Contract law is an area of law which is largely influences the business society. The parties to the contract are legally provided the right to take actions against each other for breach of its terms. Along with its formation and content, it is also important to understand the law regarding damages in case of contractual breach. There are various forms in which damages is provided to the aggrieved party by the courts. The contract can only be breached when one of the parties has not followed the terms that was mentioned in the contract. The other party has the right to sue the party who has breached the terms of the contract and has the right to claim damages. In the case Addis v Gramophone Co Ltd [1909] AC 488, the general rule regarding the damages is if the contractual rights have been breached of one of the party then the court must restore the party’s previous position. It is difficult for the court to find out the party’s position because there are several expectations of party regarding the contract. The research topic is “should the courts award expectation damages for the breach of contract in relation to the principles of damages in contract law, why or why not.”
When there is loss in revenue regarding to the violation of contract then there might be claims regarding the expectation damages that has been made by injured party. No such principles has been mentioned in contract law regarding to what profit must be deducted. Every expense is determined individually if it is direct cost or overall cost.
The rules of expectation damages has been deliberated through the court in the given case Robinson v Harman (1848) 1 Ex Rep 850. Parke B has said that the rules of common law states that when the contractual party has faced loss because of the violation of the contract, then the party needs to be situated in that same position with the help of money if the formation of the contract was done regarding the damage. A question that arises by the rules of the above mentioned case is whether the profit needs to be included that the party had expected to make if this contract was formed. One such problem that the court faced while resolving the above issue is the contract that was violated was of the small amount and the injured party’s expectation regarding the profit is high. An example has been set out that A and B had entered in a contract. B has to supply the spare parts to A of a machine and the cost was £100. It was stated to B by A that he needs those parts to resale his machine to a nice customer and that customer will not wait more than two days. A could not get the profit as B could not supply the parts. The profit amount is £200,000. A question has arisen in front of the court that whether B is legally responsible to pay the amount of £200,000 to A as per the rules of the expectation damages. This part of law is not explored in a wide manner. There is still a question about what provisions will be followed by the judges in the above mentioned case. Thus, the justification of this research is to search out what provisions should be followed by the court in the given circumstances.
Contract law uses three types of damages. The first type is expectation type that puts the aggrieved party in such place as contract was not violated. The second type is reliance that places the party in such position like the contract was never executed and the third type is restitution that assures the benefit restoration to injured party that is obtained through the party who has done wrong at injured party’s expenses. The expectation type should be the rule always. These damages have been ranked by the court as per their importance and at the end the expectation measure is put. Thus, it is important to see the court’s approach and how does it put an impact on society of business where several contracts are formed and violated on a regular basis.
The research has got the capability to identify the discrimination that might be there in the present system of law regarding the expectation damages. This system of law might give some sufficient guidelines to the parties whose contractual rights have been violated regarding to analyse what damages they have the tight to claim for the violation of the contract. It can be clarified through the research to the contractual parties that what correspondences regarding the formation of the contract they must have so that they can claim the expectation damages.
The main guideline that is to assess regarding the most important question is the manner in which the expectation damages have been recently measured through the court. The primary amount is that, which will give the injured party a bargain’s benefit. These damages are however penitentiary. The main motive is to place the injured party in such situation that will be occupied through them if the legal agreement is performed totally. In order to make it straightforward, the amount will make the injured party immune with relation to the terms of the contract. There are some other guidelines that need to be taken into consideration in regards with the research. The other guidelines are “duty to mitigate”, the rules of the reasonable certainty, and prediction of the damages and the cost of the damages or the proposed value of the performance that would exceed the market price of the whole performance.
According to McKendrick (2014), the damages which are entitled to be recovered by a non-breaching party with respect to breach of contract are called expectation damages. The court awards to a part expectation damages for the purpose of protecting the interest of the party with respect to acquiring value of expectancy which had been formed because of the agreement with the other party. The main reason which is considered by the court when they decide to provide expectation damages is placing the aggrieved party is situation which would have been held by it in the event of contract formation. Macaulay (2018), has stated that expectation damages are not same as restitution damages or reliance damages. In relation to expectation damages, the aggrieved party is only provided money or equivalents which may further be subjected to exceptions or limitations. The determination or measurement of expectation damages is done via diminution in value along with incidental or consequential damages.
