In our earlier article, we looked at the different bases on which a court can assess damages. A defendant will not be held accountable for every loss a plaintiff suffers which is in someway related to the defendant’s breach of the contract. There are a number of factors the court will consider which may limit an award of damages made against a defendant.

Causation

Essentially, a defendant’s breach of contract must have caused the plaintiff’s loss or damage. It is up to the plaintiff to prove that they would not have suffered the loss or damage but for the defendant’s breach. In effect, this is a matter of ordinary common sense and experience.

Circumstances can arise where multiple factors contribute to the loss or damage the plaintiff suffers. Generally speaking, it will be sufficient if one of those factors is the defendant’s breach. Like life, however, breaches of contract are complicated. If an external event intervenes in such a way as to break the chain of causation, the plaintiff will only be entitled to nominal damages. The court needs to look at the factual circumstances of each case to determine the causal link between the defendant’s breach and the plaintiff’s loss or damage.

Remoteness

A plaintiff’s loss or damage, even if caused by the defendant’s breach of contract, must not be considered too remote. This has become known as the test in Hadley v Baxendale. A plaintiff’s loss or damage must have either:

  1. Arisen naturally, according to the usual course of things; or
  2. Been in the contemplation of both parties at the time they made the contract.

Whether a plaintiff’s loss or damage is considered to be too remote is to be decided on the facts of each case. As circumstances surrounding breaches of contract are generally factually unique, previous cases can only assist to a limited degree.

Mitigation of Loss

Mitigation of loss refers to the steps the plaintiff took, or ought to have taken, to minimise their loss or damage. It is up to the defendant to prove that a plaintiff should have mitigated their loss. For example, Party A contracts to supply Party B with goods and Party B breaches that contract by refusing to pay for the goods. Party A may mitigate their loss in circumstances where Party C indicates that they wish to buy the goods. If Party A can sell the goods to Party C, Party A will not have suffered any loss.

A plaintiff does not owe a duty to the defendant to mitigate their loss. Rather, a plaintiff must not act unreasonably. Once again, whether a plaintiff has acted reasonably or not, is determined on the facts of each case.

When are Damages Assessed?

Damages are most frequently assessed at the time when the breach occurs. Although this is the general rule, a court will not apply the rule if doing so will cause an injustice. In those circumstances, a Court can fix any date it deems appropriate.

***

Factors that can limit an award of damages for breach of contract are complicated. Any party to a contract which has been breached should seek independent legal advice. If you have any questions, get in touch with LegalVision’s dispute resolution lawyers on 1300 544 755, or by filling out the form on this page.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

Get a Free Quote Now

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • We will be in touch shortly with a quote. By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.

Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at info@legalvision.com.au

View Privacy Policy