Damages

Purpose and Nature of Damages

Definition

• Damages are the primary common law remedy for breach of contract.
• They consist of a monetary award paid by the party in breach to the innocent party.
• The aim is compensation rather than punishment.

Examination Principle

• Contract damages are compensatory.
• The objective is to place the innocent party in the position they would have occupied had the contract been properly performed.

Fundamental Purpose of Damages

Robinson v Harman (1848) 1 Ex 850

Facts

• Defendant agreed to grant a lease.
• Defendant lacked title and could not perform.
• Claimant suffered financial loss.

Judgment

• Damages awarded.

Legal Principle

• The innocent party should be placed, so far as money can do it, in the position they would have been in had the contract been performed.

Importance

• Most important damages case.
• Foundation of modern contractual damages.

Examination Application

• First authority cited when discussing the purpose of damages.

Robinson v Harman Principle

Core Objective

• Protect expectation interest.
• Compensate actual loss.
• Enforce contractual promises through monetary compensation.

Application

• Governs virtually all contractual damages questions.

Damages Are Compensatory Not Punitive

Addis v Gramophone Co Ltd [1909] AC 488

Facts

• Employee wrongfully dismissed.
• Claimed damages for manner of dismissal and injured feelings.

Judgment

• Claim largely rejected.

Legal Principle

• Contract damages compensate loss.
• They do not punish the defendant.

Importance

• Leading authority confirming compensatory nature.

Application

• Frequently examined.

Difference Between Contract and Criminal Law

Contract Law

• Compensation.

Criminal Law

• Punishment.

Application

• Important essay point.

Expectation Interest

General Principle

Definition

• The law seeks to provide the value of the promised performance.

Objective

• Give the claimant the benefit of the bargain.

Application

• Most contractual damages protect expectation interest.

Robinson v Harman (1848)

Application

• Leading expectation interest authority.

Chaplin v Hicks [1911] 2 KB 786

Facts

• Claimant wrongfully deprived of opportunity to compete in a beauty competition.
• Opportunity carried potential financial value.

Judgment

• Damages awarded.

Legal Principle

• Damages may compensate loss of a contractual opportunity.

Application

• Demonstrates breadth of expectation damages.

McRae v Commonwealth Disposals Commission (1951) 84 CLR 377

Facts

• Defendant sold rights to salvage a tanker allegedly located at a specified position.
• No tanker existed.

Judgment

• Damages awarded.

Legal Principle

• Damages compensate for loss resulting from failure to receive promised contractual benefit.

Application

• Frequently cited.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course

Reliance Interest

General Principle

Definition

• Damages may compensate expenditure incurred in reliance upon the contract.

Objective

• Restore claimant to pre-contract position.

Application

• Alternative where expectation loss is difficult to prove.

Anglia Television Ltd v Reed [1972] 1 QB 60

Facts

• Actor agreed to appear in production.
• Later withdrew.
• Production abandoned.

Judgment

• Claimant recovered wasted expenditure.

Legal Principle

• Reliance losses may be recoverable.

Importance

• Leading reliance damages authority.

Application

• Frequently examined.

C & P Haulage v Middleton [1983] 1 WLR 1461

Facts

• Claimant incurred expenditure under an unfavourable contract.

Judgment

• Recovery restricted.

Legal Principle

• Reliance damages cannot be used to escape a bad bargain.

Application

• Important limitation.

Restitutionary Interest

General Principle

Definition

• Focuses on gains obtained by the defendant rather than losses suffered by the claimant.

Application

• Rare in contract law.

Attorney General v Blake [2001] 1 AC 268

Facts

• Former spy breached confidentiality agreement by publishing memoirs.

Judgment

• Profits ordered to be surrendered.

Legal Principle

• In exceptional circumstances, account of profits may be awarded.

Importance

• Leading restitutionary damages case.

Application

• Frequently discussed in essays.

Experience Hendrix LLC v PPX Enterprises Inc [2003] EWCA Civ 323

Facts

• Contractual rights exploited without authority.

Judgment

• Court considered restitutionary principles.

Application

• Important post-Blake authority.

Damages as a Right

General Principle

Legal Rule

• Damages are available as of right once breach and loss are established.

Application

• Unlike equitable remedies, damages do not generally require judicial discretion.

Johnson v Agnew [1980] AC 367

Facts

• Contract for sale of land breached.

Judgment

• Damages available.

Legal Principle

• Damages remain the normal remedy for breach.

Application

• Important authority.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course

Objectives of Contractual Damages

Objective 1: Compensation

Robinson v Harman

• Restore claimant to expected position.

Objective 2: Protection of Bargain

Chaplin v Hicks

• Protect contractual expectations.

Objective 3: Recovery of Wasted Expenditure

Anglia Television v Reed

• Protect reliance interest.

Objective 4: Prevent Exceptional Unjust Gain

Attorney General v Blake

• Rare restitutionary objective.

Objective 5: Promote Contractual Certainty

General Principle

• Parties can assess financial consequences of breach.

Application

• Encourages commercial certainty.

What Damages Do NOT Aim To Do

Punishment

Addis v Gramophone

Principle

• Contract damages are not punitive.

Vindication

General Principle

• Contract law protects economic interests rather than moral rights.

Emotional Satisfaction

Addis v Gramophone

Principle

• Damages generally do not compensate hurt feelings.

Relationship Between Breach and Damages

Actual Breach

Poussard v Spiers (1876)

Application

• Damages available following breach.

Anticipatory Breach

Hochster v De La Tour (1853)

Application

• Damages available immediately upon acceptance of repudiation.

Defective Performance

Hoenig v Isaacs [1952]

Application

• Damages available for defects.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course

Essential Examination Cases

Types of Interest Protected

Core Examination Principle

Robinson v Harman (1848)

Rule

• Damages seek to place the innocent party, so far as money can do it, in the position they would have occupied had the contract been properly performed.

Importance

• The single most important principle governing contractual damages.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course