Money awards in contract law

After challenging this orthodoxy, Dr Winterton proposes a new understand-ing of the Robinson v Harman principle, which draws an important distinction between money awards that substitut

MONEY AWARDS

IN CONTRACT

LAW

David Winterton

The quantifi cation of contractual money awards is a topic of both signifi cant oretical interest and immense practical importance Recent debates have ranged from the availability of gain-based relief to the basis for principles of remoteness and mitigation While these and other important issues, such as the recovery of damages for non-pecuniary loss, are touched upon, the book’s principal objec-tive is to challenge the conventional interpretation of the principle generally acknowledged to govern this area of the law, which Parke B famously laid down in

Robinson v Harman According to this conventional interpretation, the objective

of all money awards given in accordance with the Robinson v Harman principle

is simply to ‘ compensate ’ the promisee for the ‘ loss ’ that can be attributed to the promisor ’ s failure to perform as promised

After challenging this orthodoxy, Dr Winterton proposes a new

understand-ing of the Robinson v Harman principle, which draws an important distinction

between money awards that substitute for the performance promised and money awards that aim to make good certain detrimental factual consequences that can

be attributed to a promisor ’ s breach In exploring the signifi cance of this tion, the different principles underpinning the quantifi cation and restriction of each kind of award are explored in addition to some important theoretical issues such as the effect that the occurrence of a breach has on the rights generated by contract formation The book ’ s unifying objective is to outline a coherent picture

distinc-of the law distinc-of contractual money awards It will be distinc-of interest to judges, ers and academics alike

Volume 13 in the series Hart Studies in Private Law

Money Awards in Contract Law

David Winterton

OXFORD AND PORTLAND, OREGON

2015

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© David Winterton 2015 David Winterton has asserted his right under the Copyright, Designs and Patents Act 1988, to be

identifi ed as the author of this work

Hart Publishing is an imprint of Bloomsbury Publishing plc

All rights reserved No part of this publication may be reproduced, stored in a retrieval system,

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as expressly permitted by law or under the terms agreed with the appropriate reprographic rights organisation Enquiries concerning reproduction which may not be covered by the above

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British Library Cataloguing in Publication Data

Data Available

ISBN: 978-1-84946-457-4 ISBN (ePDF): 978-1-78225-295-5

BY JUSTICE STEPHEN GAGELER

High Court of Australia

It is now almost 170 years since Baron Parke enunciated his ‘ ruling principle ’ 1 with respect to damages for breach of contract at common law The theoretical diffi cul-ties inherent in the outworking of that longstanding principle did not need to be addressed while common law procedure left damages to be determined by juries The theoretical diffi culties began to emerge as procedural reforms transferred questions of the quantifi cation of damages increasingly to judges whose processes

of reasoning were required to be articulated in their reasons for judgment Despite signifi cant common law developments in principles of contractual liability, the law of contract damages long remained largely un-theorised Just over 100 years ago it could still be said that ‘ [t]he quantum of damage is a question of fact, and the only guidance the law can give is to lay down general principles which afford

at times but scanty assistance in particular cases ’ 2

Fuller and Perdue took an important step in the identifi cation and tion of intermediate principles of contract damages in their highly infl uential taxonomy of measures of fi nancial loss which may fl ow from a breach of con-tract 3 Yet just under 20 years ago it could still be remarked that a simple ques-tion of contract damages could result in a wide variety of judicial opinion 4 More recent divisions of opinion as to the appropriate method of quantifying damages

articula-in novel but uncomplicated fact situations, articula-in cases articula-in the House of Lords 5 and in the High Court of Australia, 6 serve to illustrate the depth of the theoretical issues that remain

1 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd ( 2009 ) 236 CLR 272, 286 , quoting Wertheim v

4 Ruxley Electronics & Construction Ltd v Forsyth [ 1996 ] AC 344 (HL) 361

5 Golden Strait Corporation v Nippon Yusen Kubishika Kaisha (The Golden Victory) [ 2007 ] UKHL

12 , [2007] 2 AC 353

6 Clark v Macourt ( 2013 ) 88 ALJR 190 , [2013] HCA 56

David Winterton in this book grapples with those deep philosophical issues His contribution to the theorisation of contract damages is bold and ambitious Critiquing Fuller and Perdue philosophically and analytically, Winterton provides

an alternative theoretical explanation of the burgeoning mass of existing case law His explanation is based on a conceptual framework within which the fundamen-tal distinction is between damages which substitute for performance of a contract and damages which compensate for loss caused by non-performance

The thesis presented is developed through the application of what is helpfully identifi ed in explicit terms as an ‘ interpretative ’ methodology, in which ‘ principle ’

is given primacy over ‘ policy ’ , and in which ‘ principle ’ is charted as the line of most rational fi t with the data provided by the decided cases It is inevitable in the appli-cation of such a methodology that some aspects of the existing case law will be elevated, and other aspects of the existing case law de-emphasised, so as to achieve

a rational fi t with the conceptual distinction propounded It is also inevitable that the distinction itself will require qualifi cation and refi nement so as to accommo-date those aspects of the existing case law which the premises of the methodology require to be accepted There will inevitably be fl ow-on effects to related doctrines Not all aspects of all of the decided cases can be expected to survive unquestioned Not every required qualifi cation or refi nement of the conceptual framework, nor every fl ow-on effect, can be expected to be recognised and articulated No concep-tual framework, new or old, can be expected to provide all answers to all problems;

at best it can bring a measure of structure and consistency to the analysis of those problems, and a measure of predictability to the outcomes of that analysis A new conceptual framework brings its own novel set of issues to be worked through, and tested, from case to case

Conscious of those ramifi cations of the ambitiousness of his project, David Winterton has done much to explain how many principles, including those of remoteness and mitigation, are to be fi tted into his new conceptual framework, to anticipate some major objections to the framework, and to suggest how it might prove useful in practice in shedding new light on problems which have shown themselves to be diffi cult to resolve in the past Economic and social consequences

of adopting the new conceptual framework, including the systemic impact of the incentives it might create for contracting parties, are left for future exploration The book is a welcome addition to the literature in a fi eld for too long under-theorised

