Law Of Contract: Remedies For Breach Of A Contract: Common Law: The Measure Or Calculation Of Damages – The Categories Of Expectation Loss, Reliance Loss, Non-pecuniary Loss (Copy)
The Measure or Calculation of Damages
General Principle
Fundamental Rule
- The measure of damages is governed by the principle established in Robinson v Harman (1848).
- The aim is 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.
Robinson v Harman (1848) 1 Ex 850
Facts
- Defendant contracted to grant a lease.
- Defendant lacked legal title and could not perform.
Judgment
- Damages awarded.
Legal Principle
- Claimant should receive the value of the promised performance.
Importance
- Foundation of contractual damages.
- Governs calculation of expectation loss.
Application
- First authority cited in damages questions.
Expectation Loss
Definition
General Principle
- Expectation damages compensate the claimant for the benefit expected from performance of the contract.
- Protects the claimant’s expectation interest.
- Gives the claimant the value of the bargain.
Examination Application
Question:
“What would the claimant have received if the contract had been properly performed?”
The answer usually determines expectation damages.
Loss of Profit
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528
Facts
- Boiler delivery delayed.
- Laundry business lost ordinary profits.
Judgment
- Ordinary profits recoverable.
Legal Principle
- Lost profits resulting from breach may be awarded.
Application
- Classic expectation loss case.
The Heron II (Koufos v Czarnikow Ltd) [1969] 1 AC 350
Facts
- Sugar shipment delayed.
- Market price fell during delay.
Judgment
- Loss recoverable.
Legal Principle
- Damages may include lost commercial opportunities and profit.
Application
- Frequently cited.
Difference in Value
Robinson v Harman (1848)
Principle
- Claimant receives value of promised performance less actual value received.
Application
- Common measure in property and commercial contracts.
Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344
Facts
- Swimming pool built shallower than specified.
- Pool remained usable and safe.
Judgment
- Cost of rebuilding refused.
- Damages awarded for loss of amenity.
Legal Principle
- Damages should reflect actual loss rather than mechanically applying rebuilding costs.
Application
- Important authority on valuation.
Cost of Cure
General Principle
Definition
- Cost required to rectify defective performance.
Application
- Frequently used in construction disputes.
East Ham Corporation v Bernard Sunley & Sons Ltd [1966] AC 406
Facts
- Building work defective.
Judgment
- Cost of repair awarded.
Legal Principle
- Cost of cure often provides appropriate measure.
Application
- Leading authority.
Ruxley Electronics v Forsyth [1996]
Limitation
- Cost of cure may be refused where disproportionate.
Application
- Essential examination 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
Reliance Loss
Definition
General Principle
- Reliance damages compensate expenditure incurred in reliance upon the contract.
- Aim is to restore claimant to the position occupied before the contract was made.
Examination Application
Used where:
- Expected profits cannot be proved.
- Expectation damages are uncertain.
Anglia Television Ltd v Reed [1972] 1 QB 60
Facts
- Actor agreed to appear in television production.
- Withdrew before filming.
- Production abandoned.
Judgment
- Claimant recovered wasted expenditure.
Legal Principle
- Reliance losses incurred before and after contract formation may be recoverable.
Importance
- Leading reliance damages authority.
Application
- Frequently examined.
CCC Films (London) Ltd v Impact Quadrant Films Ltd [1985] QB 16
Facts
- Film distribution agreement breached.
Judgment
- Reliance expenditure recoverable.
Legal Principle
- Defendant bears burden of proving that expenditure would not have been recovered.
Application
- Important reliance authority.
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377
Facts
- Defendant sold rights to salvage a tanker.
- Tanker did not exist.
Judgment
- Claimant recovered wasted expenditure.
Legal Principle
- Reliance losses recoverable where expected benefit impossible to calculate.
Application
- Frequently cited.
Limits on Reliance Loss
C & P Haulage v Middleton [1983] 1 WLR 1461
Facts
- Claimant spent money improving leased premises.
- Contract terminated according to its terms.
Judgment
- Recovery denied.
Legal Principle
- Reliance damages cannot be used to escape a bad bargain.
Importance
- Leading limitation authority.
Application
- Frequently examined.
Omak Maritime Ltd v Mamola Challenger Shipping Co Ltd [2010] EWHC 2026
Facts
- Reliance losses claimed following breach.
Judgment
- Court reaffirmed limits on reliance damages.
