Contract Damages Ii - Contract

CONTRACT DAMAGES II: RELIANCE, LOSS AND AGREED DAMAGES * * * * * Contract damages compensate the innocent party for the losses they have suffered because of the other party's breach Usually, these damages are awarded on the basis of the plaintiff's loss of the expectation of performance Rarely it is not possible accurately to assess the loss on the expectation measure The court may then award damages to compensate the plaintiff for the expenses they incurred in reliance on the defendants contractual promise o McRae v Commonwealth Disposals Commission o Commonwealth v Amann Aviation Pty Ltd Damages are only awarded on this basis if the plaintiff cannot prove their expectation loss. Reliance Loss: * The 'law assumes that a plaintiff would at least have recovered his or her expenditure had the contract been fully performed' o Commonwealth v Amann Aviation Pty Ltd * Reliance damages will not be awarded if the defendant can show that the plaintiff would not have recouped its expenditure even if the contract had been fully performed. * In that case, the plaintiff would only be entitled to recover damages on the expectation measure. Damages for the loss of a chance: * Quantifying the loss of a chance: the plaintiff must prove, on the balance of probabilities, that it lost a chance of something of value. * Damages are then estimated by reference to a degree of probability, e.g. 25%. o Commonwealth v Amann Aviation Pty Ltd Agreed Damages and Penalties * The parties can agree the consequences of breach of contract, including the liability of a party for breach. * They may include a agreed damages clause which provides that in the event of breach, one party must pay the other party a certain (liquidated) amount of money . * Such an agreement is enforceable unless the amount specified is held to be an unenforceable penalty. * Where a provision is struck down as a penalty, the plaintiff can still recover common law damages.