Contractual damages—general principles
Produced in partnership with Zainab Hodgson of CMS
Contractual damages—general principles

The following Dispute Resolution guidance note Produced in partnership with Zainab Hodgson of CMS provides comprehensive and up to date legal information covering:

  • Contractual damages—general principles
  • Compensatory function of damages for breach of contract
  • Main categories of damages for contractual breach
  • Nominal damages for breach of contract
  • Least burdensome obligation rule
  • Cost of cure or diminution in value?
  • Date by reference to which damages are assessed
  • Damages under section 50(3) of the Sale of Goods Act 1979
  • Default damages clauses
  • Contractual mechanism for dealing with breach
  • more

This Practice Note considers the general principles of recovering damages for contractual breach, starting with the compensatory function of damages and the different kinds of damages for pecuniary and non-pecuniary losses, as well as nominal damages, damages under the Sale of Goods Act 1979 (SGA 1979), default damages clauses, contractual mechanisms for dealing with breach and interest on damages.

Compensatory function of damages for breach of contract

The normal function of damages for breach of contract is the same as that in tort, namely, compensatory. The aim being to compensate the true loss suffered by the innocent party and place them in the same position, so far as money can do it, as if the contract had been performed. There are, however, exceptional circumstances where the court may depart from this general policy and award some greater sum, such as in cases of an award of gain-based damages.

Note: unlike many torts, a breach of contract is actionable per se, therefore, in principle, a claimant who proves a breach, even if they prove no recoverable loss at all, is entitled at least to a nominal award (see Nominal damages for breach of contract).

Claims for damages for breach of contract need to be distinguished from claims in restitution based on unjust enrichment and not on compensation for breach. For guidance on such