This book is a revised and updated version of the doctoral thesis I defended in Oxford in October, 2011 Its production has depended heavily on assistance from numerous sources In Justice James Edelman and Professor John Gardner, I had the benefi t of two dedicated and inspirational DPhil supervisors who guided me carefully along the path to completion From each of them I learned a great deal and I am extremely grateful for the support they provided during my time in Oxford I also wish to express my deep gratitude to both the Rhodes Trust and Magdalen College for the generous support, fi nancial and otherwise, that each institution afforded me during the course of my studies, as well as to Richard Hart for backing the project, and to his fantastic team for their hard work in helping to bring it to fruition

Via written comments, conversations, or simply friendship, numerous others also contributed to this book ’ s production In this regard, I would particularly like to thank Scott Ralston, Carmine Conte, Fred Wilmot-Smith, Andrew Dyson, Andrew Lodder, Eli Ball and Tatiana Cutts for astute comments on earlier drafts and for their general willingness to engage in fruitful discussion on the topic Ben Spagnolo deserves special praise in this regard; in addition to providing me with

me a plethora of insightful comments, he was also instrumental in the very tical task of producing the fi nal thesis document itself I also wish to express my appreciation to Gageler J for kindly agreeing to write a foreword to the book and for his willingness to engage with me in discussion about some of its central con-

prac-cerns following publication of the High Court ’ s reasons in Clark v Macourt [2013]

HCA 56 My fi nal debt of gratitude is to my parents Without my father ’ s agement and example of fi ne scholarship I may never have embarked upon this project and without my mother ’ s support and understanding I may never have

encour-fi nished it

Foreword v

Acknowledgements vii

Detailed Contents xi

Table of Cases xix

Table of Legislation xxxi

Introduction .1

Part I: The Inadequacy of the Orthodox Understanding of Contractual Money Awards 1 An Overview of the Orthodox Account 23

2 The Doctrinal Inaccuracy of the Orthodox Account 44

3 Conceptual and Terminological Diffi culties with the Orthodox Account 97

Part II: A New Account of Contractual Money Awards 4 Foundations of the New Account 133

5 Money Awards that Substitute for Performance 178

6 Money Awards that Compensate for Loss 216

Part III: The New Account in Practice 7 Explaining Some Important Decisions in Tension with the Orthodox Account 261

8 Defusing Some Potential Doctrinal Objections 285

Conclusion .316

Index .323

Foreword v

Acknowledgements vii

Summary Contents ix

Table of Cases xix

Table of Legislation xxxi

Introduction 1

I Context and Motivation .1

II An Overview of the Argument .2

III The Need for the Proposed Distinction .5

IV The Place of Theory .8

A The Kind of Substitutionary Account Proposed .8

B The Distinction Between ‘Principle’ and ‘Policy’ .11

C The Theoretical Basis for the Proposed Distinction .12

V The Structure of the Book .12

A Part I .13

B Part II .14

C Part III .15

VI Methodology .16

A An Interpretative Approach .16

B Why Take this Approach? .19

Part I: The Inadequacy of the Orthodox Understanding of Contractual Money Awards 1 An Overview of the Orthodox Account .23

I Introduction .23

II The Conventional Interpretation of the Robinson v Harman Principle .24

A The Principle’s Indeterminacy .24

1 Indeterminacy as to Purpose .24

2 Indeterminacy as to Scope .25

B The Meaning of ‘ Loss ’ in the Orthodox Account .26

1 A Focus on the Financial Consequences of Breach .26

2 Limited Recognition of Non-Pecuniary Consequences .28

III Expanding Recovery for Non-Pecuniary Loss .30

A Damages for ‘ Mental Distress ’ and ‘ Physical Inconvenience ’ 30

1 Two Exceptions to the General Bar on Recovery .30

2 The Decision in Farley v Skinner 32

3 More Recent Developments .33

B Damages for ‘ Loss of Amenity ’ 35

1 Ruxley Electronics v Forsyth 35

2 Subsequent Judicial Analysis of Ruxley 40

IV Conclusion .42

2 The Doctrinal Inaccuracy of the Orthodox Account .44

I Introduction 44

II Two Clear Examples of Non-Compensatory Money Awards .45

A Nominal Damages for Breach of Contract .45

1 Conventional Nominal Damages .46

2 Substantial ‘ Nominal ’ Damages .46

B Gain-Based Awards for Breach of Contract .47

1 Attorney-General v Blake 48

2 Subsequent Case Law .50

III Other Awards Inconsistent with the Law ’ s Orthodox Understanding .51

A Substantial Money Awards in the Three-Party Context .52

1 Specifi c Exceptions to the General Exclusionary Rule .52

2 Extending ‘ the Albazero Exception ’ .54

3 The Signifi cance of Panatown .57

4 Appraising the Current Legal Position .59

B Awards Based on a Hypothetical Release Bargain .60

1 Award In Lieu of a Restorative Injunction .60

2 Award for Breach of Exclusivity 66

3 Award for Breach of Confi dentiality .67

C Awards for the Breach of a Contract of Sale that Exceed the Promisee ’ s Factual Loss .68

1 Non-delivery .69

2 Late Delivery .71

3 Defective Goods .73

4 Summary of the Sale of Goods Case Law .78

D Contractual Awards in Other Contexts that Exceed the Promisee ’ s Factual Loss .79

