Working Guide To Damages - Contract Law

Working guide to damages

General rule

• Burrows: entitled to expectation/performance interest

  • Robinson v Harman [1848]:

    • Parke B:

      • Rule of Common Law is that if party suffers loss owing to breach of contract

        • He is entitled to damages, insofar as money can do it

          • To be put into as good a position as if the contract had been performed.

  • This is different from C’s reliance interest.

• However, the courts will also consider whether it would be reasonable to grant the full expectation interest, such as the cost of repair:

  • Ruxley Electronics Ltd v Forsyth [1996]:

    • Lord Jauncey:

      • X is entitled to recover damage for the cost of repair if

        • He actually intends to carry out the repair

        • The repair work is not unreasonable

      • If the cost of remedying the defect is disproportionate to the end to be attained,

        • the damages will be measured by the diminution in value.

    • Lord Mustill

      • If it is unreasonable, should be able to claim loss of amenity - a small amount to reflect the loss of aesthetic pleasure or loss of use.

    • Lord Lloyd

      • Reasonableness is the way to decide the measure of damages

        • If it would be unreasonable to give the cost of repair

          • Then the Judge must confine themselves to giving the diminution in value only.

      • Intention also has an impact on whether giving the cost of repair

        • If D doesn’t intend to repair the pool

          • Then he ought not to be awarded the cost of repair – he has lost nothing except and diminution in value.

Rules for consequential losses

• Availability

  • Natural Consequence

    • Hadley v Baxendale

      • Anderson B:

        • The damages apportioned should be such as may fairly and reasonably be considered arising naturally

          • i.e. according to the usual course of things

            • from the breach itself

  • Reasonable contemplation

    • Hadley v Baxendale

      • Anderson B:

        • Or as such might be reasonably contemplated by the parties

          • At the time of making the contract

            • As the probable result of a breach such as this.

    • Although The Heron II [1969]:

      • Lord Reid:

        • Court in Hadley v Baxendale didn’t intend that all reasonably foreseeable damage from the breach was to be recoverable.

          • The contract rule of remoteness if different from the tort rule of remoteness.

        • The crucial question is whether, on the information available to D when the contract was made,

          • the reasonable man in his position would have realised that such loss was not unlikely to result from the breach of contract

            • to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.

    • And The Achilleas [2008]:

      • Lord Hoffmann:

        • Reasonable foreseeability is not a complete guide to the circumstances in which damage are recoverable

          • Even if loss reasonably foreseeable as not unlikely

        • Court may avoid granting damages whereby

          • Unreasonable to impose liability

          • Scope duty limited so as to exclude it

          • Matter of common sense, breach can’t be said to have caused loss.

  • Special risks (e.g. lucrative contracts)

    • Victoria Laundry v Newman Industries [1949]:

      • Asquith LJ:

        • Second rule = “actual knowledge” =

          • where D knows of special facts communicated to him,

            • then D is also liable for damage that results from these special circumstances being brought about by the breach,

              • even if this would not be ordinarily foreseeable w/o this knowledge.

    • The Achilleas [2008]:

      • Lord Hope:

        • Only where special circumstances are known to or communicated to the party who is in breach at the time of entering into the contract

          • Can what arises out of these special circumstances be attributed to D’s liability

            • which because he knew about, he can be expected to provide for in the contract if he wishes,

              • the absence of any provision presuming acceptance of the risks.

• Quantum

  • Damage must be foreseeable but extent need not

    • Brown v KMR [1995]:

      • Stuart Smith LJ:

        • The fact that the extent of the loss (catastrophic) could not have been contemplated

          • Does not matter as long as the kind of damage, or “head of damage” is foreseeable as a not unlikely result of the breach.

Duty to mitigate and contributory negligence

• Law Reform (Contributory Negligence) Act 1945 s.1(1)

  • Where any person suffers damage as a result

    • partly of his own fault

    • and partly of the fault of another person(s)

  • the claim shall not be defeated by reason of C being at fault

    • but the damages will be reduced to the extent the court feels just and equitable having regard to C’s share in the responsibility for the damage.

• Vesta v Butcher [1988]:

  • O...