Basic Damages

What is the common law way of dealing with breach of contract?
action for damages, normally compensatory- making good for victim of breach. Lord Bingham says
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Lord Bingham said in Golden Straight Corporation v Nippon Yusen Kubishka Kaisha The Golden Victory [ [2007] UKHL 12 at para 9:
The compensatory principle which has long been recognized as the governing principle in contract… has been enunciated and applied times without number”
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Apart from compensatory damages, there are restitutionary damages, What do they do?
to take away any gain that the party has made through their breach
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Pecuniary vs Non-Pecuniary losses.
losses which are financial and losses which aren't financial e.g. company buy new machine for their workshop, breach of contract to supply machine will result in pecuniary loss
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Direct vs Consequential losses
D= breach of contract leads to direct loss for claimant, but will also lead to consequential losses, e.g. is machine is defective, it is a consequential loss since they will have less teddy bears being manufactured. this isn't a direct/ instant loss
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2 parts to assessing damages: what is the right measure of damages? what are the limiting factors? (e.g. remoteness, mitigation)
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stage 1: two measures of damages- expectation measure
(what would you have got if contract had been performed) "a party…so far as money can do it, [should] be placed in the same situation with respect to damages as if the contract had been performed" Parke B Robinson v Harman (1848) 1 Exch 850.
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reliance measure
(puts them back in position before breach happened) "... a plaintiff... can claim... the expenditure which has been thrown away, that is, wasted, by reason of the breach" Lord Denning MR in Anglia TV v Reed [1972]
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Two Measures of Damages: An Example. A contracts to sell to B a valuable ‘Chippendale chair’ for £10k. B pays A £10k and A delivers the chair. The chair turns out to be a reproduction worth only £500.
If it were a genuine Chippendale chair it would have been worth £15k. If B keeps the chair what sum is he entitled to receive by way of an award of:
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Expectation Measure Damages :
he expected chair to be work £15k, therefore expectation measure awarded would be £14.5k
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Reliance Measure Damages?:
before he entered into contract he had £10k. he should therefore be given £9.5k back
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3 rules for Expectation measure
The ‘Breach Date’ Rule (The Golden Victory 2007), ‘Cost of Cure’ or ‘Diminution in Value’? (Ruxley v Forsyth 1996), Loss of a Chance (Chaplin v Hicks 1911)
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The ‘Breach Date’ Rule (The Golden Victory 2007)
presumption that damages are assessed as of the date of breach. The Golden Victory was a ship case, in 2001, charterers said they were terminating the contract. they were'nt entitled to, 3 months later, iraq war broke out, so they would have been abl
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able to terminate. Ship owner claimed damages since when they did breach, they still have 4 years left of service within charter
court held that breach date rule wasn't inflexible, if justice was better achieved by selecting a different date then courts can. here, overriding principle is compensating victim for loss, the loss only ran for 3 months here so they were only given
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3 months compensation.
here, all we need to know is that damages are generally assessed at the date of breach, but this is not always the case
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‘Cost of Cure’ or ‘Diminution in Value’?
here, swimming pool was dug 6 inches too shallow, however, the value isn't lessened by this. yet, the cost of cure is, as you would have to completely re-dig the swimming pool. it is only reasonable to ask for C of C when benefit is proportionate to
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the amount going to be spent
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Loss of a Chance Chaplin v Hicks 1911
here, in a beauty contest, and contestant was prevented from presenting themselves in last round, here they will win what they would have gotten if they had won, divided by likelihood that they would win
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The Reliance or Status Quo Ante Measure: Anglia TV v Reed 1972
In breach of contract an actor withdrew causing TV company to abandon a project. Damages were awarded to the TV company to compensate for wasted expenditure included money spent before the contract was entered, but which were nonetheless wasted by, t
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by, the breach of contract.
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STAGE TWO Limiting Factors Remoteness: The Problem- British Columbia Saw-Mill Co Ltd v Nettleship [1868] LR 3CP 499 at 508
man going to be married to an heiress, his horse having cast a shoe, employed a blacksmith to replace it, who did the work so unskilfully that the horse was lamed, the lady married another; and the blacksmith was held liable for the loss of the marri
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Hadley v Baxendale (1854) most famous case in the common law of contract