1 Contracts of Carriage .79

2 Contracts of Employment .81

3 Building Repairs .82

4 Breach of Tenant ’ s Obligation to Repair .84

5 Breach of Restrictive Covenant in Relation to Goods .85

E Awards Exceeding Factual Loss Due to the Accrual of Post-Breach Benefi ts .87

1 Loss Reduced or Eliminated by a Third Party Payment .89

2 Loss Reduced or Eliminated by Other Post-Breach Events .89

IV Conclusion .95

3 Conceptual and Terminological Diffi culties

with the Orthodox Account .97

I Introduction .97

II The Conceptual Inadequacy of the Orthodox Account .98

A Fuller and Perdue ’ s Challenge .98

1 Questioning the Priority of the Expectation Measure .98

2 Response .100

B The Signifi cance of Fuller and Perdue ’ s Critique 101

1 The Dominance of the Compensatory Paradigm .101

2 Preoccupation with the Appropriate Measure of Loss .103

III The Meaning of ‘ Loss ’ in English Contract Law .104

A General Ambiguity Surrounding the Meaning of Loss .104

1 The Relationship Between Loss and Harm .105

2 Distinguishing Damage and Injury .106

B Clarifying the Meaning of Loss 107

1 Three Different Conceptions of Loss in English Contract Law .107

2 The Best Interpretations of ‘ Loss ’ , ‘ Damage ’ , ‘ Injury ’ and ‘ Harm ’ 109

3 Explaining the Proposed Interpretation of Loss .111

IV Other Sources of Terminological Uncertainty .113

A The Meaning of ‘ Damages ’ .114

1 The Conventional Understanding of ‘ Damages ’ .114

2 A Superior Defi nition .115

B The Meaning of ‘ Compensation ’ 117

1 The Orthodox Understanding .117

2 Alternative Judicial Conceptions of ‘ Compensation ’ .118

3 Alternative Academic Conceptions of ‘ Compensation ’ .120

4 The Proposed Defi nition .121

C The Concept of a Legal Remedy .123

1 Legal Rights .123

2 The Proposed Defi nition of a Legal ‘ Remedy ’ .124

3 Classifying Legal Remedies .125

D The Need for New Terminology .127

V Conclusion .128

Part II: A New Account of Contractual Money Awards 4 Foundations of the New Account .133

I Introduction .133

II A Defence of the Right to Contractual Performance .134

A The Basic ‘ Holmesian ’ Objection .134

B Overcoming this Objection .135

1 Understanding English Law ’ s Approach to Coercive Relief .136

2 Additional Doctrinal Support for the Right

to Performance .141

3 Theoretical Support: The Nature of Legal Rights .146

III The Doctrinal Basis for the Distinction Between Substitution and Compensation .148

A Historical Foundations .149

1 The Distinction at Common Law .150

2 The Distinction in Equity .151

B The Action for the Agreed Sum .153

1 Two Limits on the Recovery of Contractual Debts .153

2 A Claim in Debt is not a Claim for Loss .156

C Money Awards In Lieu of Specifi c Performance .157

1 The Law in England .157

2 The Canadian Position .159

D Other Clear Examples of Substitutionary Money Awards .160

1 The Right to Recover Under a Deed .161

2 Contracts for the Sale of Goods .161

3 Contracts for the Provision of Services .162

E Restrictions on Compensatory Recovery do not Apply to Substitutionary Awards .165

1 Mitigation .165

2 Remoteness .166

IV Theoretical Underpinnings of the New Account .167

A The Kind of Substitutionary Account Advanced .168

1 Professor Stevens ’ s ‘ Substitutive Damages ’ Theory .168

2 Dissimilarities from the Account Proposed Here .169

B The Theoretical Basis for the Proposed Distinction .172

1 The Uncertain Relationship Between Substantial and Remedial Rights in English Contract Law .172

2 Towards a Superior Account .173

V Conclusion .176

5 Money Awards that Substitute for Performance .178

I Introduction .178

II Awards of the Cost of Substitute Performance .179

A Quantifi cation .179

1 Justifi cation .180

2 Doctrinal Support .183

B Restriction .188

1 Restriction on the Ground of ‘ Reasonableness ’ 189

2 The Uncertain Meaning of ‘ Reasonableness ’ in this Context .190

3 Against a Focus on Intention .196

4 Understanding the ‘ Reasonableness ’ Restriction .199

III Awards of the Price of ‘ Release ’ from Further Performance .201

A Quantifi cation .202

1 Justifi cation .202

2 Doctrinal Support .206

B Restriction .210

1 The Current Position .211

2 Future Direction .213

IV Conclusion .214

6 Money Awards that Compensate for Loss .216

I Introduction .216

II Fitting Compensatory Awards into the New Account .218

A The Theoretical Basis for Compensatory Money Awards .218

1 The Controversial Status of the Secondary Duty to Repair .218

2 Signifi cance of this Debate for the Argument of this Book .221

B Two Inherent Limits on the Recovery of Compensation for Breach of Contract .222

1 The Causation Principle .223

2 The Prohibition on Double Recovery .226

3 Summary and Preview .227

III Understanding the Restrictions Applicable to Compensatory Money Awards .228

A Remoteness .229

1 The Orthodox Approach .230

2 The Challenge Posed by The Achilleas 231

3 Subsequent English Decisions .234

4 A Defence of the Orthodox Approach .236

5 Can the Agreement-Centred View be Salvaged ? 244

6 Summary .246

B Mitigation .247

1 The Rules of ‘ Mitigation ’ .248

2 Not Agreement Based .251

3 Not an Aspect of ‘ Remoteness ’ .252

C Restrictions on Recovery for Non-Pecuniary Loss .253

1 Not Agreement Based .254

2 Not an Aspect of ‘ Remoteness ’ .255

IV Conclusion .256

Part III: The New Account in Practice

7 Explaining Some Important Decisions in Tension with

the Orthodox Account .261

I Introduction .261

II Substitutionary Awards for the Cost of Repairs .261

A The Law Prior to Ruxley .262

B Making Sense of the Ruxley Decision .264

1 Refusal to Award the Cost of Substitute Performance .264

2 The Award for ‘ Loss of Amenity ’ 270

III Panatown : Substitutionary Awards in the Three-Party Context .273

A Availability of an Award of the Cost of Substitute Performance .273

B Availability of an Award in Substitution for the Right to Timely Performance .274

