What are the main remedies for breach of a sale of goods contract?

In case of breach of a contract for the sale of goods, the common remedies available are the following: damages, rectification, rescission, specific performance, injunction and restitution. 

1. Damages

Damages are the most common remedy sought by the innocent party, who is entitled to claim damages as compensation for loss arising directly and naturally, in the ordinary course of events, from the breach of contract. However, the non-breaching party/innocent party has a duty to mitigate the loss i.e. it must take reasonable steps to minimize the loss if the contract is breached. 

In the case of non-acceptance of goods or non-delivery of goods, where there is an available market for the goods in question, the damages are calculated based on the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted or delivered.

Generally, damages that are remote are not recoverable i.e. the damages are reasonably contemplated by both parties at the time of entering into the contract then they can be recovered. 

2. Rectification

If a written contract does not accurately convey the specific agreement made by the parties, a court can order an alteration of the written contract to properly reflect the true intention of the parties. 

This is an equitable remedy for altering a contract to reflect the true intention of the parties at the time when the contract was entered into. It is generally allowed when there is an error/mistake in the contract. It is often granted together with specific performance.

3. Rescission

Rescission is when a contract is set aside and the parties are put back to their pre-contractual position. It is an equitable remedy and a court can set aside a contract by reason of misrepresentation, mistake, duress or undue influence.

4. Specific Performance

Specific performance is also an equitable remedy, whereby a court issues an order requiring a party to perform a specific action, such as to complete the performance of the contract. 

An innocent party can apply to the court for an order for specific performance of the contract by the defaulting party. A court will only award specific performance where damages are not held to be an adequate remedy. In addition, in deciding whether to order a specific performance, the court will take into account whether:

  • the contractual terms to be enforced are sufficiently clear;
  • the interests of third parties will be adversely affected by the order;
  • the innocent party comes to court “with clean hands”; and
  • there will be a severe hardship for the defaulting party as a result of an order.

In practice, however, orders for specific performance are rarely granted.

5. Injunction

In law, an injunction is an order by a court to one or more of the parties in a civil trial to refrain from doing, or less commonly to do, some specified act or acts (the former kind of injunction is called prohibitory or preventive, the latter mandatory).

A court or an arbitral tribunal can order a party to perform acts that are required under a contract or restrain a party from breaching a contract. As an equitable remedy, an injunction order is generally only granted when damages are not an adequate remedy.

6. Restitution

This is a further remedy (both legal and equitable) and permits an injured party to bring a claim for restitution if the party in breach has been unjustly enriched at the injured party’s expense.