## Facts

- Watts purchased a house after commissioning a survey from Morrow.
- The survey prepared by Morrow negligently failed to identify significant structural defects.
- After completion, Watts discovered the defects and had to live in a "building site" while repairs were carried out.
- Watts sought damages for both the costs of repair and for mental distress resulting from the disruption and inconvenience.
- The Court of Appeal was asked to determine the appropriate measure of damages, especially relating to the claim for mental distress.

## Issues

1. Whether damages for mental distress are recoverable in contract law for breach of contract.
2. Under what circumstances non-pecuniary damages, such as mental distress, can be awarded for breach of contract.
3. Whether the inconvenience and mental suffering experienced by Watts fell within any exceptions to the general rule excluding such damages.

## Decision

- Damages for mere disappointment or distress caused by a breach of contract are generally not recoverable.
- Exceptions exist: damages are recoverable when the contract's purpose is to provide pleasure, relaxation, or peace of mind; or when mental distress is a direct result of physical inconvenience or discomfort caused by the breach.
- Watts could not recover the full cost of repairs, but was awarded damages reflecting the excess purchase price paid due to reliance on the negligent survey.
- The court limited damages for mental distress to the extent that it was directly linked to the physical discomfort caused by the defects and subsequent disruption.
- The claim was not within the exception for contracts whose purpose is pleasure, but did fall within the exception for distress caused by physical inconvenience.

## Legal Principles

- The expectation interest in contract law aims to put the injured party in the position they would have occupied had the contract been properly performed.
- General disappointment and mental distress from breaches of contract are not usually compensable.
- Damages for mental distress may be awarded when a contract is specifically intended to provide pleasure, relaxation, or peace of mind, and the breach defeats this purpose.
- Damages may also be awarded for mental distress that is directly attributable to physical inconvenience or discomfort resulting from the breach.
- The distinction between general mental distress (not recoverable) and distress arising from physical inconvenience (potentially recoverable) helps control the scope of liability.

## Conclusion

Watts v Morrow [1991] 1 WLR 1421 confirms the general exclusion of damages for mental distress in contract law, establishing clear exceptions for cases involving physical inconvenience or contracts for pleasure or peace of mind. The decision ensures damages are available only where mental distress is closely linked to tangible impacts, providing a structured approach to non-pecuniary loss in contractual claims.