C Two Further Matters .275

IV Contractual Awards in the Sale of Goods Context .277

A Awards for Breach by the Buyer .277

B Awards for Breach by the Seller .278

1 Availability of an Award for Non-Delivery .278

2 Availability of an Award for Defective Goods .279

3 Availability of an Award for Late Delivery .283

V Conclusion .284

8 Defusing Some Potential Doctrinal Objections .285

I Introduction .285

II The Signifi cance, Application and Scope of the Golden Victory Principle .286

A The Golden Victory : Prospective Loss Reduced by an Extraneous Event .286

1 The Facts and Decisions Below .286

2 The Decision in the House of Lords .287

3 Subsequent Controversy .289

4 The Preferable Analysis .291

B Leofelis v Lonsdale : Prospective Loss Reduced by the Contract ’ s Early Termination .294

1 The Decision .294

2 A Defence of the Decision .296

C The Glory Wealth : Prospective Loss Must be Proved on the Balance of Probabilities .302

1 The Decision .302

2 A Defence of the Decision .305

III Specifi c Performance, ‘ Mitigation ’ and Damages

In Lieu of Coercive Relief .307

A The Relationship Between Specifi c Performance and ‘ Mitigation ’ 307

1 A Restatement of the Basic Principles .307

2 The Decision in Southcott Estates 308

3 A Preferable Understanding of the Law .310

B Damages In Lieu of Specifi c Performance .312

1 The Decisions in Wroth and Semelhago 312

2 Explaining Johnson v Agnew .313

IV Conclusion .314

Conclusion .316

I Summary of the Argument 316

II Principal Conclusions and Implications .319

Index .323

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Jaggard v Sawyer [1995] 1 WLR 269 (CA) 118 , 210

Jamal v Moolla Dawood, Sons & Co [1916] 1 AC 175 (PC) 166

James v Hutton and Cook Ltd [1950] 1 KB 9 (CA) 198

Jarvis v Swans Tours Ltd [1973] QB 233 (CA) 30

Jebsen v East and West Indian Dock Company (1875) LR 10 CP 300 (CP) 90

Jefford v Gee [1970] 2 QB 130 (CA) 220

Jervis v Harris [1996] Ch 195 (CA) 155 – 6 , 165 – 6

Jobling v Associated Dairies Ltd [1982] AC 794 223

John Grimes Partnership Ltd v Gubbins [2013] EWCA Civ 37 235 , 246

Johnson v Agnew [1980] AC 367 (HL) 16 , 158 – 60 , 285 ,

308 , 312 – 15 , 319

Johnson v Gore Wood & Co [2002] 2 AC 1 (HL) 108 , 111 , 256

Johnson v Unisys Ltd [2001] UKHL 13; [2003] 1 AC 518 29 , 34 , 108 , 254

Jones v Just (1868) LR 3 QB 197 69

Joyner v Weeks [1891] 2 QB 31 (CA) 84 – 5 , 166 , 171 , 190

Kenny v Preen [1963] 1 QB 499 (CA) 102

Kingston v Preston (1773) 2 Doug 684; Lofft 197 7

Koch Marine Inc v d ’ Amica Societa di Navigazione ARL

( The Elena D ’ Amico ) [1980] 1 Lloyd ’ s Rep 75 94 – 5 , 249 , 286

Koufos v C Czarnikow Ltd ( The Heron II ) [1969] 1 AC 350

(HL) (n 58) 230 – 1 , 237 , 239 , 246 , 256

Lagden v O ’ Connor [2004] 1 AC 1067 (HL) 249

Lane v O ’ Brien Homes Ltd [2004] EWHC 303 (QB) 61

Lavarack v Woods of Colchester Ltd [1967] 1 QB 278 87 , 90 , 94

Lazenby v Wright [1976] 1 WLR 459 (CA) 277 – 8

Leeds Industrial Co-operative Society Ltd v Slack [1924] AC 851 (HL) 157

Leofelis SA & Anor v Lonsdale Sports Ltd & Ors [2007] EWHC 451 (Ch) 295

Leofelis SA & Anor v Lonsdale Sports Ltd & Ors [2008]

EWCA Civ 640; [2008] ETMR 63 295

Leofelis SA & Anor v Lonsdale Sports Ltd & Ors [2009] EWCA Civ 68 295

Leofelis SA & Anor v Lonsdale Sports Ltd & Ors [2009] EWCA Civ 457 295

Leofelis SA & Anor v Lonsdale Sports Ltd & Ors [2012]

EWHC 485 (Ch D), substantively upheld on appeal

(The Trademark Licensing Co Ltd & Anor v

Leofelis SA & Ors [2012] EWCA Civ 985) 294 , 296 – 7 , 299 – 302 , 305

Lep Air v Rolloswin [1973] AC 331 (HL) 220

LG Schuler AG v Wickman Machine Tool Sales [1974]

Linklaters Business Services v Sir Robert McAlpine Ltd,

Sir Robert McAlpine (Holdings) Ltd [2010] EWHC 2931 (TCC) 266 – 8

Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 (HL) 116

Lumley v Gye [1853] EWHC QB J73 146

McGhee v National Coal Board [1973] 1 WLR 1; [1972] UKHL 7 223

Malhotra v Choudhury [1980] Ch 52 (CA) 158

Malik v BCCI [1998] AC 20 (HL) 29 , 108

Maredelanto Compania Naviera SA v Bergbau-Handel

GmbH ( The Mihalis Angelos ) [1971] QB 164 295 , 301 , 303 – 4

Mayson v Clouet [1924] AC 980 (HL) 135

Merrett v Capitol Indemnity Group Corp [1991] 1 Lloyd ’ s Rep 169 89

Mertens v Home Freeholds [1921] 2 KB 526 (CA) 262

Miles v Wakefi eld MDC [1987] AC 539 (HL) 82 , 165 , 301

Milner v Carnival Plc [2010] EWCA Civ 389; [2010] PIQR Q3 34 – 5 , 108

Ministry of Sound (Ireland) Ltd v World Online Ltd

[2003] EWHC 2178 (Ch) 153

Mirant Construction (Hong Kong) Ltd v Ove Arup &

Partners International Ltd [2007] EWHC 918 (TCC) 59

Monarch Steamship Co Ltd v Karlshamns Oljefebriker A/B

[1949] AC 196 (HL) 224 , 240

Mouat v Betts Motors Ltd [1958] UKPC 23; [1959] AC 71 86 – 7

Nadreph Ltd v Willmett & Co [1978] 1 WLR 1537 94

National Coal Board v Galley [1958] 1 WLR 16 (CA) 81 , 165

National Coffee Palace Co, Re (1883) 24 Ch D 367 167

Needler Financial Services Ltd v Taber [2002] 3 All

ER 501 (Ch) 90 – 3 , 95 , 133

Newbigging v Adam (1886) 34 ChD 582 (CA) 153

Newton Abbot Development Ltd v Stockman Bros (1931) 47 TLR 616 190

Nykredit plc v Edward Erdman Group Pty Ltd (No 2)

