Remedies 

The default remedy for breach of contract is damages. Equitable remedies — specific performance and injunction — are discretionary and secondary, available where damages are inadequate. Restitutionary claims sit alongside both.

Damages: the compensatory principle

Contract damages aim to put the innocent party, so far as money can, in the position they would have occupied had the contract been performed. That is the expectation measure, and it is what distinguishes contract damages from tort, which restores the plaintiff to their pre-wrong position. Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64¹ confirms this compensatory principle and treats damages for wasted expenditure as another manifestation of it rather than an election.

For the cross-cutting framework for selecting and limiting a damages measure, see Damages as a remedy.

A party may also claim reliance damages — wasted expenditure incurred in reliance on the contract — which is useful where expectation loss is hard to prove. They may not recover both where that would produce double recovery. The joint reasons in Amann describe wasted expenditure as a second manifestation of the compensatory principle, not a choice between alternatives. On proof, the High Court has since said in Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17² (joint reasons of Edelman, Steward, Gleeson and Beech-Jones JJ) that the plaintiff keeps the legal onus of proving loss, but that where the breach caused or increased uncertainty an inference that expenditure reasonably incurred would have been recovered facilitates proof; those Justices said the presumption relied on in Amann cannot be accepted.

Limits

• Causation — the loss must be caused by the breach.
• Remoteness — recoverable loss is loss arising naturally from the breach, or which the parties contemplated when contracting as a probable result of it. The second limb depends on what was communicated about special circumstances.
• Mitigation — the innocent party cannot recover loss they could reasonably have avoided, and may recover the costs of reasonable mitigation attempts even if unsuccessful.
• Proof — loss must be proved with reasonable certainty, though courts do their best with difficult assessments rather than refusing recovery.

Particular heads

• Cost of cure or diminution in value — for defective work, the cost of rectification is the usual measure, but not where it would be unreasonable relative to the benefit, in which case diminution in value applies.
• Loss of a chance may be compensable where a real and valuable opportunity was lost.
• Distress and disappointment are not generally recoverable, except where the contract's object was to provide enjoyment, relaxation or freedom from distress, or where physical inconvenience results.

Agreed sums

A clause fixing the sum payable on breach is enforceable as liquidated damages if it is a genuine attempt to estimate loss, and unenforceable as a penalty if it is out of all proportion to the legitimate interests it protects. Australian law has developed the penalty doctrine beyond breach in some respects, so consider it even where the trigger is not a breach.

Deposits and forfeiture clauses raise related questions and equity may grant relief.

Equitable remedies

• Specific performance compels performance. Discretionary, refused where damages are adequate, where constant supervision would be required, for contracts of personal service, or where hardship or the plaintiff's conduct tells against it. Readily granted for land, which is treated as unique.
• Injunction restrains breach, most usefully of a negative stipulation.

See Equitable relief: specific performance, injunctions and declarations for the discretionary analysis and the distinction between interim and final relief.

Restitution

Where a contract is discharged, void or never formed, a restitutionary claim may lie for the value of benefits conferred — a quantum meruit for work done, or recovery of money paid on a total failure of consideration. This is not a contractual remedy and is measured differently.

Restitutionary remedies explains why a valid contract normally remains central to that analysis.

Statutory remedies

Where consumer legislation applies, the court's remedial discretion is broad and often more useful than the contractual measure. Consumer guarantees carry their own remedies, including repair, replacement, refund and, for major failures, rejection.

Applying this in a problem question

1. State the compensatory principle and choose the measure.
2. Work through causation, remoteness, mitigation and proof, in that order.
3. Address any agreed-sum clause and the penalty doctrine.
4. Consider equitable relief only after establishing damages are inadequate.
5. Check restitutionary and statutory routes, which frequently give more.

Where the authority sits

Common law and equity, with significant statutory overlay. The penalty doctrine has been developed distinctively in Australia — cite Australian authority rather than English.