Damages for Breach of Contract

Question 1

What are compensatory damages?

Answer 1

• Damages = payment of money to compensate for any losses the claimant has suffered as a result of the breach
• Not subject to discretion of the court, but are awarded and refused based on established common law principles {Morris-Garner}
• Point is to compensate, not punish

Question 2

(Financial loss) What is expectation loss?

Answer 2

• The innocent party’s interests that arise from the party’s expectation that the contract will be performed, and the benefits they will gain from this performance
• Robinson v Harman: “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.”

Question 3

What are the two discussion problems regarding expectation loss?

Answer 3

• Nature of loss: expectation performance (financial loss and financial situation taken into account) + Bias in favour of financial benefits (profit)
• How to measure damages payable

Question 4

What is the difference between diminution in value vs cost of cure?

Answer 4

• Diminution: the difference between what the claimant had received, and what they had expected to receive if there was not breach
• Cost of cure: cost putting claimant in position they would have been in had the contract been fully performed

Question 5

What can we learn from the case of Ruxley Electronics & Constructions Ltd v Forsyth?

Answer 5

• Diminution in value = almost zero; cost of cure = £21,560
• Courts clam to look at what’s reasonable and what approach is more suitable
• HOL highlighted “the loss truly suffered” and awarded “loss of amenity” damages (£2,500) (for enjoyment instead of financial)

Question 6

(Financial-loss) What is reliance loss?

Answer 6

• Puts IP in position they would have been in had they not entered into the contract (more backward looking)
• Claimant has unfettered right to choose expectation loss or reliance loss, BUT they cannot claim reliance loss in an attempt to escape consequences of bad bargain {CCC FIlms}
• Cannot choose either expectation and reliance

Question 7

(Financial-loss) What is restitution interest?

Answer 7

• Claimant has no right free choice between restitution and his expectation interest
• Available in limited situations
• Unjust enrichment: defendant kept benefit without compensating claimant
• Contract terminated/breached: failure of consideration and disgorgement of profit {Attorney General v Blake}

Question 8

What would happen if there are negotiating damages?

Answer 8

• Situations, where there is a breach, the defendant benefits from the breach, but the claimant cannot demonstrate a clear loss
• Relevant in narrow circumstances {after Morris-Garner}
• At court’s discretion

Question 9

What is non-financial loss?

Answer 9

• Refers to pain and suffering, mental distress
• Usually, courts will not award this as you are expected to meet this with fortitude
• Only awarded if contract has specific rules for fulfilling enjoyment

Question 10

(Limitations on awards of damages) What happens in remoteness?

Answer 10

A claimant may only recover losses which may be reasonably considered as arising naturally from the breach or those which may reasonably be supposed to be in the contemplation of parties at time contract was made.

Question 11

What can we learn from the case of Hadely x Baxendale about remoteness?

Answer 11

• The shaft of the mill supposed to be repaired within 3 days but did not work for 7 days
• 1st limb: look at losses that would arise from breach of contract
• 2nd limb: Reasonable contemplation of both parties = loss must have been in awareness when contract was breached

Question 12

(Limitations on awards of damages) What happens in causation?

Answer 12

• Claimant has to establish causal link between loss and breach in order to claim damages suffered
• Chain must not be broken (but can be by 3rd party intervention, natural events and claimant itself in contributory negligence)

Question 13

What is contributory negligence?

Answer 13

• Where the claimant has contributed to loss, then claimant’s fault may reduce damages recoverable under s1 of Law Reform Act 1945
• Applies only when breach of contractual duty where breach constitutes a tort {Forsikrings AS Vesta case}

Question 14

(Limitations on awards of damages) What happens when the claimant is ‘under’ duty to mitigate loss?

Answer 14

• Claimant must take reasonable steps to mitigate losses or he cannot recover what is attributable to his failure to mitigate {British Westinghouse}
• Claimant must not unreasonably incur expense {Banco de Portogal case}