[1997] 1 WLR 1627 (HL) 225

OBG v Allan [2007] UKHL 21; [2008] 1 AC 1 146

Omak Maritime Ltd v Mamola Challenger Shipping Co Ltd

( The Mamola Challenger ) [2010] EWHC 2026 (Comm);

[2011] Bus LR 212; [2011] 1 Lloyd ’ s Rep 47 19 , 100

Overstone Ltd v Shipway [1962] 1 WLR 117 (CA) 156

Owners of Cargo Laden on Board the Albacruz v Owners

of the Albazero [1977] AC 774 (HL) 53 – 6 , 59

Owners of the Steamship ‘ Mediana ’ , The v The Owners,

Master and Crew of the Lightship ‘ Comet ’ [1900] AC 113 (HL) 47

Pageler Ltd v Wang (UK) Ltd (2000) 70 Con LR 68 266

Palatine Graphic Arts Co Ltd v Liverpool City Council

Perera v Vandiyar [1953] 1 WLR 672 (CA) 102

Perry v Sidney Phillips & Son [1982] 1 WLR 1297 (CA) 28 , 139 , 190

Personal Representatives of Tang Man Sit v Capacious

Investments Ltd [1996] 1 AC 514 226

Phillips v Ward [1956] 1 WLR 471 (CA) 139

Photo Production Ltd v Securicor Transport Ltd

[1980] AC 827 (HL) 12 , 125 , 134 , 169 ,

172 – 3 , 216 , 219 – 20 , 272

Pilkington v Wood [1953] Ch 770 248

Pindell Ltd v Air Asia Berhad [2011] 2 All ER (Comm) 396 235

Pratley v Surrey County Council [2003] EWCA Civ 1067 34

Pykeryng v Thurgoode (1532) 93 SS 4 151

R & H Hall Ltd and Pim (WH) (Jnr) and Co ’ s Arbitration,

Re (1928) 33 Com Cas 324 (HL) 70 , 161 , 279

Radford v De Froberville [1977] 1 WLR 1262 (Ch) 184 – 5 , 193 – 4 , 253 , 263 – 4 , 266 – 7

Rainbow Estates Ltd v Tokenhold Ltd [1999] Ch 64 137 – 8

Raw v Croydon LBC [2002] CLY 941 31

Regal Hastings Ltd v Gulliver [1967] 2 AC 134 (HL) 107

Regus (UK) Ltd v Epcot Solutions Ltd [2008] EWCA Civ 361 (CA) 187 – 8

RJ Young v Thames Properties Ltd [1999] EWCA Civ 629 38

Robinson v Harman (1848) 1 Exch 850 2 – 3 , 13 , 18 , 23 – 6 , 28 – 30 ,

Royle v Trafford Borough Council [1984] IRLR 184 81 – 2 , 165

Ruxley Electronics & Construction Ltd v Forsyth [1994]

Sealace Shipping Co Ltd v Oceanvoice Ltd, The Alecos M

[1991] 1 Lloyd ’ s Rep 120 (CA) 200

Selectmove, Re [1995] 2 All ER 531 (CA) 145

Shearman v Folland [1950] 2 KB 43 (CA) 94

Shipton v Dogge YB T.20 Hen VI f.34 pl.4; 51 SS 97 (Doige ’ s Case) 151

Sidney Phillips & Son [1982] 1 WLR 1287 (CA) 28

Siu Yin Kwan v Eastern Ins Co Ltd [1994] 2 AC 199 (HL) 53

Slater v Hoyle & Smith Ltd [1920] 2 KB 11 (CA) 73 – 6 , 161 , 186 , 279 – 80 ,

284 , 301

Smith v Wilson (1807) 8 East 437 8

Smoker v London Fire Authority, Wood v London

Fire Authority [1991] AC 502 95

South Australia Asset Management Corporation v York

Montague Ltd [1997] AC 191 (HL) 224 – 5 , 229 , 235

Staniforth v Lyall (1830) 7 Bing 169 88 , 90

Stephenson Blake (Holdings) Ltd v Street Heaver Ltd

[2001] Lloyd ’ s Rep PN 44 51

Stilk v Myrick (1809) 2 Camp 317 145

Stocznia Gdanska v Latvian Shipping Company [1998] 1 WLR 574 (HL) 164

Stoke-on-Trent City Council v W & J Wass Ltd [1988] 1 WLR 1406 (CA) 100

Strete ’ s Case (1528) BL MS 253 F.19 151

Str ö ms Bruks Aktie Bolag v Hutchinson [1905] AC 515 (HL) 80 , 278 , 280 , 284

Supershield Ltd v Siemens Building Technologies FE Ltd

[2010] EWCA Civ 7 234 – 6 , 246

Sylvia Shipping Co Ltd v Progress Bulk Carriers Ltd

[2010] EWHC 542 (Comm) 235 , 246

Tamares (Vincent Square) Ltd v Fairpoint [2007] EWHC 212 (Ch) 63

Tang Man Sit v Capacious Investments Ltd [1996] AC 514 (PC) 49

Target Holdings v Redferns [1996] 1 AC 421 (HL) 152

Taylor v Oakes, Roncoroni and Co (1922) 27 Comm Cas 262 304

Technotrade v Larkstore Ltd [2006] EWCA Civ 1079 59

The Achilleas see Transfi eld Shipping Inc v Mercator Shipping Inc

The Alaskan Trader [1983] 2 Lloyd ’ s Rep 645 154 – 5

The Albazero see Owners of Cargo Laden on Board the

Albacruz v Owners of the Albazero [1977] AC 774 (HL)

