Damages Flashcards
To recover damages, the claimant must prove that he has…
…suffered loss or damage as a result of the defendant’s breach, and the loss or damage must not be too remote a consequence of the breach.
The rule at common law is that where a party sustains loss by reason of a breach of contract, he is so far as money can do it, to be placed…
….in the same situation with respect to damages as if the contract had been performed. Robinson v Harman (1848)
If the claimant is to be placed in the position he would have been in if the contract had been properly performed, he will generally be able to recover for the loss of the benefit which he would have obtained had the contract been properly performed. Damages assessed in this way are sometimes said to be worked out on a ** basis?
…an expectation loss basis as the claimant will be compensated for his lost expectation.
When working out the benefit which the claimant would have obtained from performance of the contract, the court will take into account the costs he would have incurred in order to obtain the benefit.
Expectation losses would include…
losses incurred from..
a) Defective goods
b) Poor service
c) Loss of profit
d) Loss of opportunity
What will the court award in respect of defective goods?
The court would award either the difference in value or the cost of cure.
This means that if goods are defective, the basic rule is that the amount of damages awarded will be the difference in value between the actual value of the goods and the value the goods would have had if they had not been defective.
What will the court award in respect of poor service?
With contracts for services, the basic rule is that the amount of damages awarded will be the cost of putting the work right, ie cost of cure.
However, the court would award the cost of cure for defective goods and the difference in value for defective services if reasonable to do so.
If the object of the contract was to afford pleasure, where the cost of reinstatement would be wholly disproportionate to the non-monetary loss suffered the court may award the claimant….
…a consumer surplus for disappointed expectations Ruxley Electronics and Construction v Forsyth [1996]
Addis v Gramophone Co Ltd established the general rule that in claims for breach of contract, the claimant cannot recover damages for…
…his injured feelings.
Reliance loss damages covers expenditure wasted as a result of the….
…breach of contract. Anglia Television v Reed [1972]
In order to claim for damages on either expectation loss or reliance loss the claimant must prove that he has…
…suffered loss due to the d’s breach (Omak Maritime Ltd v Mamola Challenger Shipping Co (The Mamola Challenger) [2010] )
You may obtain damages for various kinds of loss including
▪ loss of profit ▪ damage to property ▪ physical injury ▪ loss of opportunity, and ▪ mental distress and disappointment, but only in limited situations.
The court may award damages for a lost…
..opportunity.
Chaplin v Hicks [1911] 2 KB 786, the Daily Express ran a talent contest. The top 50 contestants had to attend an audition where 12 winners would be selected. The winners would be given theatrical engagements for three years. The claimant was one of the top 50, but the organisers failed to tell her the time and place of the audition. The Court of Appeal decided that the claimant was entitled to damages to compensate her for the loss of the chance of being one of the 12 winners.
A more modern example of a lost opportunity is the case of Blackpool and Fylde Aero Club v Blackpool Borough Council [1990] 1 WLR 1195, CA. Here the Court of Appeal held that the Council had a duty to consider all properly submitted tenders. The club had properly submitted its tender but it was not considered. The club had therefore lost the opportunity of being selected for the concession to run pleasure flights.
Damages will not normally be awarded for distress or disappointment (Addis v Gramophone Co Ltd [1909]) What is the exception?
Damages for distress and disappointment can be awarded where the contract is to provide pleasure, entertainment, enjoyment or peace of mind. Jarvis v Swans Tours [1973]
It is sufficient if this is an important object of the contract.
Farley v Skinner [2001] 3 WLR 899, HL
What are the three ways to limit damages?
Remoteness
Mitigation
Contributory Negligence
The remoteness rule in contract means that the loss must have been within the..
…reasonable contemplation of the parties at the time of the contract as the probable result of the breach. This was established by Hadley v Baxendale (1854).
If the defendants knew that the mill would be idle then it is likely the decision would have been different and the defendants would have been liable to pay damages. The defendants would have known of special circumstances to bring the loss within their contemplation.
What are the two limbs to the remoteness rule established in Hadley v Baxendale?
