What are the damages for mental distress arising from a breach of contract?

52 The first are true aggravated damages, which arise out of aggravating circumstances. They are not awarded under the general principle of Hadley v. Baxendale, but rest on a separate cause of action — usually in tort — like defamation, oppression or fraud. The idea that damages for mental distress for breach of contract may be awarded where an object of a contract was to secure a particular psychological benefit has no effect on the availability of such damages. If a plaintiff can establish mental distress as a result of the breach of an independent cause of action, then he or she may be able to recover accordingly. The award of damages in such a case arises from the separate cause of action. It does not arise out of the contractual breach itself, and it has nothing to do with contractual damages under the rule in Hadley v. Baxendale.

53 The second are mental distress damages which do arise out of the contractual breach itself. These are awarded under the principles of Hadley v. Baxendale, as discussed above. They exist independent of any aggravating circumstances and are based completely on the parties’ expectations at the time of contract formation. With respect to this category of damages, the term “aggravated damages” becomes unnecessary and, indeed, a source of possible confusion.