The Aquafaith see Isabella Shipowner SA v Shagang Shipping Co Ltd

The Dynamic [2003] 2 Lloyds Rep 693 155

The Elena D ’ Amico see Koch Marine Inc v d ’ Amica Societa di Navigazione ARL

The Glory Wealth see Flame SA v Glory Wealth Shipping PTE Ltd

The Golden Victory see Golden Strait Corp v Nippon Yusen Kubishika Kaisha

The Gregos see Torvald Klaveness A/S v Arni Maritime Corporation

The Heron II see Koufos v C Czarnikow Ltd

The Mihalis Angelos see Maredelanto Compania Naviera SA v

Bergbau-Handel GmbH

The New Flamenco see Fulton Shipping Inc of Panama v

Globalia Business Travel SAU

The Odenfeld [1978] 2 Lloyd ’ s Rep 357 155

The Puerto Buitrago [1976] 1 Lloyd ’ s Rep 250 153 , 155

The Rijn [1981] 2 Lloyd ’ s Rep 267 182

The Silver Sky [1981] 2 Lloyd ’ s Rep 95 224

The Simona [1986] 1 Lloyd ’ s Rep 171 304

The Yasin [1979] 2 Lloyd ’ s Rep 45 94

Thorensen Car Ferries Ltd v Weymouth Portland BC

[1977] 2 Lloyd ’ s Rep 614 142

Thornton v Place (1832) 1 Mood & R 217 100 , 151

Thorp v Thorp (1702) 12 Mod 445 142

Tidebrook Maritime Corporation v Vitol SA of Geneva

( The Front Commander ) [2006] EWCA Civ 944 303

Tito v Waddell (No 2) [1977] Ch 106 82 , 101 , 137 – 8 , 190 ,

192 – 4 , 200 , 205 , 263 , 265

Todd v Gee (1810) 17 Ves Jun 273; 34 ER 106 152

Torvald Klaveness A/S v Arni Maritime Corporation

[1994] 1 WLR 1465 (HL) 232

Trademark Licensing Co Ltd & Anor v Leofelis SA & Ors

[2012] EWCA Civ 985 294

Transfi eld Shipping Inc of Panama v Mercator Shipping

Inc of Monrovia [2006] EWHC 3030 (Comm) 231

Transfi eld Shipping Inc v Mercator Shipping Inc ( The Achilleas )

[2008] UKHL 48; [2009] 1 AC 61 3 19 , 225 , 229 ,

231 – 9 , 243 , 245 – 7

Tweddle v Atkinson (1861) 1 B&S 393 52

Vercoe v Rutland Fund Management Ltd [2010]

EWHC 424 (Ch); [2010] Bus LR D141 67 , 210 , 283

Victoria Laundry (Windsor) v Newman Industries [1949] 2 KB 528 245

Watts v Morrow [1991] 1 WLR 1421 (CA) 28 , 30 – 3 , 39 , 41 ,

White Arrow Express Ltd v Lamey ’ s Distribution Ltd

Wigsell v Schools for the Indigent Blind (1882) 8 QBD 357 191 – 2 , 200

William Cory & Son Ltd v Wingate Investment (London Colney)

Ltd (1980) 17 BLR 104 (CA) 267

Williams v Roffey Bros [1991] 1 QB 1 (CA) 145

Williams Bros v ET Agius Ltd [1914] AC 510 (HL) 69 – 70 , 81 , 161 ,

186 , 278 , 284 , 301

Withers v General Theatre Corp Ltd [1933] 2 KB 536 (CA) 29 , 108 , 182

WL Thompson Ltd v Robinson (Gunmakers) Ltd [1955] Ch 177 277

Woodar Investments Developments Ltd v Wimpey Construction

UK Ltd [1980] 1 WLR 277 (HL) 54 – 5

World Wide Fund for Nature v World Wide Wrestling Federation

( ‘ WWF ’ ) [2007] EWCA Civ 286 (CA) 61 , 119 , 121 – 2 , 212

Agricultural Land Management Ltd v Jackson [No 2] [2014] WASC 102 152

Alexander v Cambridge Credit Corporation (1987) 9 NSWLR 310 224 – 5

Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd [2009] FCAFC 85;

(2009) 178 FCR 57 306

ASA Constructions Pty Ltd v Iwanov [1975] 1 NSWLR 512 158

Baltic Shipping v Dillon (1993) 176 CLR 344 (HCA) 256

Bellgrove v Eldridge [1954] HCA 36; (1954) 90

Hospitality Group Pty Ltd v Australian Rugby Union Ltd

(Hospitality Group) (2001) 110 FCR 157 (FCA) 102

Howe v Teefy (1927) SR (NSW) 301 87

JC Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282 (HCA) 140 – 1

Kenny & Good Pty v MGICA (1992) Ltd (1999) 199 CLR 413 225

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 135

Macourt v Clark [2012] NSWCA 367 77

March v E & MH Stramare (1991) 171 CLR 506 (HCA) 224

National Insurance Company of New Zealand Ltd v Espagne

(1961) 105 CLR 569 94

Pakenham Upper Fruit Co Ltd v Crosby (1924) 35 CLR 386 (HCA) 140

Pourzand v Telstra Corporation Ltd [2012] WASC 210 85

Wenham v Ella (1972) 127 CLR 454 (HCA) 241

Young v Queensland Trustees Ltd (1956) 99 CLR 560 (HCA) 135

Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003]

HCA 15; 212 CLR 484 152 , 315

YP Barley Producers Ltd v Robertson (EC) Pty Ltd [1927] VLR 194 304 , 306

Canada

Asamera Oil Corp Ltd v Sea Oil and General Corp [1979] 1 SCR 633 155 , 309 , 311

Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 (SCC) 152 , 220 , 315

Coarse v Ravenwood Homes Ltd (1998) 226 AR 214 309

Cook v Lewis [1951] SCR 830 (SCC) 223

Eldon Weiss Home Construction Ltd v Clark (1982)

