Remedies

Damages can be defined as monetary composition and it is one of the most common reliefs provided
by the court in the event of a breach of contract. It was developed by the common law court. The main
objective for damages is to provide appropriate relief, to restore the pl to his original place and to redress a
wrong rather than to punish a defendant. There are three types of damages which are pecuniary and
non-pecuniary damages, specific damages and liquidated damages and penalties.

Type of damages
1. Pecuniary / Non-pecuniary
a. Pecuniary
- Financial/ material loss
- eg: loss of earnings, loss of profits, cost of repair and replacement

b. Non-pecuniary
- Not economic or financial in nature
- eg: physical pain, injury to feeling and mutual distress

2. Specific damage
a. General / specific
- General- damages award for loss that cannot be calculated eg: pain suffering
(no need pleaded as the law presumes)

- Specific- damages award for loss that can be calculated eg: loss of profits
(must be pleaded & evidence must adduced)

b. Nominal
- A small token award to pl to acknowledge his right has been breached
- When a pl is a victim of breach but unable to prove the loss suffer / no actual loss

c. Aggravated damages
- Apply where the injury has been aggravated by the wrongdoer's behaviour
- eg: their cruelty
- Not often apply

d. Exemplary/ punitive damages

- Damages awarded to punish
- e.g. breach of promise to marry.
- no longer available in the UK because the objective of awarding damages is not to punish
(now under tort)

3. Liquidated damages

However, in order for a pl to recover damages there are some principles that need to be fulfilled by the
pl which are causation and remoteness.
 Firstly, in order for a pl to recover damages the plaintiff must show that his loss was cause by the
defendant's breach. He must prove that the loss was due to the act or default of the defendant and that there is
no breach in the chain of causation between the infringement of the defendant and the loss of the plaintiff.

Secondly, he also must prove to the court that the loss that he has suffered was not too remote. In
English law, the test of remoteness of damages was laid down in the case of Hadley v Baxendale [1854]. It
lays down the fundamental law to determine consequential damage from breach of contract, where the party
who violated the agreement is responsible for all losses that the contracting parties should have foreseen. In
this case, the plaintiff’s mill broke down and the plaintiffs hired the defendant to transport the shaft for repairs.
The def delayed in returning the shaft and did not know that the pl did not have a spare shelf. The question
raised by the appeal, in this case, was whether a defendant in a breach of contract case could be held liable
for damages that the defendant was not aware would be incurred from a breach of the contract. The court
rejected the pl claim as it was too remote and stated that d could only hold liable for losses that were generally
foreseeable or if Hadley had mentioned his special circumstances in advance. It also further states that there
are two types of limb in order to whether the losses are not too remote. Firstly, ordinary losses arise naturally in
the usual course of things. Secondly, extraordinary losses which arise within the reasonable contemplation of
the parties at the time they entered into the contract.

In the case of Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949], the court further
explained the test of Hadley v Baxendale where in this case In this case, the plaintiff bought a new boiler for
their laundry and dry cleaning business from the defendant but they received it 5 months after the contracted
date of delivery. The defendant knew that the plaintiff required the boiler for their business. The plaintiff claimed
for loss of profits during the period of 5 months and the loss of profit of a highly lucrative dyeing contract with
the Ministry of Supply. The court held that the plaintiff was entitled to the loss of profit arising from the
defendant’s delay in delivering the boiler but the defendant was not entitled to the exceptional loss of profit as
the plaintiff could have earned it from the dyeing contract with the Ministry of Supply. The court provided that
the plaintiff can always recover foreseeable losses or damages which arise naturally and what is reasonable
foreseeability depends on the knowledge the parties had. Besides, in determining what is reasonable
foreseeability by the parties, the court must look at the knowledge of the parties whether it is actual knowledge
or imputed knowledge. The first limb of the test in Hadley v Baxendale was applied to imputed knowledge,
where imputed knowledge is defined as any reasonable individual is assumed to know the ‘ordinary course of
things’ and to be aware of the damage that that ordinary course is likely to occur from a breach of contract.
Next, actual knowledge is vested on the second limb of the test in Hadley v Baxendale in which the parties
have the knowledge of special circumstances where a breach will be liable to inflict further losses in those
special circumstances.

