The general rule

Damages for breach of contract are usually only awarded to compensate the claimant for financial loss suffered as a result of the breach. As a general principle, it is not possible to obtain contractual damages for other losses, such as mental distress, disappointment, frustration, anxiety or aggravation. This restriction is based on policy considerations, primarily the desire to prevent the opening of the floodgates of litigation.

The exceptions
However, there are two main exceptions to the general principle. The first is that damages for mental distress are available if the object of the contract breached was to provide pleasure, relaxation or peace of mind, such as a contract for a holiday. The second is where the mental suffering complained of is directly related to physical inconvenience and discomfort caused by the breach: Lord Justice Bingham in Watts versus Morrow.

The scope of these exceptions has been unclear and the first exception has been narrowly interpreted. In 1995, the Court of Appeal in Knott versus Bolton refused to award damages for disappointment and distress resulting from an architect's failure to design an appropriate staircase and impressive entrance hall for the claimants' dream home.

The Court of Appeal held that the central object of the contract in question was to design a house, not to provide pleasure to the occupiers of the house and that any pleasure element was merely ancillary to the main object of the contract.

Even in cases where the claimant has been successful, awards have been modest. In the case of Ruxley Electronics and Construction Ltd versus Forsyth, the House of Lords did award damages for the claimant's disappointment caused by the contractor's failure to construct a swimming pool with a deep end depth of seven and a half feet (as specified by the claimant) instead of the standard six feet deep, but the sum awarded was a fairly modest one of £2500. In Watts versus Morrow, the sum of £4000 awarded by the judge at first instance to each claimant to compensate them for inconvenience and distress as a result of a negligent survey (which failed to discover defects in a property) was revised by the Court of Appeal to £750 each.

Recent developments
The latest House of Lords decision in this area in the case of Farley versus Skinner throws some light on the scope of the first exception to the general restriction on compensation for non-financial losses but confirms that sums awarded will remain modest.

It is important that developments in this corner of the law should not contribute to the creation of a society bent on litigation

In Farley versus Skinner, a prospective buyer (the claimant) employed a surveyor (the defendant) to survey a 'gracious country residence' in Surrey, close to Gatwick Airport. The claimant expressly asked the surveyor to investigate whether the property was seriously affected by aircraft noise. The surveyor reported back that the property was unlikely to suffer greatly from such noise. The claimant went ahead and bought the house, spent money on improving it, and then discovered that the aircraft noise was intolerable. The surveyor had been negligent.

The trial judge awarded the claimant £10 000 for distress and inconvenience. This was overturned by the Court of Appeal, however the House of Lords restored the trial judge's award.

The House of Lords held that the contract in question fell within the first exception to the rule against recovering damages in respect of non-financial loss since it was a contract to provide the claimant with freedom from distress. The House of Lords overruled the decision in Knott versus Bolton, holding that it is not necessary that the provision of pleasure, relaxation or peace of mind should be the only object of the contract, it is sufficient if a "major or important object" of the contract is to give pleasure, relaxation or peace of mind.

The claimant had specifically asked the defendant to investigate aircraft noise and the defendant's undertaking to do so was an important term within the context of the contract as a whole.

The House of Lords also held that the damage suffered by the claimant fell within the Watts versus Morrow exception: the claimant did not just suffer mere disappointment as a result of the aircraft noise but "real discomfort" and inconvenience for which he was entitled to compensation. His enjoyment of the property he had bought was seriously restricted.