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Cases on Damages
Smith, Hogg & Co v Black Sea Insurance (1940)
A shipowner was held liable to a charterer in damages for loss of a cargo
which had been caused by a combination of perils of the sea and the
unseaworthiness of the ship. The latter was sufficient to carry a claim for
Stansbie v Troman (1948)
A painter in breach of contract after he had completed decorations, left
unlocked a house, which was later burgled by thieves. The defendant was held
liable for the value of goods taken as this was exactly the sort of loss he
should have guarded against and foreseen.
Weld-Blundell v Stephens (1920)
The plaintiff employed an accountant, the defendant, to investigate the
affairs of a company he had invested in. The defendant’s partner negligently
dropped a letter from the plaintiff in the office of the company’s manager,
which the manager picked up and showed to his directors, who sued the plaintiff
in libel and won. The plaintiff sued the defendant for breach of contract to
recover the damages he paid out in the libel action.
The court declared that the claim must be dismissed since (1) the plaintiff’s
liability for libel existed apart from the contract, and (2) the loss was not
caused by breach of contract, but by the act of the company’s manager showing
the letter to the directors. This was an act the defendant could not have
Hadley v Baxendale (1849)
Victoria Laundry v Newman Industries (1949)
The Heron II (1969)
See extract from Casebook.
Pilkington v Wood (1953)
The plaintiff bought a house in Hampshire and his solicitor, in breach of
contract, negligently failed to notice that the house had a defective title. The
solicitor was held liable for the amount by which the house’s value had been
lessened by the title not being good. The plaintiff shortly afterwards took up
work in Lancashire and suffered added loss as the house was hard to resell.
However, the solicitor was not liable for the latter loss as he could not
anticipate that the plaintiff would shortly move.
Horne v Midland Railway (1873)
The defendant contracted to carry a consignment of shoes to London by 3
February, but delivered a day late. As a result of the delay, the plaintiff lost
an opportunity of selling shoes at an exceptionally high price. It was held that
the defendant was not liable for this loss. Although he knew the plaintiff would
have to take the shoes back if they were not delivered by 3 February, he did not
know the plaintiff would lose an exceptionally high profit.
Simpson v L&N Railway (1876)
The defendant contracted to carry the plaintiff’s samples of cattle food from
an agricultural show at Bedford to another at Newcastle. He delivered certain
goods to an agent of the defendant at Bedford showground. The goods were marked
‘must be at Newcastle by Monday certain’. No express reference was made in the
contract of carriage to the Newcastle show. The samples arrived at Newcastle
after the show was over.
The defendant was held to be liable for loss of profits which the plaintiff
would have made had the samples reached Newcastle on time. The plaintiff’s
purpose and intention could readily be inferred from the circumstances, which
clearly indicated that the contract was one to carry samples to the Newcastle
show and not simply to Newcastle.
Payzu v Saunders (1919)
The plaintiff agreed to buy certain goods from the defendant over a period of
nine months with payment within one month of delivery, and deliveries monthly.
The plaintiff failed to make prompt payment for the first instalment, and the
defendant, in breach of contract, refused to deliver any more instalments under
the contract, but offered to deliver the goods at the contract price if the
plaintiff paid cash on delivery of the order. The plaintiff refused this and
claimed damages, these being the difference between the contract price and the
It was held that the plaintiff had permitted himself to sustain a large
measure of the loss which, as prudent and reasonable people, they ought to have
avoided. He had the cash available to meet the defendant’s demands and could
have mitigated by purchasing off the defendant at the contract price as the
defendant offered, instead of going into the market to purchase at a higher
price. He was, therefore, not entitled to damages.
Pilkington v Wood (1953)
A solicitor, in breach of contract, obtained for the plaintiff a house which
had a defective title. The plaintiff tried to sue the solicitor, who argued that
the plaintiff should have mitigated by suing the vendor under the covenants for
title under s76 LPA 1925. The court remarked:
“The so-called duty to mitigate does not go so far as to oblige the
injured party, even under an indemnity, to embark on a complicated and difficult
piece of litigation against a third party… it is no part of the plaintiff’s
duty to embark on the proposed litigation in order to protect his solicitor from
the consequences of his own carelessness’ (per Harman J).”