39 OR (2d) 129 (Comm) 80

Fidler v Sun Life Assurance Co of Canada [2006] 2 SCR 3 (SCC) 255

Jaggard v Sawyer [1995] 1 WLR 269 (CA) 159

John E Dodge Holdings Ltd v 805062 Ontario Ltd (2001)

56 OR (3d) 341 309

Metropolitan Trust Co of Canada v Pressure Concrete Services Ltd

(1975) 9 OR (2d) 375; 60 DLR (3d) 431 158

Red Deer College v Michaels [1976] 2 SCR 324 (SCC) 250

Royal Bank of Canada v W Got & Associates Electric Ltd (2000)

178 DLR (4th) 385 102 , 216

Semelhago v Paramadevan [1996] 2 SCR 415 (SCC) 159 – 60 , 308 – 15

Smith v Landstar Properties Inc 2011 BCCA 44

(British Columbia CA) 61

Southcott Estates Inc v Toronto Catholic District School Board

New Zealand

Grocott v Ayson [1975] 2 NZLR 586 158

McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39 (NZCA) 241

Samson & Samson Ltd v Proctor [1975] 1 NZLR 655 (CA) 83

Souster v Epsom Plumbing Contractors Ltd [1974] 2 NZLR 5151 158

Singapore

Out of the Box Pte Ltd v Wanin Industries Pte Ltd

[2013] 2 SLR 363; [2013] SGCA 15 236

United States of America

City of New Orleans v Firemen ’ s Charitable Association,

9 So 486 (1891 SC Lou) 211 – 12

Jacob & Youngs v Kent 129 NE 889 (1921) 185

Peeveyhouse v Garland Coal Mining Co, 382 P 2d 109 (Okl 1962) 200

Landlord and Tenant Act 1927, s 18(1) 84 , 166

Law Reform (Contributory Negligence) Act 1945, s 1(1) 227

Matrimonial Homes Act 1967 157 , 312

Offi cial Secrets Act 1911 48

Sale of Goods Act 1893 208

Sale of Goods Act 1897 69

Sale of Goods Act 1979 68 – 9 , 73

Introduction

I Context and Motivation

Contracts are made and broken every day Contracting parties also come in a variety of different forms — from sophisticated commercial parties pursuing profi t,

to everyday citizens looking to purchase property or secure a dependable wage Regardless of one ’ s status or motive for entering into a particular contract, the legal responses available upon the other party ’ s failure to perform promises con-tained within it are generally of critical importance even if this is not always fully appreciated by the contracting parties at the time of formation In responding to breaches of contract, the law of England and Wales (and other common law juris-dictions) has tended to exhibit a strong preference for ordering a breaching party

to pay money rather than ordering the (late) performance of the promise broken Despite general acceptance both of this approach and of the overriding principle said to govern the quantifi cation of these monetary awards, there is sometimes signifi cant judicial disagreement regarding the actual sum to be awarded This disagreement provides the motivation for this book

It is at the very least arguable that one important purpose of the law is to do ‘ justice ’ between people Much has been written regarding precisely what this entails but this important jurisprudential question lies beyond the scope of this book At a minimum, ‘ justice ’ would seem to require that the law treat its subjects with equal concern, 1 though even those who accept this claim may disagree mean-ingfully about precisely what it entails The idea of equality before the law is often partially expressed through the principle that like cases should be treated alike The account proposed here strives to promote this principle, suggesting that whilst English law generally conforms to this ideal, some relatively minor modifi cations are necessary for its full realisation in this context But equal treatment before the law requires more than simply that similar cases be treated as such The fulfi lment

of this ideal also necessitates that the principles used to decide cases appropriately balance the relevant interests of the parties involved where, as is often the case, these interests are in confl ict

In the specifi c context of assessing the sum of money that should be awarded

to a promisee following the promisor ’ s failure to perform as promised, ‘ justice ’

1 See, for example, R Dworkin , ‘ Justice and Rights ’ in Taking Rights Seriously ( Duckworth , 1977 )

150, 180

thus requires that the two contracting parties ’ interests be balanced in a way that appropriately refl ects their competing strengths Again, there may be room for reasonable disagreement regarding precisely what result such balancing produces and this disagreement no doubt accounts for many of the differences in judicial opinion that have been expressed on various aspects of the law of contractual money awards over the years It nevertheless is contended that a signifi cant num-ber of the disagreements and defi ciencies evident in this part of the law can be traced back to the failure to correctly identify the relevant governing principles and that this failure is itself attributable to four main factors:

1 that the principle generally accepted to govern the quantifi cation of

contrac-tual money awards, as laid down in Robinson v Harman , is expressed at a

suffi ciently high level of generality as to be consistent with two quite different interpretations of it;

2 that the terminology traditionally employed in discussions concerning the law of contractual money awards is notoriously ambiguous and confusing;

3 English law ’ s rigid and myopic focus on identifying a ‘ loss ’ suffered by the victim of a breach before any substantial money award can be made;

4 that very often, though not always, money awards that substitute for

per-formance also have the effect of making good some or all of the detrimental

factual consequences that the innocent party has suffered as a result of the breaching party ’ s failure to perform

In combination, these four factors have helped conceal the fundamental tinction this book proposes between substitutionary and compensatory money awards in contract law Fortunately, despite the existence of these internally gen-erated obstacles to clarity, in most, though not all, cases the common law, as it often does, generally manages to reach the appropriate result After exposing the defi ciencies of the conventional account, as well as the obstacles standing in the way of the law ’ s principled development, this book endeavours to articulate the principles that should be applied in future cases when quantifying contractual money awards Where necessary, minor modifi cations to existing principles also are suggested in order to ensure that future cases are decided correctly The argu-ment advanced hopes not simply to better explain the current law, but also to ensure that future disputes are resolved appropriately

II An Overview of the Argument

In English law the orthodox understanding of contractual money awards is that they compensate the innocent party for ‘ loss ’ caused by the relevant breach of contract that falls within the limits defi ned by the applicable rule of remoteness and mitigation In this context ‘ loss ’ is measured by comparing the position the innocent party would have been in had the contract been performed with the

position this party now occupies on account of the breach 2 In the law of contract, ‘ loss ’ also has traditionally been understood almost exclusively in fi nancial terms with recovery for non-pecuniary harm only being allowed in limited situations