Loss which arises naturally from the breach will normally be within the parties’ reasonable contemplation at the time the contract was made (Limb 1).
Unusual loss will be within the parties’ reasonable contemplation only if the special circumstances which give rise to the loss are known to both parties at the time the contract is made (Limb 2).
Why was the loss too remote in Balfour Beatty Construction (Scotland) Ltd v Scottish Power plc 1994 ?
The House of Lords held that Scottish Power was not liable for the full loss suffered by the claimant as a result of an interruption in the electricity supply.
The interruption in electricity supply happened when the claimant was in the middle of a construction project which required a continuous pour of concrete.
Because of the interruption in supply, the work already done was worthless. The defendant did not know about the need for a continuous pour, and the House of Lords stated that there was no general rule that contracting parties were presumed to have knowledge of all techniques in each other’s business practices. However, the simpler the activity, the easier it would be to imply knowledge. In this case, the construction project was complicated and Scottish Power was not deemed to know about it.
Why was the defendant’s knowledge at the time of the contract was informed so important in Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949]?
Because the defendant did not know about the claimant’s highly lucrative contracts with the Ministry of Supply.
The defendant was liable for the loss of ordinary business profit. This was a reasonably foreseeable result of the late delivery as the defendant knew the nature of the claimants’ business and that they intended to put the boiler to immediate use.
The defendant was not liable for the loss of profit on the highly lucrative contracts with the Ministry of Supply. This loss of profit went beyond ordinary profit and, as the defendant had no knowledge of these special circumstances, the loss was too remote.
If the loss arises in the usual course of things under Limb 1 in Hadley v Baxendale, the defendant will have imputed knowledge of it (ie he will be taken to know of it) and it will not be too remote.
If the loss is unusual loss under Limb 2 of Hadley v Baxendale, then it will be too remote unless…
…the defendant had actual knowledge of special circumstances at the time the contract was made.
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949]
Defendant’s knowledge at the time of the contract is crucial
If loss arises in usual course – the D will have imputed knowledge of it
If the loss is unusual, then it will be too remote unless the D knew of it.
In The Heron II, the House of Lords considered the degree of probability needed in order for the loss to be within the reasonable contemplation of the parties.
The question to ask is whether the loss in question is ‘of a kind which the defendant, when he made the contract, ought to have realised was not…
…unlikely to result from [the] breach …’.
In Heron II it was found that loss may be recoverable in damages if it is likely, for the present purposes to occur as a consequence of the breach.
For the loss to be in reasonable contemplation it needs to be a loss that was likely to occur as a consequence of the breach.
In Parsons (Livestock) Ltd v Uttley Ingham Ltd [1978], the court decided that if the defendant can contemplate the type of loss as a serious possibility, then all loss of that type is recoverable even though….
…the extent of the loss could not have been contemplated.
Although the Parsons case involved physical injury, Scarman LJ said that the same principles applied in loss of profit cases.
In Brown v KMR Services Ltd [1995], The Court of Appeal held that, in this case, the underwriting losses, although of far greater magnitude than contemplated, were nevertheless of the same type as ones that were contemplated and so were not too….
…remote (following Parsons).
Obiter – loss of ordinary business profits is different in kind from those that flow from a contract which gives rise to very high profits. (which reconciles this with Vic Laundry).
What happened in the Achilleas case?
Court will test what losses the D could reasonably taken to have assumed responsibility for.
The House of Lords had to decide whether the claimant could recover damages in respect of the extra profit it would have earned on the lucrative lost charter. Their Lordships were unanimous in deciding that that the claimant could not be awarded damages for loss of the lucrative charter as this loss was too remote.
In The Achilleas Lord Hoffman felt that the commercial background to the agreement made it clear that the charterer could not reasonably be regarded as having assumed the risk of the owner’s loss of profit on the re-charter of the ship.
• What’s in the reasonable contemplation of the parties is judged when?
… at the time of the contract.
that’s the point at which the defendant might be said to be, in a general sense, assuming responsibility for what might go wrong.
