Addis v Gramophone Co Ltd [1909]

Addis v Gramophone Co Ltd [1909] AC 488 establishes the general rule that damages for mental distress or loss of reputation are not recoverable in an action for breach of contract. Damages in breach of contract cases are viewed as compensation rather than a form of punishment.

Addis (claimant) was employed as a manager by Gramophone Co Ltd (defendant). Gramophone Co Ltd provided the required 6 months' notice of termination but appointed a replacement and prevented Addis from fulfilling his managerial duties before the notice period ended. Consequently, Addis left his position after two months and initiated legal proceedings against Gramophone Co Ltd, claiming wrongful dismissal for breach of contract.

The House of Lords held that Addis was entitled to damages for loss of wages and commission, equivalent to six months of earnings. However, Addis was not granted damages for injured feelings and loss of reputation. Lord Atkinson explained that damages for breach of contract are intended as compensation for the financial loss suffered by the injured party and are not meant to serve as a punitive measure. While there might be cases involving fraud, defamation, or violence, these circumstances are more appropriately addressed through a tort action, rather than an action for breach of contract.

In summary, this case affirms the principle that damages in a contract claim are generally limited to the actual financial loss suffered due to the breach, and damages for mental distress or loss of reputation are not recoverable unless the breach involves elements typically addressed in tort actions, such as fraud or defamation.
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