Beyond Borders: What type of damages are relevant in a UK breach of contract suit?

A breach of contract occurs when one party of a contract fails to perform its obligation according to the contract. Today we’ll look beyond our own borders and explore what damages are relevant in breach of contract lawsuits in the UK.

When a party is found to be in breach of contract, economic damages are usually the legal remedy for the violation. The party must show that there was actual economic loss.

The court has two main considerations when making an award of economic damages: first, which consequences of the breach of contract are the defendant legally responsible; and second, quantification of the economic damages.

The court established in Hadley v Baxendale that when one party is in breach of contract, the plaintiff should receive economic compensation for the damage that was a consequence of the breach. Two types of damages are relevant in breach of contract suits: what arises naturally, and what the parties would have seen the result of the breach to be at the time the contract was made.

Damages in breach of contract cases are to ‘right’ the damaged party, not to punish the party which breached the contract. Courts will usually deduct tax which would have been owed by the plaintiff had the contract not been breached. The plaintiff is of course responsible for mitigating damages.

For further reading about breach of contract damages in the UK, have a look at Goldsmith International Business School’s introduction to breach of contract and remedies, and ‘Calculating damages for breach of contract‘ from Gannons. You can also learn about damages in breach of contract cases in Australia and India.