Moving on, the remoteness of damages in Malaysia can be seen in Section 74 Contracts Act 1950
which it sets out the consequences of a breach of contract where the first limb stated that if there has been a
breach of contract, the party that suffered loss or damages from the breach is entitled to compensation where it
naturally arose in the ordinary course of things from the breach.

The illustration of the first limb in S.74 (1) of CA 1950 can be seen through the case of Bee Chuan
Rubber Factory Sdn Bhd v Loo Sam Mooi [1976], where the plaintiffs had entered into contract with the
defendant to sell a piece of land and to build house thereon for the defendant. The defendant had breached
the contract by delaying finishing the building of the house. Thus, the trial judge awarded damages of $100 to
the plaintiff for every month from the time delivery that was due on 21st September, 1970 until 3rd April, 1975
when delivery of the house was finally given. Subsequently, the Federal court also confirmed the trial judge’s
decision and held that the damages are recoverable for a breach of contract for delay in the completion of
ordinary dwelling house required for personal occupation. The damages also include the reasonable cost of
living accommodation or living elsewhere and storing furniture came within the first limb of the rule in Hadley v
Baxendale.

Meanwhile, the second limb of S.74(1) of CA 1950 provided that compensation which the parties were
aware of the situation when they made the contract that is likely to result from the breach of it. The application
of the second limb is laid down in Tham Cheow Toh v Associated Metal Smelters Ltd [1971], whereby the
defendant had agreed to sell a metal melting furnace to the plaintiff and had given an undertaking that the
melting furnace would have a temperature of not lower that 2,600’F and the delivery was promised to be made
within 45 days after the order was made. However, the specification of the furnace was not satisfied and the
delivery was also delayed. The plaintiff brought an action alleging breach of an express condition of the
contract. The High court held that the defendant’s failure to supply in a furnace which was capable of the
requisite temperature constituted a breach of contract and awarded damages for loss of profits. Thus, the case
falls within the second limb of the test of remoteness as the defendants knew that they must follow the
specification and requirement to deliver the items to the plaintiff. Thus, once it is shown that the damages could
fall under the first or second limb, the defendant will be liable to the extent of damages that has been shown on
the balance of probabilities.

Last but not least, in mitigation of damages. The duty to mitigate only comes when there is a breach of
contract. The clarification in S.74 CA 1950 provides that the means taken to remedy the inconvenience
resulting from the non-performance of the contract must be taken into account in calculating the loss or
damage arising from a breach of the contract. Therefore, the innocent party has a duty to mitigate his loss by
following the principle of mitigating. First, the plaintiff must take reasonable steps to mitigate his loss and must
not incur any unreasonable expenses. Next, if the plaintiff fails to mitigate his loss, he will only recover the half
of the loss incurred by his failure to mitigate the loss. Besides, the loss could not be recovered if the plaintiff
does not incur any loss after he mitigates his loss. Finally, if the plaintiff has mitigated his loss and still incur
losses, the losses then can be recovered. The principle of mitigation of damages has been applied to the case
of Kabatsan Timber Extraction v Chong Fah Shing [1969], where the appellants had contracted to supply
timber to the respondent, which was to be delivered at the site where the respondent had erected a saw-mill.
Three lots were then delivered. However, the second lot was dumped more than 500 feet from the mill instead
of delivered to the mill. The respondent purchased new time elsewhere in substitution of the second lot and
claimed for the cost of doing so. The court held that the respondent had a duty to take reasonable steps to
mitigate its loss. Instead of expending money to purchase new timber, all that was required of the respondent
was to arrange to haul the logs to the saw-mill. Thus, the duty to mitigate only rises where there is breach of
contract in which it was to reduce the damages that the party who had breached the contract has to
compensate to the party who had suffered loss of profit.

To conclude, both English law and Contract Act 1950 has laid down the test of remoteness by virtue of
Hadley v Baxendale and S.74 of CA 1950 in determining the loss for damages when there is breach of
contract. Thus, the plaintiff must show that the loss of profit suffered by them caused by the breach is not too
remote in order to succeed in their claim. However, the court will not award compensation to the plaintiff for all
the losses they have suffered caused by the breach as the plaintiff must mitigate his loss of profits.
Consequently, the plaintiff will not be entitled to compensation if the damage is too remote.