Damages (L20) Flashcards
What is the concept of damages in contract law?
Purpose of damages is to compensate for loss caused by breach of contract.
Damages is a money substitute for defective, late or absent performance.
Available as of right but must prove loss before compensation can be made.
Limited by principles of causation, remoteness and mitigation of loss.
What cases tell us about the purpose of damages?
Houldsworth v Brand’s Trs (1877) 4 R 369.
“the supposition to be made is that the contract had been duly implemented, and then the inquiry will be what would have been in money value the result to the pursuer” (Lord Gifford, p 375).
Robinson v Harman (1848) 1 Exch. 850:
“The rule of the common law is, that where a party sustains a 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.”
What is pecuniary loss?
Valuable loss caused by the breach e.g. financial (the normal case).
Balfour Beatty Construction v Scottish Power 1994 SC (HL) 20:
“As a result of the stage 1 pour of the Union canal aqueduct not being completed on 28 October 1985 the pursuers had no reasonable alternative but to demolish and reconstruct stage 1 and the costs of doing so and of investigating the breakdown of the power supply as averred in art. 5 amounted to £229,102.53 sterling.”
What is non-pecuniary loss?
In exceptional cases.
No recovery for hurt feelings or mental distress generally.
BUT recovery may exceptionally be allowed.
In which exceptional circumstances may recovery for non-pecuniary loss be allowed?
Loss of amenity, pleasure/environment if purpose of contract to provide personal, subjective and non-monetary benefit.
- Dieson v Samson 1971 SLT (Sh Ct) 49.
- Ruxley Electronics & Construction Ltd v Forsyth [1996] AC 344.
Mental distress when consequent on physical inconvenience.
- Watts v Morrow [1991] 1 WLR 1421.
- Farley v Skinner [2002] 2 AC 732.
What was said in Diesen v Samson?
“Wedding photographs generally are of no interest to anyone except the bride and bridegroom and their relatives and friends, and then only because they serve to stimulate recollection of a happy occasion and so give pleasure. What both the parties obviously had in their contemplation was that the pursuer would be enabled to enjoy such pleasure in the years ahead. This has been permanently denied her by the defender’s breach of contract and, in my opinion, it is as fitting a case for the award of damages as the examples cited.”
“The reason for the general rule [excluding compensation for hurt feelings] is that contracts normally concern commercial matters and that mental suffering on breach is not in the contemplation of the parties as part of the business risk of the transaction.”
This contract “was not commercial … and was exclusively concerned with the pursuer’s personal, social, and family interests and with her feelings.”
What was significant about the case of Ruxley?
“Loss of amenity” recognised as a form of non-pecuniary loss in Ruxley.
What was said and concluded in Ruxley?
“Where a contract is for the provision of a pleasurable amenity, such as a swimming pool, it is entirely proper to award a general sum for the loss of amenity” (trial judge).
“The law must cater for those occasions where the value of the promise to the promisee exceeds the financial enhancement of his position which full performance will secure…. It represents a personal, subjective and non-monetary gain.” (Lord Mustill).
Loss of amenity a way “to compensate the buyer for his disappointed expectations” (Lord Lloyd).
What are the stages to measure the extent of the loss?
Normal rule, damages protect contractually agreed expectations of parties by compensating loss:
- Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344.
- Houldsworth v Brand’s Trs (1877) 4 R 369.
But in one important case, held that damages may exceptionally be measured by gain of contract breaker, not loss to innocent party:
- Attorney General v Blake 2001 AC 268.
Sometimes a damages claim is only made to cover wasted expenditure incurred in reliance on the contract being performed:
- Fielding v Newell 1987 SLT 530.
When can damages be measured by gain not loss?
Damages compensates loss caused to the innocent party by the breach.
Therefore gains of the contract breaker from the breach are normally irrelevant to damages.
But in Attorney General v Blake 2001 AC 268 the House of Lords recognised an exception.
Instead of loss, exceptionally the profits of a contract breaker could be awarded to the innocent party as a remedy.
What was the test for exceptional circumstances set out in Attorney General v Blake?
An account of profits held to be available as ‘the just response to a breach of contract’ if:
- The case is exceptional.
- Normal remedies are inadequate.
- There is a legitimate interest in preventing the profit-making activity.
- Circumstances of the case support such a remedy
Here ‘the Crown had and has a legitimate interest in preventing Blake profiting from the disclosure of official information’ (Lord Nicholls).
What are nominal damages?
Does loss always have to be proved?
- Wilkie v Brown 2003 SC 573.
- Opinion of the 2nd Division on nominal damages:
‘If there is proof that by reason of the breach of contract the pursuer has been put to trouble and inconvenience, the pursuer can be said to have suffered damage of a kind for which a nominal award may be appropriate’.
What are the requirements for the proof of damages?
Identifying the loss:
- In what ways has innocent party not been put in position to which it is entitled under the contract?
Choosing a measure of loss to quantify damages:
- A question of fact: how is position which innocent party should have been put in (by performance) ascertained and quantified?
More than one measure may exist.
- Generally no one measure of loss is conclusive.
Presumptions exist about appropriate measure in some established categories of contract.
- e.g. building contracts; sale of goods.
What did the case of Duke of Portland v Wood’s Trs 1926 SC 640 tell us about choosing the measure of loss
Lord President Clyde at 651:
The measures employed to estimate the money value of anything (including the damage flowing from a breach of contract) are not to be confounded with the value which it is sought to estimate; and the true value may only be found after employing more measures than one – in themselves all legitimate.
What are some typical measures of loss?
- Cost of completion or reinstatement of defective performance (‘cost of cure’).
- Diminution of value.
- Loss of amenity.
