#2254 - 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’Connor LJ:

    • Where D’s liability in contract is the same as his liability in the tort of negligence independently from the existence of any contract then these cases are susceptible to Contributory Negligence Act 1945

• British Westinghouse v Underground Railways

  • Viscount Haldane:

    • Person who has broken a contract is not to be exposed to additional cost by reason of C not doing what they ought reasonably to do

      • C, of course, being under no obligation to do anything otherwise than in the course of business

    • However, if C does or could do something in the course of business

      • And that action decreases or would decrease his loss

        • The effect in actual diminution of the loss he has suffered may be taken into account even though no duty for him to act.

Rule for mental distress damages

• Where point of contract is to provide enjoyment

  • Jarvis v Swan’s Tour [1973]:

    • Lord Denning:

      • Point of C’s holiday isn’t to be conveyed to Switzerland and sleep in a bed and have meals

        • Point of holiday was for C to relax and enjoy holiday

      • Where contract is to provided entertainment or enjoyment

        • Then although difficult to assess in money

          • Damages should be given for loss of enjoyment, disappointment and distress.

• Even where it isn’t – where physical inconvenience

  • Farley v Skinner [2001]:

    • Lord Steyn:

      • Just because the sole aim of the contract is not to provide pleasure or enjoyment

        • Does not mean that mental distress damages should not be available.

        • Contract can be enforceable even where mental satisfaction is an important aim, but not the sole aim.

    • Lord Scott:

      • Awarding damages for this or not is a matter of cause

        • If the cause is because the contract has broken down

          • Then even if mental breakdown results, then mental distress cannot be awarded

        • If the cause is a sensory one – sight, hearing, smell, touch etc.

          • Then subject to remoteness

            • Then damages can be awarded for this inconvenience.

Loss of reputation/publicity

• Clayton and Waller v Oliver

  • Lord Buckmaster:

    • Rule of remoteness must always apply:

      • the damages are those that may reasonably be supposed to have been in contemplation of the parties at contract formation

        • as the probable result of its breach,

        • and if any special circumstances unknown to one party

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