Types of Losses +mitigation, causation etc

Mental Distress (General Rule)

Damages are not recoverable in contract for distress, anxiety, upset or injured feelings

Mental Distress (Exception – Purpose of Contract)

Damages are recoverable where the whole or major purpose of the contract is pleasure, relaxation, peace of mind or freedom from distress

Examples of Pleasure Contracts

Holiday contracts, wedding services, or contracts promising quiet enjoyment of property

Non-Pecuniary Damages

Damages awarded for non-financial loss such as distress or loss of amenity in limited contractual contexts

Loss of Reputation (General Rule)

Damages for loss of reputation are generally not recoverable in contract

Loss of Reputation (Employment Exception)

Economic loss resulting from reputational harm may be recoverable where the employer breaches the implied term of mutual trust and confidence

Implied Term of Trust and Confidence

An employer must not conduct itself in a manner likely to destroy or seriously damage the employment relationship

Employment Reputational Damages

Recoverable only for financial loss (e.g. inability to obtain future employment), not for injured feelings

Loss of Chance

Damages may be awarded for the loss of a real and substantial opportunity that had measurable value

Requirement for Loss of Chance

The chance must be more than speculative and capable of monetary assessment

Damages on Behalf of Another (General Rule)

A party cannot recover damages for loss suffered by a third party due to privity of contract

Causation (Factual)

The breach must be the dominant or effective cause of the claimant’s loss

Causation (Legal)

Even if factual causation exists, liability may be excluded if a novus actus interveniens breaks the chain of causation

Novus Actus Interveniens

A new intervening act that breaks the chain of causation and relieves the defendant of liability

Remoteness of Damage (Hadley v Baxendale – Limb 1)

Loss is recoverable if it arises naturally according to the usual course of things from the breach

Remoteness of Damage (Hadley v Baxendale – Limb 2)

Unusual loss is recoverable only if special circumstances were known to the defendant at the time of contracting

Mitigation Principle

The claimant must take reasonable steps to reduce their loss following breach

Failure to Mitigate

Losses caused by the claimant’s unreasonable failure to mitigate are not recoverable

Reasonable Substitute Performance

Mitigation may require accepting substitute performance from the contract-breaker if reasonable

No Duty to Mitigate (Debt Claims)

There is no duty to mitigate where the claim is for a contractual debt or liquidated damages, as these are fixed entitlements