DAMAGES

DAMAGES
Expectation, Reliance & Restitution Interests

OBJECTIVES
• Objective of all damages is to put IP(innocent party) into position it
would have been in if wrong had not been done – so far as money
can.
• Tort – personal injury – compensate. Puts IP back where she was
before wrong.
• Contract – give IP contractual benefits she would have received if
contract performed.
• Common to call Tort damages reliance & Contract expectation.
Robinson v Harman
• Parke B – “The rule of the common law is, that where a party sustains a loss
by reason of a breach of contract, he is, so far as money can do it, to be
placed in the same situation, with respect to damages, as if the contract had
been performed.”
• Fuller & Perdue emphasised primacy of reliance damages.(distinguish btwn
expectation, reliance and restitution)
• Friedmann(1990s) shows this is inconsistent with Robinson v Harman.
• Restitution – kick into touch for now.
• Today is about expectation & reliance.
• Message is reliance is part of expectation in sense of Robinson v Harman.
Where reliance only because no other losses.
BUILDER EXAMPLE
• Builder (B) contracts with Owner (O) to build house for O for £100k.
• B builds house. O does not pay. B sues O for price.
• House costs B £90k to build. B’s profit £10k.
• If O repudiates contract before B starts work & B accepts termination,
what are B’s damages?
• If B does £30k work, O repudiates & B accepts termination, what are
B’s damages?
ONLY RELIANCE?
• McRae v CDC (1951)(Australian case) 84 CLR 377 – no profits proved so only reliance.- McRae
contracted to buy oil tank, went out to search tanker which wasn’t exist
• No lost profits & no reliance – Omak v Mamola.
• Reliance is part of that; part of expectation.
• Where IP suffers no loss can’t get any damages, neither profits nor expenses.- no objective,
scientific, reasonable way to figure out the amt, no profit awarded, too spectative
• Anglia TV v Reed. Reliance may include pre-contract expenses.
• Must IP can elect between reliance & expectation? Anglia sought only expenses because
profits difficult to prove.
• IP can’t have reliance if contract loser. Losses not caused by D’s breach. Terminate & move
on.
• D bears burden of proof that contract loser.
• In order to be compensated, C must show:
• 1. BOC, 2. suffer loss 3. the loss was caused by the BOC
• -read Denning’s opinion
REINSTATEMENT or DIFFERENCE IN
VALUE?
• Where D’s performance defective & C has expectation losses.
• Ruxley v Forsyth. Reinstatement or difference in value or something else?
• Reinstatement usual rule – protect performance interest.
• No reinstatement if unreasonable (the cost of providing damages wld be
disproportionate). Expense disproportionate to benefit.
• D to show unreasonable.
• Unreasonable re the contract, not at large, e.g. folly. (no functional value)
• IP’s intention to rebuild relevant to unreasonableness.
• Concern to prevent over-compensation.
• Third way of measuring loss – amenity value.
PROBLEM
• Charles & Camilla engage services of Bathroom Fittings Ltd to install
new bathroom in their home. Colour to be pink and price £20k.
While Charles & Camilla on holiday Bathroom Fittings Ltd install
bathroom. Everything fine except wrong colour – purple.
Difference in value nil. Cost of reinstatement £20k.
Are Charles & Camilla entitled to cost of reinstatement?
DATE FOR ASSESSMENT
• General rule date of breach – difference between contract rate & market rate.
• Based on section 51 Sale of Goods Act 1979 – if available market IP should
mitigate loss by entering it & acquiring sub performance.
• May mean no loss if market rate better, e.g Omak v Mamola.
• What happens if tribunal assessing damages knows something has occurred
that suggests true compensation different from date of breach?
• The Golden Victory – repudiation 4 years early – war clause 33 – by time of
damages assessment war had broken out.
• Issue – measure damages as difference between contract & market rates from
repudiation to end of contract or just until outbreak war?
ARGUMENTS FOR/AGAINST DATE OF
BREACH
ARGUMENTS FOR
• Encourages early settlement.
• Significance of initial arbitration proceedings.
ARGUMENTS AGAINST
• Over compensation. Why shut eyes to what we know happened?
• New c/party would have included war clause.
• Courts/arbitrators have power to prevent abuse of process.
Bunge SA v Nidera BV
• Contract for purchase of Russian grain to be shipped 23-30 August
2010.
• 5 August Russian government announced embargo on export of grain
15 August to 31 December 2010.
• 9 August sellers cancelled contract. Did not want to incur expense of
chartering ship.
• 11 August buyers accepted this repudiation of contract.
• It was repudiation because embargo might have been lifted in time.
• When GAFTA tribunal sat some months later embargo had been
imposed.
Bunge v Nidera Decision
• Question was – apply SGA(sale of Goods Act) difference between contract
price and market price of new cargo at date of breach? $3m. Or
• Like Golden Victory take account of embargo? Therefore reduce the damages
to Nominal damages.
• Clause 20 of GAFTA Form 49 – only dealt with sum payable if date of breach
rule applied. Did not say whether date of breach rule applied.
• Once past clause 20 Golden Victory applies.
• Differences from Golden Victory make argument for applying that principle
stronger:-
• At breach embargo was almost inevitable whereas war only possible.
• Arbitration tribunal could only have sat after embargo.

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Expectation, Reliance & Restitution Interests

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