special damages

Damages compensate loss as a result of a breach of contract or a tort are either ‘general’ or ‘special’. The distinction grew up between those damages which had to be specifically pleaded, special damages, and those which were presumed to have been suffered, namely general damages.

Special damages is loss suffered by a particular claimant in the circumstances of the claimant, as opposed to the general loss which is presumed to follow from say a breach of contract or infringement of intellectual property rights. Claims made in some areas of law prevent the claimant succeeding in its claim unless it proves to the satisfaction of the court that it has suffered special damage, such as malicious falsehood.

As is the case with general damages, simply because a precise sum of special damages is not able to be quantified does not mean that the claimant is disentitled to recovering special damages.

Special Damages - Breach of Contract

In breach of contract cases special damages are the precise losses where the exact size of the loss can be proved from the particular facts peculiar to the particular claimant, which are set out in pleadings and given their nature are more frequently referred to as “consequential damages” or “consequential loss”. If this meaning were applied to tort then all tortious damages would be special damages. This is best explained an example provided by the rule in Hadley v Baxendale: where a mill only had one shaft and it was sent for repair the failure to deliver the repaired shaft on time would be compensated through general damages but the hiring of a temporary replacement shaft would be special damages (which required special knowledge on the part of the defendant). The former required the judge’s discretion to decide what percentage of the contract should be returned to the claimant in damages; the latter had a specific hire cost and, once proven, did not require the discretion of the judge.

As a result of the precise nature of the loss suffered, special damages must be demonstrated with specific reference to evidence so that the defendant is aware of the facts leading to the loss. This is done by pleading the facts claimed to give rise to special damages. As the evidence has to be specified, the defendant has the opportunity to challenge the damages on an individual basis in its defence and will often do so on the value, causation of the damage and remoteness of the damage. Special damages are limited in the same way as general damages, in that they must be reasonably foreseeable to a person standing in the shoes of the defendant, whether this is by actual or constructive notice of specific knowledge which would have indicated that the damage would be likely to follow a given breach of the contract, in accordance with the rule in Hadley v Baxendale.

Special Damages in Tort

The term special damages is perhaps more useful in tort cases, and particularly in personal injury cases. Here there is a clear distinction between damages caused by the injury, such as loss of earnings or medical bills, and those damages which compensate you for the injury itself. The latter, one is entitled to as a right, the former has to be proven with reference to precise figures coming from specified evidence. So for instance, loss of earnings before a trial would be compensated by special damages as it can be evidenced through time off work. In contrast loss of future earnings after a trial would be compensated by general damages as there is no way of knowing precisely what the loss would be and therefore have to left to the discretion of the judge.
Again questions of remoteness and causation apply to limit the extent of damages that can be claimed and recovered.

Further Example - Special Damages

By way of example, suppose a business enters into a contract for the supply and installation of new plant and equipment. Suppose also that the business depends upon the proper and timely performance of that contract of supply in order to place it in a position to increase its productivity. In anticipation of the performance of that contract, the business enters into further contracts which will only be able to be performed by the business if the first contract is properly performed. In the event that the first contract is not performed such that the plant and equipment is not installed, the business is not in a position to perform those other contracts. In these circumstances, the business is likely to suffer special damage by falling in breach of those later contracts.