Date: Fri, 30 Mar 2007 18:21

From: Robert Stevens

Subject: The Golden Victory

I agree with Robert that, while a contracting party clearly has a right to be compensated for losses caused by breach, this is not the only right or interest he has.

I don't think that. So, I don't agree with those who say that each contracting party has "two distinct contractual interests in receiving performance and in being compensated for losses caused by non-performance" (C Webb, "Performance and Compensation..." (2006) 26 OJLS 41). Each contracting party has one primary right: to performance. When that is breached secondary obligations arise, commonly, but not always, to make good losses suffered as a result of non-performance. So, I think it a mistake to think that the secondary obligation is always one to make compensation for consequential loss.

He also has a right to performance of the defendant’s (primary) contractual obligations, a right distinct from the right to compensation, and on which the notion of breach of contract is predicated. This can usefully be called the performance interest. There is no reason why responses to breach of contract should be confined to “vindication” of the right to be compensated for losses. In other words, a claimant should be able to argue that, irrespective of what loss the breach may have caused him, he has a right to have the contract performed and that he is entitled to an award which gives him this.

I further don't agree with those who see actions for the agreed sum, specific performance and injunctions as responses to a breach of contract. Proof of breach is irrelevant to the specific enforcement of the primary right to performance which these remedies give.

What I don’t see is how such an assertion or vindication of a claimant’s performance interest entitles the claimant to damages measured by the difference in value between the promised performance and what the claimant actually received. There is simply no necessary connection between the two.

Unsurprisingly, I don't agree. If we are to protect the "performance interest" (ie the right to performance in and of itself, as opposed to the loss consequent upon non-performance) we must value that right to performance. "Cost of cure" is obviously inappropriate, I would have thought (contra C Webb (2006) OJLS 41, 58-). "Cost of cure" is a measure of loss (expense) that the claimant incurs in making good the breach, it is not a valuation of the right itself. In the examples I gave of the defective ring and inferior delivery service 'cost of cure' damages are clearly not available. Damages measured by the difference in value between what was promised and what was received are, despite the absence of any consequential loss.

The substitutive nature of the award is importantly reflected in the timing: date of breach. Consequential losses, including costs of cure, are assessed at time of trial.

Remedies/responses for breach of contract (and elsewhere) can be justified where they give effect to the claimant’s rights. A claimant has a right not to be left worse off by a breach of contract.

I don't think so. He has a right to performance. Frequently innocent parties are left worse off by a breach.

This entitles him to compensatory damages since such claims seek to ensure that no such loss is suffered. Necessarily a claim cannot be justified on this basis if it does not compensate a genuine loss suffered by the claimant.

This assumes what you are trying to prove: that damages are, and only are, awarded in order to make good consequential loss.

A claimant also has a right to have the contract performed. This will justify an award of damages where, but only where, this gives the claimant, or enables him to obtain, that performance.

I don't agree. Nor does the common law: see Rodocanachi Sons & Co v. Milburn Bros (1886) 18 Q.B.D. 67; William Bros v. Ed T Agius Ltd [1914] A.C. 510; Slater v. Hoyle & Smith Ltd [1920] 2 K.B. 11; White Arrow Express Ltd v Lamey’s Distribution Ltd [1995] 15 Tr LR 69; Joyner v Weeks [1891] 2 QB 31, CA; Haviland v Long [1952] 2 QB 80, CA.

In none of these cases was the substitutive award made in order to enable the claimant to obtain performance. Usually because it is too late to do so.

On this basis there is a strong argument for saying that cost of cure damages should be available as of right, where, but only where, performance is still possible and the damages are indeed so used, since in such cases the award enables the claimant to obtain the performance he is entitled to. I don’t think Robert’s suggested damages award can be justified on either basis.

Well, I think it depends upon how seriously you want to treat the contractual right. We clearly do award damages as a substitute for some rights in the absence of consequential loss (see the example of the Bentley, or the classic Ashby v White, or The Mediana - there are many more). The issue is whether we do the same in contract. For myself, I think even in contract cases "cost of cure" is a red herring as most example of substitutive damages don't involve building contracts (see the cases on sale).

RS

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