In contractual disputes, there is often a misconception that the mere breach of a contract automatically gives rise to a right for compensation. This is not the case under Cypriot law. A party alleging breach must do more than prove the other side failed to fulfil their obligations. They must also clearly prove the damages suffered and properly plead these damages in their court filings. Failing to do so can render an otherwise valid claim legally ineffective.
Breach Alone Is Not Enough
It is a well-established principle in Cyprus that when a contract is breached, the innocent party has a choice: either to terminate the contract and claim damages, or to affirm the agreement and still seek compensation for any losses incurred. This was underscored by the Supreme Court in Theoharides v. Ioannou & Ors (2012) 1 Α.Α.Δ. 1311, where the Court reiterated that the right to compensation arises only where damage or loss has actually been suffered and proven.
The right to damages is governed by Articles 73 to 75 of the Contract Law, Cap. 149. Article 73(1) makes it clear that compensation is due only for losses that arise naturally from the breach or were reasonably foreseeable by both parties at the time the contract was signed. That means a party must not only demonstrate a breach, but also lead sufficient evidence of the specific financial harm suffered.
Specific vs. General Damages
Where damages can be calculated, courts may award special damages—that is, a financial amount that corresponds to actual, provable loss. Where that is not possible, general damages may be awarded, based on the Court’s best estimation.
However, as the Court explained in CLR Investment Fund Ltd v. Alliance International Reinsurance Company Ltd (2012) 1 Α.Α.Δ. 1009, even when a specific amount is written into the contract, such as a €3 million refund clause, the claimant must still plead and prove the damages. The Court held that without sufficient pleading or evidential basis for the loss—especially regarding the value of shares that were not bought—no compensation could be awarded.
In that case, the appellants demanded return of €3 million under the contract, but they neither pled the legal basis for specific performance nor provided evidence of the shares’ value or how they were impacted by the breach. Consequently, no damages were awarded.
The Role of Pre-Agreed Sums: Not What You Think
Many commercial contracts include pre-agreed compensation clauses, sometimes referred to as “liquidated damages” or “penalty clauses.” Under Cypriot law, the distinction between the two—so central in English law—is less meaningful. The Court retains discretion in both cases to award reasonable compensation, capped at the amount stated in the contract.
As explained in Charalambous v. Liberty Life Insurance Co (2011) 1Γ Α.Α.Δ. 1739, a contractual clause setting a fixed amount of compensation does not bind the Court. If that amount is a genuine pre-estimate of damages, it will be a relevant consideration in determining reasonable damages. If it is a penalty designed to coerce performance, it will be ignored.
In any event, such clauses only set the maximum ceiling of potential damages. They do not automatically entitle the claimant to the amount stated. Evidence of actual loss is still required.
You Must Plead Actual Damages
Cypriot case law makes it clear: you cannot succeed in a claim unless you plead and prove the damages. In D. & G. Products Ltd v. Anastasiou (2002) 1Β Α.Α.Δ. 1400, the Court stressed that damages must be shown by evidence as a result of the other party’s breach. Where no such evidence is produced—no matter how egregious the breach—no compensation is payable.
The Duty to Minimise Loss
A party cannot claim damages for losses that could reasonably have been avoided. This “duty to mitigate” was reaffirmed in George Charalambous Ltd v. Kalos Kafes Ltd (1997) 1Α Α.Α.Δ. 199. Any losses that could have been reduced with reasonable effort by the innocent party are excluded from the compensation calculation.
Practical Takeaways
- Signing a contract does not entitle you to damages simply because there was a breach.
- The burden is on the claimant to plead, prove, and quantify the actual loss suffered.
- Even pre-agreed amounts in contracts will not be enforced unless the Court is satisfied the loss is real, proven, and reasonably matches the clause.
- Legal representation is critical. A well-drafted claim can mean the difference between a successful case and a dismissed one, even where a breach is undisputed.
At Phoebus, Christos Clerides & Associates LLC, our team regularly advises on the drafting and enforcement of commercial agreements, including how to structure and plead claims for damages effectively. Whether you are seeking to enforce a breached contract or defend against an unsubstantiated claim, sound legal strategy from the outset can be decisive. For more information or to discuss your specific situation, feel free to contact us.