There are special rules put in place for determining exceptional damages as discussed in the case of Bellgrove v Eldridge [1954] HCA 36. The court stated in this case that expectation damages are measured by calculating the difference between the promise made and the actual receipt. The court also consider ant incidental or consequential expenses deducted by the value received by the aggrieved party. Any cost which has been saved in relation to the breach is also taken into consideration. The appropriate value is that which provides the aggrieved party “benefit of bargain”. However, the judges also stated in this case that expectation damages are not in any way punitive in nature. The only purpose which such damages have in theory is to place the aggrieved party in position which would be held by them if the contract was performed totally. Knapp (2016), has defined expectation damage as the amount which makes the aggrieved party immune to the breach.
An example of expectation damages have been provided by Poole (2016), in form a transactions between A (General Contractor) and B (Sub-contractor). A and B get into a contract and the contract is breached by A. in general B can claim damages equalling contract price or any value of the promise which is unrealized and adding with it expenses made to perform the contract. This has to be subtracted with cost saved by the breach and general payments made by A. These damages may have anticipated profits. In another situation X signs a contract with Y for 5 hours of services at $500 an hour. In case X does not use any services, the expectation damages to be provided to Y would include $2500 deducted by cost saved by Y. In case the contract is breached by Y and X has to hire a service at $600 an hour, Y would have to pay $500 to X.
According to Cartwright (2016), there are a few limitation and exceptions relating to expectation damages. These exceptions are as follows.
Under this duty the non-breaching party has to ensure reasonable approach with respect to mitigating any damages. In case such steps are not considered, the courts may reduce damages. In the case of Robinson v Harman, (1848) 1 Ex Rep 850 the court stated that this duty is only limited to taking reasonable care and no duty is imposed in relation to actions which are unreasonable burdensome.
The provisions of reasonable certainty had been discussed by the courts in the case of Clark v Macourt [2013] HCA 56, (2013) 253 CLR. In this case the court ruled that damages must be calculated in relation to reasonably fixed facts or situations which can be compared. The calculation cannot be made based on guesses and unreasonable expectations. Where there is uncertainty, the breaching party may be subjected to the risk rather than the non-breaching party.
The rules of the landmark case of Hadley v Baxendale [1854] EWHC J70 discuss the issue of foreseeability. Damages would only be provided if they are foreseeable or known. The parties would be entitled to expectation damages if they have been contemplated or are reasonably foreseeable.
The case of Peevyhouse v. Garland Coal & Mining Co., 382 P.2d 109 discussed rules in relation to expectation damages and their relation to cost of performance. The cost of performance may be much more than the market value as suggested by this case.
There have been various other cases where the provisions relating to expectation damages have been covered. For instance in Robinson v Harman, (1848) 1 Ex Rep 850, the court stated that the claimant has to be placed in a similar position in relation to the damages like where the contract was carried out without any breach. In Smith v. Bolles, 132 U.S. 125 (1889) the court provided rules in relation to limitation on expectation damages. The court stated that fraudulent conduct which can be attributed legitimately to the misrepresentation relying on unrealized speculations. Another landmark case in relation to expectation damages is Hawkins v. McGee, 84 N.H. 114, 146 A. 641 (N.H. 1929). There have been cases where the court did not allow the claimant to get expectation damages such as the case of Harper v. Virgin Net [2004] EWCA Civ 271. In this case an employee was restricted form claiming damages for losing opportunity of initiating an unfair dismissal claim. Should would have been able to make the claim if she had served the notice period.
This is an issue similar to expectation damages. Under this rule the law has the power to assess a hypothetical outcome which either impacts the claimant or a third party in case breach of contract by the defendant restricts the claimant from deriving a benefit or avoiding any loss. In relation to such circumstances the remedy of damages generally intends to compensate the claimant for any loss of expectation. According to Chaplin v Hicks [1911] 2 KB 786 loss of chance can be compensated when the chance was a term which was promised through a contract.
The given chapter is devised in such a manner that it will help undertake research and discuss its tools for the benefit of the person undertaking the research. The definition of terms such as design, approach and philosophies are elaborately discussed here for the benefit of the researcher. For the scope of the study, date and resources that are secondary in nature have been validated in relation to the topic for this approach.
