Bad bargain CASES

The term “bad bargain” is not a strict term of art in English law but is used to describe a contract that has turned out to be disadvantageous, unprofitable, or simply regrettable for one of the parties. The term encompasses a range of different situations, but it is helpful to understand the different scenarios where one party has a practical incentive to seek to avoid performing its agreement, because different arguments may be run depending on the nature of the “bad bargain”.

The starting point in English law is the principle of freedom of contract. A clear way of showing that English law respects freedom of contract is to hold parties to contracts freely entered into, and this applies even if the contract is a ‘bad bargain’ for one party. Courts are cautious about allowing parties to escape bad deals, and the fundamental approach is therefore to uphold the validity of the contract wherever possible. Thus, there is no general protection offered to those who find they have entered into a bad bargain.

Two senses of “bad bargain”

In practice, the phrase appears in two related but distinct contexts:

1. Refusing to rewrite the contract (substantive doctrine)

The courts will not use doctrines of construction, implication of terms, misrepresentation, duress, or frustration to release a party simply because the deal has become disadvantageous. Courts will be slow to reject the meaning of a provision simply because one of the parties made a bad bargain; it is not the court’s task to improve the positions of the parties by re-writing the contract.

2. Limiting damages (the “bad bargain rule”)

Where a contract has been breached, a claimant cannot use the reliance measure of damages (wasted expenditure) to recoup losses that they would have suffered anyway because the contract itself was unprofitable. This is sometimes called the “bad bargain rule.”

Leading cases

Robinson v Harman (1848) 1 Exch 850 – Established the foundational rule that damages should place the claimant in the position they would have been in had the contract been performed (not a better one).

Anglia Television Ltd v Reed [1972] 1 QB 60 – Confirmed that a claimant may elect between loss of profits and wasted expenditure (reliance damages), but cannot claim both.

C & P Haulage Co Ltd v Middleton [1983] 1 WLR 1461 – The leading authority that reliance damages cannot be used to escape the consequences of a bad bargain.

CCC Films (London) Ltd v Impact Quadrant Films Ltd [1985] QB 16 – Placed the burden of proof on the defendant to show, by clear evidence, that the contract was a bad bargain.

McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 – Australian, but highly persuasive. Reliance damages may be recoverable where expectation losses are too speculative.

Omak Maritime Ltd v Mamola Challenger Shipping Co [2010] EWHC 2026 (Comm) – Modern reconciliation holding that reliance losses are a subset of expectation losses, not a separate juridical basis.

Optimares S.p.A v Qatar Airways Group Q.C.S.C [2022] EWHC 2461 (Comm) – Recent reaffirmation that English courts will hold parties to clear contractual terms even where the outcome is harsh.

How the two strands fit together

The position can be summarised as follows:

Issue	Rule
Construction of the contract	It is not the court’s task to improve the positions of the parties by re-writing the contract simply because one made a bad bargain.
Election of damages	A claimant may elect between loss of profits and wasted expenditure, but cannot claim both (Anglia TV v Reed).
Limit on reliance damages	A claimant cannot use reliance damages to escape from a bad bargain (C & P Haulage). If the defendant can prove the contract would have resulted in a net loss, reliance damages will be reduced accordingly. The burden of proof lies on the defendant.
Theoretical basis	Reliance losses are a species of expectation losses, not awarded on a different juridical basis (Omak Maritime).

Practical takeaway

The doctrine reflects a deliberate policy choice: English contract law prioritises certainty, freedom of contract, and the integrity of the bargain over sympathy for a party who has miscalculated. One should not assume that the English courts will be quick to soften what are otherwise clear contractual rights and obligations so as to save a party from a painful outcome. Anyone contemplating a commercial transaction should therefore undertake careful due diligence and negotiate protective drafting before signing, because the courts will rarely come to the rescue afterwards.