Thursday, August 24, 2006
The most practically important part of contract law is the law on damages. How much damage the plaintiff has actually suffered, and how much of that damage the defendant will have to make good, is an issue in virtually ever litigated dispute. Yet the rules vary from jurisdiction to jurisdiction. Sometimes they vary a little, sometimes a lot.
So those who teach or litigate damages should welcome a new primer from John Gotanda (Villanova), Damages in Lieu of Performance Because of Breach of Contract, which is included in a forthcoming book from the Hague Academy of International Law, Damages in Private International Law. Here's the abstract:
In contract disputes between transnational contracting parties, damages are often awarded to compensate a claimant for loss, injury or detriment resulting from a respondent’s failure to perform the agreement. In fact, damages may be the principal means of substituting for performance or they may complement other remedies, such as rescission or specific performance.
Damages for breach of contract typically serve to protect one of three interests of a claimant: (1) performance interest (also known as expectation interest); (2) reliance interest; or (3) restitution interest. The primary goal of damages in most jurisdictions is to fulfill a claimant’s performance interest by giving the claimant the substitute remedy of the benefit of the bargain monetarily. This typically includes compensation for actual loss incurred as a result of the breach and for net gains, including lost profits, that the claimant was precluded from because of the respondent’s actions.
All legal systems place limitations on damage awards. The most common limitations are causation, foreseeability, certainty, fault, and avoidability. In order to obtain damages, there must be a causal connection between the respondent’s breach and the claimant’s loss. In addition, the claimant must show that the loss was foreseeable or not too remote. Further, the claimant is required to show with reasonable certainty the amount of the damage. Many civil law countries also require, as a prerequisite to an award of damages for breach of contract, that the respondent be at fault in breaching the agreement. Damages may also be limited by the doctrine of avoidability, which provides that damages which could have been avoided without undue risk, burden, or humiliation are not recoverable.
The rules concerning damages for breach of contract are complex and vary greatly from country to country. Furthermore, in some federal countries, such as the United States and Canada, the applicable rules differ among states and provinces. This chapter, which is part of a comprehensive study of the awarding of damages in private international law, focuses on the general rules concerning damages awarded in lieu of performance because of a breach of contract (performance damages). It begins with an overview of the purposes served by awarding damages. It then examines performance damages for breach of contract in common law and civil law countries. The study subsequently analyzes the awarding of damages under the Convention on the International Sale of Goods (CISG), general principles of law, and principles of equity and fairness.