REMEDIES FOR BREACH OF CONTRACT

When a contract is breached, the innocent party is contractual rights are violated and the party
has a cause of action known as breach of contract which entitles it to a remedy.

Remedies for breach of contracts are:-

 Common Law and

 Equitable

Whereas Common Law remedies comprise damages only, Equitable remedies include;

 Injunction
 Rescission
 Specific performance
 Account
 Tracing
 Quantum Mernit
 Winding Up
 Appointment of Receiver

Before 1873, Common Law remedies could only be availed by the Common Law Courts while
equitable remedies were only available in the Lord Chancellors Courts. The 2 categories of
remedies differ in that whereas common law remedies are awarded “as right” equitable remedies
are awarded as discretional.

It is for the Court to decide whether the circumstances justify the remedy. (DISCRETIONARY)

1. DAMAGES (monetary compensation)

This is the basic Common Law remedy; it is a monetary award by the court to compensate the
plaintiff for the loss occasioned by the breach.

The principal remedy under common law for breach of contract is an award of damages, with
the purpose of damages being to compensate the injured party for the loss suffered as a result
of the breach, rather than (except for very limited circumstances) to punish the breaching
party. his general rule, which can be traced back to the decision in the case of Robinson v
Harman (1848) 1 Ex 850, is to place the claimant in the same position as if the contract had
been performed, with the guiding principle being that of restitution. As was held by the Court
in Robinson v Harman:

“The rule of the common law is, that where a party sustains a loss by reason of a breach of
contract, he is, so far as money can do it, to be placed in the same situation, with respect to
damages, as if the contract had been performed.”

Its objective is to place the plaintiff to the position he would have been had the contract been
performed.

Damages for breach of contract may nominal or substantial.

1. Nominal Damages

This is an amount awarded by the court to show that a party’s rights have been violated but no
loss was occasioned or the party was unable to prove loss.

2. Substantial Damages

This is an amount by the court as the actual loss suffered or as the amount the court is willing to
recognize as direct consequences of the breach f the contract.

We further have a general category known as:

1. General damages

General damages, or non-pecuniary losses, are those damages which cannot be mathematically
assessed as at the date of the trial. These damages are not amenable to precise monetary
quantification and are assessed by the Court, ordinarily guided by precedents of a similar
nature.

It is noteworthy that general damages are ordinarily not recoverable in cases concerning breach
of contract as highlighted in the Court of Appeal case of National Industrial Credit Bank Limited
v Aquinas Francis Wasike & Another (2015) eKLR.

Further, the Court of Appeal has on numerous occasions held that allowing a claim for general
damages in addition to quantified damages under a breach of contract would amount to
duplication. In addition, where there has been a breach of contract but the innocent party has
not sustained any actual damage therefrom, or fails to prove that he has, only nominal
damages would be recoverable by the innocent party.

2. Special damages

Special damages are awarded to compensate a claimant for actual out-of-pocket expenses and
provable losses that have been incurred as a direct result of the defendant’s actions or
behaviour. Special damages are amenable to precise monetary quantification and as such the
claimant must be able to support their claim with compelling and accurate evidence of the
losses sustained.

In Equity Bank Limited v Gerald Wang’ombe Thuni (2015) eKLR , the Court highlighted the
importance of special damages being specifically pleaded and thereafter strictly proved before
they can be awarded. This position was further buttressed by the Court in Okulu Gondi v South
Nyanza Sugar Company Limited (2018) eKLR , where it was held that “special damages must
indeed be specifically pleaded and proved with a degree of certainty and particularity.”

3. Expectation damages
Expectation damages are a form of compensation awarded to the party harmed by a
breach of contract for the loss of what was reasonably anticipated from the transaction
that was not completed and are aimed at placing the innocent party in the position he
would have been, had the breach not occurred.
Expectation damages are recoverable only where they can be calculated to a reasonable
certainty, and where this is not possible, the injured party will only be able to recover
nominal damages.

RULES ON THE ASSESSMENT AND PAYMENT OF DAMAGES

1. The purpose of a monetary award in damages is to compensate the plaintiff for the loss
or injury suffered. Damages as a remedy are compensatory in nature.

2. The loss or damage suffered by the plaintiff must be proved, the plaintiff must show
that but for the defendant’s breach the loss would not have been occasioned. There must
 be a nexus or link between the breach of contract and the plaintiff’s loss failing which the
damages are said to be too remote and therefore irrecoverable.

In Hadley V. Baxendale, the plaintiff owned a mill whose crankshaft was broken and
required replacement the following day, however there was undue delay by the defendant
during which time the mill remained closed. The plaintiff sued for loss of profit. It was
held that the defendant was not liable for the lost profit as the same could not be traced to
the delay in the delivery of the crankshaft. .The plaintiff’s loss was too remote and
irrecoverable.

This case is authority to the proposition that the defendant is only liable for such loss or
damage as is reasonably foreseeable in the ordinary course of events.

