Damages for Mental Distress and Other Intangible Loss in a Commercial Context

As a general rule, contracts law does not permit an award of general damages for mental distress or other intangible loss. There are several rationales for this, including: plaintiffs are to bear their disappointment or upset with mental fortitude; without the rule, courts would be awash in litigation since every breach of contract brings with it some degree of emotional distress; without the rule, plaintiffs may fabricate or exaggerate the degree of their upset; and the rule simply reflects the lack of foreseeability of such loss under Hadley v. Baxendale. Notwithstanding the general rule, courts have awarded mental distress in a variety of circumstances by following one of three strategies to do so: permitting recovery when the contract is non-commercial; permitting recovery when the contract fits within a special or established category of exception to the general rule; and permitting recovery on the basis of foreseeability principles alone. There are a number of reasons to critique the general rule, particularly in light of the House of Lord's much more expansive approach in Farley v. Skinner, [2001] 3 WL.R. 899. In short, an under-inclusive approach to this question results in contracts only being partially enforceable - a result contrary to the foundational principles that parties should be held to their bargain. Based on Farley, this paper offers a proposed restatement of the general rule. It also offers a way of clearly distinguishing between aggravated damages, on the one hand, and general damages for mental distress, on the other