British Westinghouse v Underground Electric Railway of London (1912)
The defendant agreed to supply the plaintiff with turbines of stated
efficiency, but supplied less efficient ones, which used more coal. The
defendant accepted them and used them for some years before replacing them with
turbines which were even more efficient than those specified in the contract
with the defendant. After replacement, the plaintiff claimed damages from the
The plaintiff was held to be under no duty to mitigate by buying new
turbines, but since he had done so, the financial advantages he had gained from
new turbines had to be taken into account. Thus, as the plaintiff’s saving in
coal exceeded the cost of the new turbines, he was not entitled to damages.
However, if the plaintiff had claimed damages before buying the new turbines,
the defendant would have had no defence.
White and Carter v McGregor (1962)
See Law Report.
McRae v Commonwealth Disposals (1950)
The plaintiff recovered £3,000 spent on sending out a salvage expedition to
salvage a wrecked tanker, in a specified position, which they had purchased from
the defendant. The tanker had never, in fact, existed. See Handout on Mistake.
Anglia Television v Reed (1972)
The plaintiffs incurred expenses in preparation for filming a television
play. They subsequently entered into a contract with the defendant to play the
leading role. The defendant repudiated the contract. the plaintiffs tried hard
to find a substitute but failed, and had to abandon the play. The plaintiffs
sued the defendant for expenses of production amounting to £2,750 incurred by
the plaintiffs on production before the contract. They were held to be entitled
to recover the whole of the wasted expenditure. The defendant must have known
that much expenditure had already been incurred and would be wasted.
Millar’s Machinery v David Way (1935)
The plaintiff bought some machinery which was installed in his factory and
paid for. However, the machinery was not in accordance with the specifications
laid down by the contract and the plaintiff rejected it. It was held that the
plaintiff could recover the price (restitution), installation expenses (reliance
loss) and the net loss resulting from the breach (loss of bargain).
Johnson v Agnew (1980)
The vendors agreed to sell a house and land to the purchaser, but the
purchaser failed to complete the transaction on the appointed day. The vendors
then obtained an order for specific performance, but it was not drawn up for
five months, by which time it had become impossible as the mortgagee had taken
possession and sold. The vendors sought discharge of the order for specific
performance and to recover damages in its place.
The House of Lords found for the vendors and held that the damages were to be
assessed at the date when specific performance had become impossible. Lord
“In cases where a breach of contract for sale has occurred, and the
innocent party reasonably continues to try to have the contract completed, it
would to me appear more logical and just rather than to tie him to the date of
the original breach, to assess damages as at the date when (otherwise than by
his default) the contract is lost.”
Peevyhouse v Garland (1962)
A coal company took a mining lease of farmland, covenanting to restore the
land to its original state at the end of the lease. The work at the end of the
lease would have cost $29,000, while the result of not doing it would reduce the
value of the land by only $300. It was held that damages for the company’s
failure to do the work should be assessed at $300.
Ruxley Electronics v Forsyth (1995)
The defendants built a swimming pool for the plaintiffs. The swimming pool
was not as deep as specified, yet it was perfectly safe to dive into. To award
the cost of digging it out and rebuilding it, simply to add an extra three or
four inches of depth would be unfair and unjust. Instead the House of Lords
ordered the payment of a much smaller sum by way of compensation for loss of
See Law Report.
Thompson v Robinson (Gunmakers) Ltd (1955)
The defendant bought a Vanguard car from the plaintiff, and later refused to
accept and pay for it. The plaintiff’s profit would have been £61. It was held
that where, as here, the supply of Vanguard cars exceeded the demand, had the
plaintiff found another customer and sold to him as well as the defendant, then
there would have been two sales and two profits. Therefore, the defendant was
liable for £61.