3. If a party has special knowledge in relation to the contract but fails to act on it and the
other party suffers loss, the party is liable for the loss, as was the case in Victoria
Laundry (Windsor)Ltd. V. Newman Industries Ltd , where the plaintiff Company
wanted to expand it’s business as well as take advantage of certain lucrative. To do so it
required a large boiler which the defendant company agreed to deliver in June. The
plaintiff had by letter notified the defendant the urgency with which the boiler was
required. The boiler was not delivered until November by which time the plaintiff
company lost money from the contract. In an action against the defendant for the loss, it
was held that the defendant was liable.

A similar holding was made in The Heron II. The appellant, a ship owner agreed to ship
the respondent‘s sugar from Constanza to Basra. The appellate knew that respondent was
a sugar merchant and that there was a sugar market at Basra. By reason of a detour, the
ship arrived 9 days later at Basra, by which time the price of sugar had dropped and the
respondent made a loss of £4,011. In an action to recover the same, it was held that the
appellant was liable.

4. Mitigation of Loss: This principle is to the effect that when a breach of a contract
occurs, it is the duty of the innocent party to take reasonable steps to reduce the loss it is
likely to suffer from the breach .This duty is imposed upon the innocent party by law.
 If the party fails to mitigate its loss the amount by which loss ought to have been reduced
is irrecoverable. In Harris [Link], it was held that where the charterer of a ship
failed to provide cargo in breach of contract, the ship captain was bound to accept cargo
from other person’s at competitive rates.

Whether or not the innocent party has acted reasonably in mitigating its loss is a question
of fact. In Musa Hassan V. Hunt and Another, the appellant had contracted to buy all
the milk produced by the respondent for one year. On one occasion, the appellate refused
to take delivery of the milk on the ground that it was unfit for human consumption; the
respondent proved that it was fit for human consumption.

After the refusal the respondent converted the milk to ghee and casein which fetched a
lower price than milk. The appellant argued that the respondent had not acted reasonably
in mitigating the loss .It was held that the respondent had reasonably.

5. Liquidated damages and penalties: Parties to a contract may beforehand specify the
amount payable to the innocent party in the event of a breach .The sum specified may be:
Liquidated damages or a Penalty

If the sum is a genuine pre –estimate of the loss likely to be suffered by the innocent
party, it is awarded by the court without proof of the actual loss and it is referred to as
liquidated damages

In Wallis v. Smith, it was held that liquidated damages are an amount which represents
almost the actual loss occasioned and is awarded irrespective of the actual loss.

If the sum has no relation to the actual loss, but is intented to compel performance or it is
a sum to be forfeited by the party in default it is regarded as a penalty .A penalty is
generally extravagant it covers but does not access loss.

Penalties cannot be awarded by the court, the court assess the amount payable by
applying the rules of assessment of damages.

Whether the sum is liquidated damages or penalties depends on the intention of the
parties .In making the determination, court are guided by certain presumptions and rules.
Presumptions or rules for distinguishing liquidated damages and penalties

According to Lord Dunedin in Dunlop Pneumatic Tyre [Link] v. New Garage and Motor Co.
The following presumptions assist in the determination:

1. If the sum specified by the parties is extravagant and unconscionable it is deemed to be a

penalty.

2. If the sum payable for the non-payment of another is greater it is deemed to be a penalty.

3. If a single lumpsum is payable on the occurrence of one or several or all events, some of
which occasion serious or minor loss it is deemed to be a penalty.

4. If the sum is payable on the occurrence of only one event it is deemed to be liquidated
damages.

5. The categorization of the sum by the parties as “liquidated damages” or “Penalty” ‘is not
binding the court.

6. The fact that a precise pre-estimation of loss is problematic does not necessarily mean
that the sum specified is a penalty

7. As a general rule, exemplary or punitive damages are not awarded for breach of
contracts.

EQUITABLE REMEDIES (DISCRETIONAL)

1. SPECIFIC PERFORMANCE

The decree of specific performance is a court order which compels a party to perform its
contractual obligations as previously agreed.

It compels a party to discharge its contractual obligation.

It orders performance without an option to pay damages. It is an equitable remedy manifesting

the equitable maxim that equity acts in personam1.

1
Against the person. This is as compared to an action in rem which is as against a thing or
property
Specific performance may be granted in circumstance in which

1. Monetary compensation inadequate

2. The subject matter is unique or has rare characteristics e.g. land

The award of specific performance is discretional on the basis of established principles of

equity:-

a) Delay

The innocent party must seek judicial redress at the earliest possible instance as delay defects
equity. The remedy is not available if the innocent party has slept on its rights for too long.

b) Clean Hands

The innocent Party must approach the court free from blame as he who comes to equity must do
so with clan hands. Evidence of mistake misrepresentation or duress disentitles the party the
remedy

c) Hardship to the dependent

Specific performance will not be decreed if it is likely to subject the defendant to undue hardship
as he who seeks equity must do equity and equality is equity.

d) Performance and Supervision

Specific performance cannot be decreed if is impossible for the defendant to perform or where
performance requires contract supervision. This is because court of law are reluctant to make
ineffectual orders and do not have the mechanism to supervise performance.

e) Mutuality.

