Types of Damages (Lecturer Notes for Contracts) PDF

Preview

Summary

Types of damages (lecturer notes) for contract law...

Description

Types of Damages Actual damages, or compensatory damages, is money awarded to compensate for actual losses. The amount awarded is based on proven harm, loss or injury suffered by the plaintiff.

Compensatory damages Court-awarded damages to put the plaintiff in the same position as if the contract had been performed. Consequential damages Court-awarded damages arising from unusual losses which the parties knew would result from breach of the contract. Liquidated damages Damages specified in the contract in the event of non-performance by either party. Nominal damages Include a small amount awarded by the court to the plaintiff for a breach of contract. Specific performance Directs a party to perform their duties under the contract. Specific performance is not available for service obligations. Rescission Is an equitable remedy- one party sues another party to exit the contract and to put themselves in the same position as if they have started again,

Exemplary damages a.k.a. punitive damages damages requested in a lawsuit when the defendants wilful acts were malicious, violent or fraudulent nominal damages: damage award issued by a court when a legal wrong had occurred when there was no actual financial loss as a result of the wrong liquidated damages: the amount the parties designate during the formation of a contract for the injured party to collect as compensation

Damages and Remoteness Damages can not be too remote from the breach. They are compensatory and they must be mitigated. They can also be pre-agreed.

In short, damages are limited to those that are note too remote. In Hadley v Baxendale (1854) “where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such a breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e. according to the usual course of things, from such breach of contract itself, or such as may be reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probably result of the breach of it. Hadley v Baxendale (1854) Hadley owned a cornmill in England. The two limbs of Hadley v Baxendale: 1. Limb one: Natural consequences: the defendant will be liable for damage that could have been foreseeable as a likely result of his or her breach but not for damage that could not have been so foreseen: refer to Victoria Laundry (Windsor) Ltd v Newman Industries Ltd (1949). As Graw explains: Foreseeability in the required sense does not relate to the actual damage caused, just to the type of damage. In H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd (1978) the majority held that losses for breach of contract are recoverable if the type or kind of loss is a likely result of the breach of contract. Facts: The defendants had installed a pig nut hopper for the plaintiffs, but failed to provide adequate ventilation, causing the nuts to go sour, and the pigs to be poisoned. Decision: remoteness of damage is a question of law. The death of the pigs would have been within the contemplation of the parties when they made their contract, and damages were not too remote and were payable. ‘The courts task, therefore, is to decide what loss to the plaintiffs it is reasonable to suppose would have been in the contemplation of the parties as a serious possibility and had they had in mind the breach when they made their contract. 2. Limb Two: Contemplated consequences: If the damage is attributable to special circumstances that would not normally be expected, a defendant will not be liable unless those special circumstances were brought to his or her attention at the time of contracting. It is not required that a specific term is in the contract making the defendant responsible for any abnormal loss of damage; the mere fact of the awareness that such loss of damage could occur and the express or implied undertaking will be enough to establish liability in the event of a breach. The plaintiff bears the onus of proving that the losses in question were within the parties common contemplation at the time of contracting.

Considerations for Damage Damages are compensatory

The general rule/principle is that in assessing damages, the court will attempt to put the plaintif (or injured party) back in the same position as if the contract had been performed: Robinson v Harman (1848). In Commonwealth of Australia v Amann Aviation P/L (1991), it was held: “the general principle governing the assessment of compensatory damages in both contract and tort is that the plaintiff should receive the monetary sum which, so far as money can, represents fair and adequate compensation for the loss or injury sustained by reason of the defendant’s wrongful conduct.” Put simply, the award of damages should put the ‘wronged’ party in the position they would have been in had the breach of contract not occurred, and the contract had been performed. In essence, Amann was awarded ‘reliance/expectation damages’ as Amann’s postcontractual position could not be adequately ascertained. Disgorgement damages= awarded to deprive a defendant of any profit or other benefit he has received as a direct result of their breach. Such damages are not awarded in Australia. Damages in Equity The flexibility in the choice of the date for the assessment of damages is most evident in the award of damages in equity in lieu of specific performance or following the failure of an order for specific performance. A later date than the date of breach may be chosen, even if there is no difference of approach between common law damages and damages in equity. However, the mere fact that damages are given in lieu of specific performance is not a sufficient justification for rejecting the date of breach as the proper date for assessment: the general position is simply that a later date may be necessary to achieve justice. Where damages are awarded after the failure of an order for specific performance, a date later than the date of the defendant’s breach is usually more appropriate because there is, in effect, a subsequent breach, namely, at the time when the order becomes incapable of enforcement. Generally, the date for assessment will be the date when, without the default of the plaintiff, the contract is lost.

Timing of damages Normally, damages are assessed as at the time when the cause of action arises, that is, the time of breach of contract on the basis of the loss or damage suffered at that time: Wenham v Ella (1972).

Although the general rule is still frequently applied in contract cases, it is less common these days. The general rule, that damages in contract are assessed at the time of the breach, will not be applied if to do so would give rise to injustice, in which case the court has the power to fix such other date as may be appropriate in the circumstances: Johnson v Agnew (1980).

The plaintiff’s cause of action in damages for breach must be complete at the time when the action is brought, and for example, a plaintiff cannot recover as damages money which would have been payable by the defendant at a later date. However, this rule only restricts recovery where a future sum depends on a fresh cause of action. In cases where the plaintiff has terminated the performance of the contract for a serious breach or for a repudiation by the defendant, there is no objection to future sums being awarded, because the breach is regarded as extending further than the obligations which have fallen due for performance. In such cases, a discount may be necessary to take account for future contingencies. No bar recovery Even though at times the assessment of damages is extremely difficult, particularly where a speculative claim is in issue, it is well established that difficulty of assessment is not a bar to recovery, provided that the difficulty does not arise from the fact that the plaintiff has produced no evidence of loss or damage, or the rejection by the court of the evidence which is put forward on loss caused by the breach. Relevance to the basis of assessment The fact that damages are difficult to assess on one basis may lead the court to award a sum on some basis other than the expectation basis normally applied in most breach of contract cases. Thus, although the nature of the contract may suggest the expectation basis as the normal basis...