Damages in contract are limited to losses arising naturally from the breach or within the reasonable contemplation of both parties at the time of contracting (two-limb remoteness test).
Contract — Breach and Remedies
The UKSC reformulated the penalty clause rule, replacing the Dunlop test with a legitimate interest test asking whether the clause is extravagant or unconscionable relative to that interest.
Remoteness of damage in contract may depend on whether the defendant assumed responsibility for the type of loss, not merely reasonable contemplation.
Where a charterparty was repudiated, damages are assessed by reference to subsequent events that would have terminated the contract early, reducing the award accordingly.
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