Date: Wed, 28 Mar 2007 16:54

From: Robert Stevens

Subject: The Golden Victory

My view is that the true position is a bit more subtle.

If the claim is for the (factual) loss consequent upon the breach of contract, then obviously the correct time for assessment should be date of trial. Why in assessing the loss actually suffered should the court ignore the facts which have occurred in the interim? If the only thing damages are awarded to compensate is factual consequential loss, assessing damages at the moment of breach/the tort makes no sense. Arguing (as Bingham and Walker do, following Treitel's note in the LQR) that commercial certainty dictates ignoring such relevant facts is wholly unconvincing (as I said). A rule which said that damages are always fixed at £100 would be extremely certain, but it would not be just. Certainty is a second order principle of justice. Indeed, it is obvious that when assessing consequential factual loss the courts do indeed take into account events which happen after breach. If the innocent party's consequential losses are much higher because of a foreseeable event which occurs after breach, this should be taken into account.

Similarly, I wouldn't support an exceptional rule for 'commercial contracts'. Uncertainty in definition makes that an impossible rule.

But, damages for consequential losses are not the only sort of damages recoverable. If I buy a wedding ring for my wife from a jeweler, which is sold as 21 carat gold, and which turns out to be gold plate, the jeweler cannot resist a claim for damages by arguing that my wife actually prefers the ring she received to the ring I thought I was buying (perhaps because it more accurately reflects our relationship). The jeweler must pay the difference in value between the ring promised and the ring received. Alternatively, if I employ a firm to supply me with a deluxe delivery service and I receive the ordinary service, I should be entitled to the difference in value between the service I was promised and the service I received (White Arrow Express v Lamey's Distribution per Bingham MR). The fact that I suffered no loss as a result of the poorer quality of service should be irrelevant.

Why? Because I am entitled to damages substitutive for the contractual right. The presence or absence of consequential additional loss is irrelevant to this head of general damages. The value of the right is assessed at the time of the wrong.

We find the same principle in the law of torts. If you burn down my house you must pay me the value of the right to the house. It is wholly irrelevant that the house would have been lost in an earthquake the next day (eg Kingston v Chicago & Northwest Rly 211 NW 913). Damages are not (solely) awarded to compensate for consequential loss.

Put another way, it is the old debate between those who believe in the 'performance interest' in contract and those who do not. No doubt for some wrongs it is only consequential factual loss which is recoverable (eg deceit). The question is whether we treat the right to have contracts performed more seriously than that. If we are to move to a system where only consequential factual losses are recoverable for breach of contract, we should do so across the board, realising the choice we are making.

Robert Stevens

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