●  Compensatory damages (financial compensation) are the principal remedy for breach of contract. Specific enforcement is available only in limited circumstances generally when damages would not be an adequate remedy, e.g. Beswick v Beswick (see Chapter 4).

●  Contractual damages traditionally aim to compensate the claimant for losses suffered, as opposed to seeking to punish the defendant. The aim of damages for breach of contract is normally to protect the claimant’s contractual expectation and put the claimant into the position they would have been in had the contract been properly performed and the breach not occurred. Compensation for lost expectation may sometimes include an award of damages to compensate for expenditure wasted as a result of the breach.

●  The lost expectation may be measured in terms of the difference in value between what the claimant expected to get and what was actually received. However, this loss may extend beyond the financial interest in performance to include purely subjective expectations in performance (the ‘consumer surplus’) and in such circumstances the cost of repair or replacement may be appropriate to achieve compensation if this would be reasonable (not out of all proportion to the benefit to be obtained) and if this expense represents an actual loss incurred.

●  Non-pecuniary losses are generally not recoverable in a claim for breach of contract. However, there are some exceptional circumstances where pleasure, enjoyment, or peace of mind are recognized as being part of the expectation and because of that their loss is compensated.

●  There are other limitations on the claimant’s ability to be fully compensated such as the ‘duty’ to take reasonable steps to minimize loss (mitigation), the fact that losses which are too remote a consequence of the breach cannot be recovered (remoteness), and the possibility that a damages award may be apportioned (reduced) to take account of the claimant’s own negligence (contributory negligence).

●  The parties may agree in advance on the damages to be payable in the event of breach (agreed damages clauses). However, in certain circumstances the courts will strike down these clauses if they are penal (or punitive). It is necessary to distinguish those clauses operating as penalties from those which constitute enforceable liquidated damages. In addition, there are a number of anomalies surrounding the operation of the rule which strike down penal clauses.