Facts Mill shaft broke and mill was unable to work. Broken mill shaft was taken by defendant carrier to be used as pattern for a new one. In breach of contract, the carrier failed to deliver broken mill shaft so that mill did not work.
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What was the question that arose?
Are the carriers liable and if so for what?
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Why is Hadley famous? The Hadley Rules
‘ breach of contract [damages] should be such as: [1] may fairly and reasonably be considered as either arising naturally that is according to the usual course of things [i.e. damages for ordinary losses], …or
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[2] as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it [i.e. damages for unusual losses].’ Alderson B in Hadley v. Baxendale 1854
These are damages for ordinary losses or damages for unusual losses
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Conclusion here was that losses were not regarded under first rule, since it was not an ordinary loss
under the second limb of Hadley v Baxendale- the party would have had to have had the knowledge... it was decided that the carrier was not aware that the mill was idle while in possession of carrier
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this case is also interesting why?
there is a mistake in headnote of case, headnote suggests that carrier was made aware that this was the only (?) however, the headnote has no precedential authority, it is the judgment that prevails
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The Hadley Rule(s) applied- Victoria Laundry (Windsor) Ltd v Newman Industries 1949
Boiler delivered late and Cls sought dams for loss of profit under 2 heads: 1) Loss of normal laundering business and (2) Loss of particularly lucrative government dying contracts. Held by CA only (1) recoverable
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in the tort of negligence, you can recover items of loss even if you see them as a remote possibility.
in contract, you can only recover things if you see them as likely
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in contract there is only one limb, but in hadley v baxondale there are two
in contract, if you want to expand your chances to second limb, you must tell other party about a loss that may occur that they may not take into account. then the party sees the liability and could walk away from contract/ put up price
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Hadley v Baxendale shows there is two limbs, Victoria tells us how they are applied
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Parsons v Uttley Ingham 1978
party failed to properly install device to feed pigs. The food went moldy and many pigs died. judges applied first limb of hadley and baxondale, saying that the broad loss must be foreseen. it was reasonably foreseeable that pigs would get ill.
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where there is physical injury, more generous negligence rule applies, where there is economic loss, contract rule applies
so in majority, reason farmer received damages was because of the type of damage was physical
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The Hadley Rules challenged The Archilleas (2007)
Ship was redelivered late, therefore they had to deliver the ship to the next people late and had to reduce the rate since it was late. HoL provided damages only for the 9 day overrun of the first people who delivered the ship late
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What is the Q to be asked?
whether the charterers had assumed responsibility for the loss. they have here, since they also had a late redelivery of the ship
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hadley and baxondale remains principle which will apply to all issues within basic damages
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Stage two, limiting Factors- mitigation
Victim of a breach cannot recover damages for losses that she could have avoided by taking reasonable steps. this reduces into 2 sub-rules
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The victim should not increase her loss by unreasonable action
the victim cannot recover damages for losses which he could have avoided by taking reasonable action
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non pecuniary loss
jarvis v swan tours(?) (1972) Provision of pleasure is an important, not necessarily the only, object of the contract. damages of £125 awarded by court of appeal, about twice the contract price
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Farley v Skinner (2001)
said that damages are available not only where 'provision of pleasure is sole purpose' but where it is an important part
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what are the other categories of none pecuniary losses?
Avoidance of mental distress, is an important, not necessarily in the only, object of the contract. Where the claimant suffers 'physical inconvenience'. Loss of amenity. Exceptionally for loss of employment prospects.
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Card 2


Lord Bingham said in Golden Straight Corporation v Nippon Yusen Kubishka Kaisha The Golden Victory [ [2007] UKHL 12 at para 9:


The compensatory principle which has long been recognized as the governing principle in contract… has been enunciated and applied times without number”

Card 3


Apart from compensatory damages, there are restitutionary damages, What do they do?


Preview of the front of card 3

Card 4


Pecuniary vs Non-Pecuniary losses.


Preview of the front of card 4

Card 5


Direct vs Consequential losses


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