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The Supreme Court in the case of Morris-Garner v One Step (Support) Limited has clarified the approach to awarding damages against parties who deliberately breach their obligations under a contract.

It was held that “negotiating” damages for breach of contract should only be applied to exceptional circumstances. Where the complainant’s interest in the performance of a contract is economic but no economic loss from the breach can be established then the normal inference is that no more than nominal damages can be awarded. However, the Court confirmed that damages based on a negotiation between the parties for a release of the restrictions can be awarded.

In this case a former Director and 50% Shareholder of One Step had sold her shareholding for £3.15m and accepted various “non- compete” restrictions for a duration of three years. It was found that she had set up a company offering similar services breaching her restrictions.

One Step argued that they would have problems proving the losses to the Company’s goodwill and therefore sought damages on the basis of what the parties would have agreed for the release of a “non-compete” clause. The Court held that this was appropriate under the circumstances.

This decision has brought much needed clarity in this area where previous case law has been unclear. Essentially in circumstances where the defendant has taken “something for nothing” potential claimants are comforted by the decision in this case that allows for damages based on hypothetical negotiation between the parties.

If you require further information on anything covered in this article please contact our Commercial Dispute Resolution team or your usual contact at the firm on 01484 821 500.