Damages- What can I claim?
Written by Mekael Rahman on 30 November 2014« Return to Reading Room
It is important to note however, that the onus of proving any consequential harm rests solely on the shoulders of the applicant. Judicial authorities are concerned about appropriately compensating an injured party for the loss that germinates from the non-performance of a contractual obligation. The court will endeavour to place the claimant in the same position they would have occupied if the contract had been properly executed. A pecuniary remedy of expectation damages is therefore not intended to punish the defaulting party; it is not punitive in nature.
The majority of damages awards that are furnished by the judiciary, compensate for monetary loss. Financial harm in this regard, can take many forms. A fitting depiction would be the costs or liability that is incurred to a third party. Another apt illustration of monetary loss are the profits an injured party has foregone. In both plausible scenarios, the claimant’s financial harm must result from the defendant’s failure to fulfil their part of the agreement. In other words, there needs to be a causal link between the undesired outcome and the breach of contract.
With respect to the first articulated example of monetary loss, the claimant may pay a third party to ameliorate their post-breach position. When such expenditure is incurred before the date of trial, the loss can be recovered from the defendant. Spending an unreasonable sum of money however, will strengthen the opposition’s case; the court would in all probability construe this as a failure to mitigate and/or a break in the chain of causation. Conversely, if the cost of cure is incurred after the date of trial, it will only be recoverable from the infringing party if incurring the cost is deemed reasonable in all circumstances. This is largely attributable to the claimant’s intrinsic prerogative, namely, their right to choose whether or not to cure the problem that has emanated from the breach. The injured party could simply decide to live with the consequences of an unsuccessful contract.
There are essentially two components to the test of reasonableness. Firstly, a comparison between the cost of cure and the diminution in value (the financial and non-financial loss that will be borne by the claimant if the cure is not undertaken) must take place. It is imperative to appreciate that if the cost of cure is found to be greater than the diminution in value, that alone, will not constitute unreasonableness; the pertinent question is how much greater the cost of cure is. Secondly, the injured entity needs to demonstrate an intention to effect the cure. An obligation to a third party would undoubtedly satisfy this criterion. Nevertheless, there will be occasions where the claimant is unable to meet the above-mentioned conditions. Alternatively, they may not wish to incur the cost of curing any complications that stem from the infringement. In situations like these, one could rely on the diminution in value measure to recover the remaining losses.
The total harm caused by the defendant’s dereliction is ordinarily quantifiable. Any benefit that ensues from the infringer’s actions must also be considered before calculating the net loss. The proof of loss desideratum can sometimes however, be a daunting obstacle to a successful damages claim. It is not always practicable for a claimant to prove the profits they would have generated from a business venture. When faced with such a predicament, one could still seek compensation for wasted expenditure. There is a rebuttable presumption that a breach which stops a venture from materialising, will engender loss of revenue that is equal in value to the costs already incurred. Hence, an award of reliance damages, effectively puts the injured party in the same position they had occupied prior to creating the contractual relationship.
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