Misrepresentation Act 1967 might be more suitable.
• Record the steps needed to restore both sides to their pre-contract position; identify any indemnity items (Whittington).

Pleading strategy and election

• Plead remedies in the alternative where compatible (e.g., damages and an injunction).
• Decide early whether to affirm or seek to rescind; your conduct after breach can affect availability.

Summary Checklist

• Start with Robinson v Harman: the compensatory aim drives damages.
• Quantify expectation loss; use reliance only where appropriate and not to outstrip the bargain.
• Apply Hadley v Baxendale and consider The Achilleas/Supershield on accepted responsibility.
• Evidence mitigation and credit benefits (British Westinghouse).
• Non-pecuniary loss is limited; rely on Jarvis, Farley, and Watts only where facts fit.
• Specific performance is exceptional; likely for land, unlikely for ongoing businesses (Argyll Stores).
• Injunctions are strong for negative covenants; avoid forcing personal service (Lumley).
• Rescission restores the status quo; watch for bars (Leaf; impossibility; affirmation; third-party rights).
• Consider damages in lieu of rescission under the Misrepresentation Act 1967 s 2(2).
• Choose remedies carefully and be clear about election.

Quick Reference