Why does the court prefer damages to specific performance?
- Most contracts are bargains and if we give financial damages for what the innocent party would have had, there is not usually any harm
- The courts don’t want to make people do specific things
- It is a lot easier to just get damages – lots simpler
- Considered adequate compensation
What is the purpose of damages?
To compensate the plaintiff’s loss, not to punish the breaching party
- Ruxley Electronics
- Marlborough District Council
What are the three measures of damages?
Expectation, reliance, restitutionary
What is the primary measure of damages?
Expectation
How do you quantify expectation loss?
Calculated using the market value
- J & B Caldwell Ltd v Logan House Retirement Home Ltd
What is diminution of value?
Barry v Davies
- Diminution of value = difference between what is promised and what is supplied
Should the innocent party always be able to get cost of cure? Case + reasoning?
No - Ruxley
- If the cost of fixing is disproportionate to the cost of benefit to be obtained, it is unreasonable to award cost of cure.
What is cost of cure subject to?
The reasonableness test.
If the subject matter is not readily substitutable, cost of cure may be appropriate, subject to the reasonableness test.
If the subject matter is not readily substitutable, what may be appropriate?
Cost of cure.
What is the restitutionary measures / Account of Profit?
- Gains made by the breaching party
- Normally idea is to compensate injured party, not punishing breaching party
- But in exceptional cases, court may find the only way to do the injured party justice is to order the breaching party to give the injured party profits it had made
What are the general limits on damages?
- The innocent party cannot end up in a superior position than if no breach had occurred
- Bloxham v Robinson - no double recovery - Damages for mental distress, anxiety, frustration etc not usually available
- Bloxham v Robinson
- Jarvis v Swan Tours - No exemplary/punitive damages
- Ruxley Electronics & Constr. Ltd v Forsyth
- Whiten v Pilot Insurance
What is NZ’s position on punitive damages?
- We don’t punish people
- But other jurisdictions do – see Whiten
What is the date for assessing loss? When the market value changes over time, when do we asses the loss to the injured party?
General rule:
- Loss is normally assessed at the date of breach.
- McElroy
BUT
- The court at its discretion may fix a later date for the assessment of loss to achieve a fair and just outcome.
What is remoteness in regards to damages?
- Innocent parties must show the breach caused the loss
- The remoteness test: the plaintiff must prove that the damages are not too remote a consequence of the defendant’s breach of contract.
Reasons for the remoteness test?
- If the loss is not foreseeabile – liability may not be fair
- Remoteness test encourages foreseeability, restriction of liability, insurance, and allocation of risk responsibility
What kind of knowledge do you need in the foreseeability test?
Imputed or actual knowledge
Summary of remoteness/foreseeability test?
- Was the loss reasonably foreseeable as a result of the breach?
- what knowledge was possessed by the parties?
- Actual or imputed needed
What is mitigation?
- The mitigation rule requires the claimant to take reasonable steps after the breach to limit or reduce his/her loss caused by the defendant’s breach.
- The loss that could have been avoided by taking reasonable steps is not recoverable in damages.
Do courts like to find mitigation?
No. Situation where contract breaker is saying they should pay less damages, courts don’t look too favourably on this
