Damages 2 - The measure of loss is based on expectation Flashcards
Expectations
Parke B in Robinson v Harman
The rule of the common law is that where a party sustains 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.
In other words he should get what he expected from performance
Hence contract protects the ‘expectation interest’ of the parties (or the ‘performance interest’ (Friedmann, ‘The Performance Interest in Contract Damages’ 111 LQR (1995) 628)
Pretty Diagram
Expected performance / Gain from the contract
Actual performance -> compensatory damages
Actual performance falls short of the expected performance and the gap (compensatory damages) has to be filled by payment of money /compensation so that the innocent party is put back into the financial position they would have been if the contract was performed
Three general methods
Claims for consequential losses
Claims for the ‘difference in value’
Claims for the ‘cost of cure’ (or ‘cost of reinstatement’)
Claims for consequential losses - 1
Boris owns a pizzeria and needs a replacement oven urgently. He calls Dominic, who sells industrial ovens, making it clear he needs the oven to be installed by 6pm and that he will lose the entire night of bookings otherwise.
In breach the oven does not arrive and Dominic only installs it two days later.
Boris is entitled to lost profits over the two nights as they are a consequential loss.
Difference in Value - 2
Boris pays £3000 to Sajid for a fridge which is normally £3,500 on special offer. The one that is delivered is a different model worth £2,500.
This is a breach of an implied condition to the effect that goods sold will meet their description (s. 13 SOGA 1979).
Boris can repudiate the contract (reject the fridge and get his £3000 back) and receive an additional £500 because what he received is different in value to what he had expected.
Cost of cure - 3
When fitting Boris’s new kitchen, Suella negligently causes structural damage to the pizzeria in breach of contract, which would cost £20,000 to fix. Boris is entitled to £20,000 as the ‘cost of cure’.
The ‘reliance measure’ - Anglia Television Ltd v Reed
Anglia TV hired Robert Reed for TV play and spent money on props, sets and staff
Reed then pulled out of the play in breach of contract
The normal calculation would be based on consequential losses but these were too unpredictable
Anglia TV received £2,750 to compensate for wasted expenses
This is sometimes described as a separate measure of loss