As a general rule, specific performance will not be granted if it would not have been granted
were the positions of the parties interchanged. This is because equality is equality

f) Nature of Contract.

Specific performance will not be granted in contracts of personal service or performance e.g.
employment as this is likely to perpetrate injustice. However, the remedy may be granted where
a contract is breached in anticipation as was the case in Jiwa V. Zenab.

A court of law may decline to decree Specific Performance if;

 1. The contract is one of personal service e.g. employment.
2. The contract is revocable by the party against whom an order of specific performance is
sought.
3. The contract is specifically enforceable in part only. Where the court cannot grant
specific performance of the contract as a whole, it will not interfere.
4. The contract is incapable of being performed i.e. impossibility. Courts are reluctant to
make ineffectual orders.
5. Performance of the contract requires constant supervision.
6. The decree is likely to subject the defendant to severe or undue hardship.
7. The contract in question was obtained by unfair means.

2. INJUCTION

This is a court order which either restrains a party from doing or continuing to do a particular
thing or compels it to undo what it has wrongfully done. It is an equitable remedy whose award
is discretional and may be granted in circumstance in which:-

1. Monetary compensation is inadequate

2. It is necessary to maintain the status quo

TYPES OF INJUNCTION

They may be classified as:-

i. Prohibitory and Mandatory

ii. Interim or temporary and permanent

1. Prohibitory injunction.

This is a court order which restrains a party from doing or continuing to do a particular thing.

2. Mandatory injunction.

It is a court order which compels a party to put right what it has wrongly done. It is restorative in
character.

3. Temporal or Interim Injunction

It is court order whose legal effect is restricted to a specified duration on the expiration of which
it lapses. However, it may be extended by the court on application by the plaintiff but can also
be lifted on application of the defendant.

4. Permanent or Perpetual Injunction

This is a court order whose legal effect is permanent.

Whether or not an injunction is awarded is the court’s discretion, in light of which the court takes
into consideration certain principles e.g. delay, clean hands, hardship to defendant etc.

However for the order to be granted, the plaintiff must prove that:-

a. It has a Prima Facie case with a high probability of success

b. If the order is not granted the plaintiff is likely to suffer irreparable injury.

If the court is in doubt it must decide the case on “a balance of convenience.” It was so held in
Annielo Giella V. Casman Brown Co. Ltd.

3. RESCISSION.

The essence of this remedy is to restore the parties to the position they were before the contract.

It is an equitable remedy whose award is discretional.

The remedy may be availed whenever a contract is vitiated by misrepresentation.

However the right to rescind a contract is lost in various ways: -

1. Delay: A contract cannot be rescinded if a party has slept on its right for too long as
“delay defeats equity”. In Leaf V. International Galleries Ltd., where the plaintiff
purported to rescind a contract after 5 years, It was held that the remedy was not available
on account of delay.

2. Affirmation: A party loses the right to rescind a contract if it expressly or by implication

accepts the contract.

3. Third party rights: A contract cannot be rescinded after 3rs party rights have arisen
under it, as this would interferes with the rights of a person who was not privy to the
original contract.
 4. Restitution in integrum not possible: Rescission is not available if the parties cannot
be restored to the position they were before the contract. E.g. if one of the parties is a
company and it has gone into liquidation.

4. QUANTUM MERUIT

This literally means “as much as is earned or deserved”

This is compensation for work done. The plaintiff is paid for the proportion of the task
completed.

The remedy has its origins in equity and its award is discretional. It may be granted where:-

1. The contract does not specify the amount payable.

2. The contract is divisible

3. The contract is substantially performed

4. Partial performance is accepted

5. A party is prevented from completing it undertaking.

LOSS OF REMEDY (LIMITATION OF ACTION)

When a person’s legal or equitable rights are violated, he is said to make a cause of action e.g.
breach of contract, negligence, nuisance etc.

Causes of actions are not enforceable in perpetuity.

The law prescribes the duration within which causes of action must be enforced.

The Limitation of Action Act prescribes the duration within which causes of action must be
enforced. If not enforced within the prescribed time the action becomes statute barred and is
unenforceable.

The prescription of the duration within which a cause of action must be enforced may be the
duration within which a cause of action must be enforced may be justified on policy grounds.

It ensures that justice is administered on the basic of the best available evidence. It ensures that
disputes are settled as and when they occur.
WHEN DOES TIME STARTING RUNNING.

As a general rule, time starts running on the date the cause of action accrues or arises.

However the running of time may be postponed in certain circumstances e.g

1. If the prospective plaintiff is an infant or minor, time starts running when it attains the
age of the majority or dies whichever occurs first.

2. If the prospective plaintiff is of unsound mind, time starts running when he becomes of
unsound mind or dies whichever comes first.

3. If the prospective plaintiff is labouring under ignorance, fraud or mistake time starts
running when he ascertains the fact or when a reasonable person would have ascertained.

4. If the prospective defendant is the president, time starts running when he leaves office or
dies whichever occurs first.

When time starts running, it generally runs through and the action becomes statute barred.
However, a statute barred action may be enforced with leave of the court if it is proved that the
failure to sue was justified.