• general (damnum commune), or
  • special (damnum singulare)

The main principle on which damages for breach of contract are awarded in Sri Lanka is that the sum to awarded should, as nearly possible be a sum which will put the wronged party in the position which he would have enjoyed if he had not sustained the wrong for which the award of damages is made and it should include both actual loss and loss of profit, (Weeramantry, page 888). Damages may be excluded by special clauses to that effect in the contract. Damages may be:-

The former refer to direct loss which would be suffered by any person as a result of breach of the contract in question. The latter refers to losses which are personal and peculiar to the plaintiff being losses which other persons similarly placed would not have suffered. The distinction broadly corresponds to the common law distinction between “ordinary” damages and damages “specially contemplated” [Cf. Ratcliffe v. Evans (1892) 2 QB 524].

In regard to liquidated damages, the approach adopted in Sri Lanka seems to be substantially the same as in England (Weeramantry pages 912, 913). In English law, the court will regard the sum fixed by the parties as liquidatd damages as the quantum to be awarded, even though the damages actually sustained are very different from this figure [Swisse Atlantique etc. v. N. V. etc., 196, Rotterdamasche etc., (1966) 2 All ER 61 (House of Lords)].

In Sri Lanka also the court will not interfere with the mode of assessment adopted by the parties, unless the payment stipulated, is in reality a penalty (Weeramantry, pages 912 to 916).

It should be mentioned that the Roman law did not distinguish between, liquidated damages and penalty. But the distinction seems to have been adopted in Roman Dutch law particularly with the South African case of Pearl Assurance Co. v. Union Government, (1934) AD 560, 568 (Privy Council).

It may however, be mentioned that in South Africa, by the Conventional Penalties Act (15 of 1962), the legislature has ensured that liquidatd damages and penalty clauses are both subject to judicial scrutiny. Courts in South Africa have a descretion to reduce a sum which is considered excessive, in both cases. At the same time “penalties” can also be recovered, subject to the above limitation (Weeramantry, page 915). In other words, a contractual stipulation in South Africa can be judicially reviewed, whether it speaks of liquidated damages or penality.