Assessment of Damages Flashcards
Purpose of Damages in the Law of Contract
- Aim is to compensate the claimant for damage, loss, or injury resulting from the defendant’s breach
- Not meant to punish the defendant
- Nominal damages awarded when claimant has not suffered any loss
What does compensating the innocent party mean?
- Default approach: put innocent party in same position they would have been in if the contract had been performed
- aka protecting the innocent party’s ‘expectation’ interest
Robinson v Harman (1848) 1 Ex 850: ‘so far as money can do it, [the innocent party] is to be placed in the same situation… as if the contract had been performed’
What are the 3 Mechanisms for Calculating the Expectation Interest
- Cost of cure
- Diminution in value
- Loss of amenity
Facts of Ruxley Electronics and Construction Ltd v Forsyth
F employs Ruxley Electronics to build a swimming pool in his garden at a cost of £17,797.40.
The contract provides that the pool should be 7 feet 6 inches deep.
Ruxley Electronics builds it only to a depth of 6 feet.
The pool is still perfectly safe for swimming and diving.
cost of cure was the cost of rebuilding the pool - £21,560.
POL in Ruxley Electronics and Construction Ltd v Forsyth
- Court refused to award cost of cure or diminution in value
- Awarded £2,500 in loss of amenity damages
- Reflects court’s willingness to accept non-economic loss as a remedy
= unreasonable for C to insist on cost of cure bc expense of work involved would be out of all proportion to benefit to be obtained.
claimant’s lack of intention to carry out the remedial works = relevant to the extent of the loss which was sustained since, if the claimant did not intend to cure the defect, he had lost nothing except the difference in value, if any.
1) What is the cost of cure?
2) What type of contract is it used in?
1) Cost of substitute or remedial work to put claimant in position if contract had been properly performed.
- C must act reasonably re defective works = otherwise limits award to the costs
2) Contracts involving defective works
What is Diminution in Value?
Difference in value between performance received and promised in contract
What is Loss of Amenity?
Non-economic loss of pleasure or value to the claimant
- arises rarely
When is it relevant to distinguish between diminution in value + cost of cure?
Where there is a disparity between the two.
Disparity likely to arise in circumstances similar to Ruxley v Forsyth - breach of contract er assets where dispute over particular specification required by purchaser.
How to calculate expectation interest (basic)
Gross income less expenses
What is the Reliance Interest?
Alternative basis for assessing damages
How does the reliance interest work?
Allows claimant to recover expenses incurred in preparing for or part performance of the contract
Aim of reliance interest
Put C in position they would have been in if they never contracted
How does reliance interest work
Only allows recovery of wasted expenditure NOT ALL EXPENDITURE . It is expenditure in connection with the breached contract
When will reliance interest be relevant
= as courts will not award expectation damages if they are highly speculative - C ltd to its reliance loss.