Legal Principle
- Reliance claims cannot exceed what proper performance would have produced.
Application
- Modern 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
Non-Pecuniary Loss
General Principle
Definition
- Losses that are not purely financial.
- Includes:
- Distress.
- Disappointment.
- Loss of enjoyment.
- Mental suffering.
Traditional Rule
- Contract damages generally do not compensate injured feelings.
Addis v Gramophone Co Ltd [1909] AC 488
Facts
- Employee wrongfully dismissed.
- Claimed damages for injured feelings.
Judgment
- Claim rejected.
Legal Principle
- Damages for distress and injured feelings are generally unavailable in contract law.
Importance
- Starting point for all non-pecuniary loss questions.
Application
- Fundamental authority.
Exception: Holiday and Enjoyment Contracts
Jarvis v Swan Tours Ltd [1973] QB 233
Facts
- Holiday advertised with numerous attractions.
- Holiday substantially disappointed expectations.
Judgment
- Damages awarded for disappointment and distress.
Legal Principle
- Non-pecuniary losses recoverable where enjoyment is a major purpose of the contract.
Importance
- Leading exception.
Application
- Frequently examined.
Jackson v Horizon Holidays Ltd [1975] 1 WLR 1468
Facts
- Family holiday failed to match contractual promises.
Judgment
- Damages awarded.
Legal Principle
- Compensation available for disappointment and distress.
Application
- Important holiday contract authority.
Farley v Skinner [2001] UKHL 49
Facts
- Surveyor engaged to assess aircraft noise near a property.
- Surveyor negligently reported that noise was insignificant.
- Property suffered significant aircraft noise disturbance.
Judgment
- Damages awarded.
Legal Principle
- Non-pecuniary damages may be awarded where an important object of the contract is peace of mind, pleasure or freedom from distress.
Importance
- Leading modern authority.
Application
- Frequently cited.
Loss of Amenity
Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344
Facts
- Swimming pool constructed shallower than contracted depth.
Judgment
- Damages awarded for loss of amenity.
Legal Principle
- Where expectation loss is difficult to quantify, damages may compensate loss of enjoyment.
Application
- Important authority linking expectation and non-pecuniary loss.
Watts v Morrow [1991] 1 WLR 1421
Facts
- Surveyor negligently inspected property.
Judgment
- Damages for distress restricted.
Legal Principle
- Distress damages generally unavailable unless:
- Physical inconvenience occurs; or
- Peace of mind is a major contractual objective.
Application
- Leading limitation 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
Comparison of Categories
| Category | Objective | Leading Cases |
|---|---|---|
| Expectation Loss | Put claimant in promised position | Robinson v Harman, Victoria Laundry, Ruxley |
| Reliance Loss | Restore claimant to pre-contract position | Anglia Television v Reed, McRae |
| Non-Pecuniary Loss | Compensate distress, disappointment or loss of enjoyment | Jarvis, Farley, Ruxley |
Examination Comparison Table
| Case | Type of Loss | Principle |
|---|---|---|
| Robinson v Harman | Expectation | Benefit of bargain |
| Victoria Laundry v Newman Industries | Expectation | Lost profits |
| The Heron II | Expectation | Commercial loss |
| East Ham Corp v Bernard Sunley | Expectation | Cost of cure |
| Ruxley Electronics v Forsyth | Expectation / Non-Pecuniary | Loss of amenity |
| Anglia Television v Reed | Reliance | Wasted expenditure |
| McRae v Commonwealth Disposals | Reliance | Expenditure recovery |
| CCC Films v Impact Quadrant | Reliance | Burden on defendant |
| C & P Haulage v Middleton | Reliance Limitation | No escape from bad bargain |
| Addis v Gramophone | Non-Pecuniary Limitation | No injured feelings damages |
| Jarvis v Swan Tours | Non-Pecuniary | Holiday disappointment |
| Jackson v Horizon Holidays | Non-Pecuniary | Loss of enjoyment |
| Farley v Skinner | Non-Pecuniary | Peace of mind contracts |
| Watts v Morrow | Non-Pecuniary Limitation | Distress generally unrecoverable |
Core Examination Principle
Robinson v Harman (1848)
Rule
- Damages should place the claimant, so far as money can do it, in the position they would have occupied had the contract been properly performed.
Importance
- Governs calculation of expectation damages and remains the foundation of all contractual damages assessment.
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