(Source: Taylor et al. 2015)
Data that is relevant for the research is compiled and evaluated by the researcher, given to verify and understand the subject taken up for research. Several different philosophies are compiled together, and some of them that are used here are realism, interpretivism and positivism. When data is taken and interpreted in a widely social criteria then that kind of philosophy is termed as interpretivism. When factual information about the given research topic is accumulated and presented, such a philosophy is termed as positivism. Similarly, the kind of philosophy that is a representation and a mixture of the above two types and is also presented and constructed in a social scale is termed as realism.
All the data that is taken up in the making and analysis will be arranged and propagated in a systematic manner using the positivism ideology and hence decide the quality of the research in progress.
The given topic has allowed the researcher the opportunity to learn and absorb more relevant data regarding the subject that is being researched upon. The researcher has selected such a topic that is in line with the subject matter. Such an approach that is discussed here is for relevant purposes divided in two informative sections, namely, inductive and deductive approach. An approach that deduces theories and studies the models in terms of research papers published by certain authors is termed to be an approach that is deductive, whereas, when new theories are deduced and models studied for a research; such an approach is termed to be inductive.
The given research is approached in a deductive manner maintaining a reduced budge estimate through study.
When a research paper is profiled in a particular design, it benefits the researcher to fulfill the project in a much simplistic manner. Mixed, secondary and primary are said to be the main types of research design that are popularly used. When it comes to the mixed design type, it follows the criterions of the latter two. For studies, surveillance and interview projects, a primary design is considered, whereas, a secondary type is used in cases of relevant pieces of information in the form of an article or simply any other kind of newspaper report.
Since the research topic is based off of literature, both secondary as well as primary methods have been projected; hence, giving shapes to a mixed design approach. The proper data estimated with a detailed survey is then put into place with a creative conclusion, hence resulting in a mixed approach.
Since the understanding of the subject was clear in the mind of the person conducting it, the result can be called satisfactory. To further simplify such an elaborate procedure, we divide it in explanatory, exploratory and lastly the descriptive type of research. The research background is verified and analyzed in the exploratory type, proper information and descriptions about the given subject are portrayed better in the descriptive type and lastly, variables are found and selected to help with the research in the explanatory type.
Since variable examination is prominent here in this case, it can be said that the type of research that is conducted here is explanatory. It has helped the researcher in grasping various ideas and plans regarding the concerned subject had benefited in its conclusion.
Secondary and primary sources have been widely used when it comes to the collection of data regarding this particular project given to us. For the sake of proper information collection and data gathering, the use of a secondary source is very prominent; though authentication will greatly be benefited with this course of action.
Various needed policies have to be maintained and rules are to be extensively considered for meeting the needs and criterions of fulfilment of this particular subject. Forceful conduct is strictly avoided when collecting data from masses for it might result in a change of perspective; hence, making sure that the transpired result is neither forged nor has any kind of biased responses but has made suitable conclusion using various recommendations by several parties. The public data is not a part of any published research scheme and will not benefit the contracting parties in any commercial way. The given data is safely kept in place and is planned to be destroyed when the study has ended.
Reference List
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Chaplin v Hicks [1911] 2 KB 786
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Clark v Macourt [2013] HCA 56, (2013) 253 CLR
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Hadley v Baxendale [1854] EWHC J70
Harper v. Virgin Net [2004] EWCA Civ 271
Hawkins v. McGee, 84 N.H. 114, 146 A. 641 (N.H. 1929)
Knapp, Charles L., Nathan M. Crystal, and Harry G. Prince. Problems in Contract Law: cases and materials. Wolters Kluwer Law & Business, 2016.
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Mackey, Alison, and Susan M. Gass. Second language research: Methodology and design. Routledge, 2015.
McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.
Peevyhouse v. Garland Coal & Mining Co., 382 P.2d 109
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Robinson v Harman (1848) 1 Ex Rep 850
Schweizer, Urs. “Efficient incentives from obligation law and the compensation principle.” International Review of Law and Economics 45 (2016): 54-62.
Smith v. Bolles, 132 U.S. 125 (1889)
Taylor, Steven J., Robert Bogdan, and Marjorie DeVault. Introduction to qualitative research methods: A guidebook and resource. John Wiley & Sons, 2015.
Vaioleti, Timote M. “Talanoa research methodology: A developing position on Pacific research.” Waikato Journal of Education 12.1 (2016).
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