Charter v Sullivan (1957)
The defendant bought a Hillman Minx car from the plaintiff but refused to
accept it. The plaintiff’s profit would have been £97. However, only nominal
damages were awarded because he could only sell as many cars as he could get
from the makers.
Addis v Gramaphone Company (1909)
The plaintiff could be dismissed by his employers on six months’ notice,
which he was given but, at the same time, a new manager was appointed to take
his place and the plaintiff was prevented from acting as manager. The plaintiff
claimed damages for the harsh and humiliating manner in which he was dismissed,
as well as for loss of salary and commission after his dismissal.
The plaintiff was held only to be entitled to the commission and salary he
had lost, and not to damages because his dismissal was harsh and humiliating.
Lord Atkinson stated: “I can conceive nothing more objectionable and
embarrassing in litigation than trying in effect an action of libel or slander
as a matter of aggravation in an action for illegal dismissal”.
Alexander v Rolls Royce Motor Cars Ltd (1995)
The plaintiff argued that the purchase of a Rolls Royce had been the
culmination of a lifelong ambition, and that when the garage concerned had not
repaired it properly or quickly enough he had suffered distress and
inconvenience. The Court of Appeal, while accepting that there was a breach of
contract to repair, were not prepared to award damages for the plaintiff’s
’emotional anguish’ while his Rolls Royce was being repaired.
LIQUIDATED DAMAGES & PENALTY CLAUSES
Dunlop Pneumatic Tyre Co v New Garage (1915)
The defendant bought tyres from the plaintiff and agreed not to: tamper with
manufacturer’s marks; sell below the list price; sell to any person blacklisted
by the plaintiff; exhibit or export tyres without the plaintiff’s consent. The
defendant agreed to pay £5 for every tyre he sold or offered in breach of the
agreement. In breach, the defendant sold to the public below the list price. It
was held that the provision for payment of £5 was held not to be penal. Looking
at the language of the contract itself, the character of the transaction and the
circumstances, it was clear that the provision was to prevent a price war and so
protect the plaintiff’s sales. The clause was, therefore, an attempt to estimate
damage at a certain figure and as the figure was not extravagant, it could only
be concluded that it was a bargain to truly assess damages and not a penalty
Lord Dunedin laid down three rules concerning penalty clauses:
1. The use of the words ‘penalty’ or ‘liquidated damages’ may prima facie be
supposed to mean what they say, yet the expression used is not conclusive.
2. The essence of a penalty is a payment of money as in terrorem of the
offending party; the essence of liquidated damages is a genuine covenanted
pre-estimate of damage.
3. Whether a sum stipulated is penalty or liquidated damages is a questions
of construction to be decided upon the terms and inherent circumstances of each
particular contract, judged as of the time of making the contract, not as at the
time of breach. There are a number of tests which would prove helpful, or even
(a) it will be held to be a penalty if the sum stipulated for is extravagant
and unconscionable in amount in comparison to the greatest loss that could
conceivably be proved to have followed from the breach;
(b) it will be held to be a penalty if the breach consists only in not paying a
sum of paying, and the sum stipulated is a sum greater than the sum which ought
to have been paid.
Cellulose Acetate v Widnes Foundries (1933)
The defendant agreed to build a chemical plant for the plaintiff in 18 weeks.
If it took longer than this, they agreed to pay ‘by way of penalty £20 per
working week’. The defendant completed 30 weeks late, and the plaintiff lost
£5,850 as a result of the delay. The defendant argued that they were only
liable for £600 damages. The plaintiff was held only to be able to recover
£600. The clause was not a penalty clause although it was described as such,
because its object was not to act in terrorem. The parties must have known that
the actual loss would be more than £20 per week, and the clause would,
therefore, appear to have been an attempt to limit liability.
Wall v Rederiaktiebolaget Luggade (1915)
It was held that a shipowner could disregard a penalty clause and sue for the
actual loss he suffered where it exceeded the amount of the penalty.
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