The correct application of this understanding of the law nevertheless has caused

signifi cant judicial disagreement at the highest level 3 The substantial divergence

of opinion in the cases just cited demonstrates the signifi cant uncertainty that exists with regard to the aim of enforcing a contract, or responding to breach, via

an award of ‘ damages ’ It is contended that the major cause of the confusion is that two different principles are invariably confl ated when courts make such awards The principal objective of this book is to decouple these two different principles and explain their operation In achieving this objective, all the cases cited in the previous paragraph are examined in signifi cant detail, along with many other authorities as well While the overwhelming majority of the decisions examined are English, important decisions from other jurisdictions also are considered where they help to illuminate the relevant principles The substantial volume of decisions on ‘ contract damages ’ makes it necessary to choose between an approach focused on breadth of coverage and one focused on depth of analysis This book adopts the latter approach The aim is not to provide an encyclopaedic digest of all the cases, 4 but rather to use key examples to show that the authorities pull in two different directions because of a misconception regarding the applicable fun-damental principles The objective is to expose this misconception and outline a coherent framework within which the various different questions that can arise in the quantifi cation of contractual money awards may be resolved

This new framework is outlined in Part II of the book The argument advanced

is that, in contrast to the orthodox understanding of the law just outlined, there are, broadly speaking, two distinct kinds of money award in English law, which,

in different ways, seek to uphold the aim of putting the innocent party into the position as if the contract had been performed The fi rst is a money award that substitutes for the promised performance The basis for such an award is the right

to performance that arises upon contract formation The money awarded is given

in substitution for the performance promised but not provided The second kind

of money award is one that aims to compensate for (ie ‘ make good ’ ) loss The theoretical basis for such awards is controversial The orthodox view is that such

2 The classic formulation is Parke B ’ s in Robinson v Harman ( 1848 ) 1 Exch 850, 855 , discussed in

greater detail in Chapter 1 For a comprehensive account of what this involves, at least in relation to

a compensatory claim for factual loss, see A Kramer , The Law of Contract Damages ( Hart Publishing ,

AC 353 ; Transfi eld Shipping Inc v Mercator Shipping Inc (The Achilleas) [ 2008 ] UKHL 48 , [2009] 1 AC

61 For a recent, striking example of such disagreement in the High Court of Australia, see Clark v

Macourt [ 2013 ] HCA 56 , (2013) 88 ALJR 190 , discussed further below

4 But for an impressive recent attempt at doing just this, see Kramer (n 2)

awards are based upon a secondary right to repair that arises upon a breach of the primary right, but recently this view has come under attack Whatever the true basis for compensatory awards, however, it is clear that they are in an important way distinct from awards that substitute for performance

The alternative understanding of contractual money awards this book proposes has at least two signifi cant implications that demand emphasis The fi rst is that ‘ compensating for loss ’ should no longer be viewed as the principal objective of contractual money awards because not all awards are concerned with making good the detrimental factual consequences that breach has caused the promisee Some awards instead aim to substitute for the promisor ’ s performance, even though in

many cases they also have the effect of making good some or all of the factual

loss that non-performance has caused to the promisee Even when compensatory awards are made, moreover, on the understanding proposed here their aim, in making good certain factual detriment caused by breach, is simply a manifesta-tion of the more fundamental purpose that underpins both substitutionary and compensatory awards, which is to achieve the next best thing to the promised performance having been provided At least whenever the promisee has become entitled unconditionally to the performance promised, 5 this is achieved by provid-ing this party with both an appropriate substitute for this performance, (either via

a coercive order or an appropriate money award) and an award designed to make good certain further detrimental consequences suffered as a result of the breach The second signifi cant implication of the proposed account is to cast doubt

on the traditionally clear division between contractual money awards and cive court orders by recognising that substitutionary money awards and coercive orders are simply different points along a remedial continuum, where all responses

coer-on this ccoer-ontinuum are, at the highest level of abstracticoer-on, ccoer-oncerned with ing the innocent party with an appropriate substitute for the performance that was promised There are numerous different ways, on this continuum, in which the common law could provide a response which substitutes for performance

provid-At one extreme is a coercive order requiring a contracting party to perform on the date the relevant performance is due This is essentially an order for actual perfor-mance accompanied by the threat of additional sanctions for non- performance Because of the new court-ordered right this would create as well as these additional sanctions, this order may be viewed as a (very close) substitute for performance Next, there is a coercive order that requires the breaching party to perform after the due date for performance has passed Again, there will be additional sanc-tions for non-performance accompanying such an order Since the time at which performance is due differs, as do the consequences of non-performance, this is a clearer example of a substitutionary order

Money awards can substitute for performance too The common law could have made such awards conditional upon requiring that any sum awarded to the

5 This occurs when all conditions (precedent and subsequent) attaching to the promisee ’ s entitlement

to his counterparty ’ s performance have been fulfi lled

innocent party be used to obtain the promised performance, or a close substitute for it But it did not to do so, and there are sound reasons for this choice, which are explored in Section II.B of Chapter 5 This book identifi es two monetary substi-tutes for performance that the common law has recognised The fi rst and closest money substitute for performance is an award of the cost of substitute perfor-mance, which provides the innocent party with the cost of obtaining a substitute for the promised performance either via repair or via replacement with a substi-tute from the market 6 However, when such an award is unquantifi able, another monetary substitute for performance may be more appropriate: this is an award

of the reasonable price of ‘ release ’ from further performance This award mates the price a reasonable person in the innocent party ’ s position would have accepted, at the date of breach, to release the other party from future performance The effect of the account proposed here is that at least when all conditions (precedent and subsequent) attaching to this party ’ s entitlement to receive the promised performance have been fulfi lled, 7 and it is both ‘ reasonable ’ and possible

approxi-to obtain a substitute for such performance via repair or market replacement, that party is entitled either to a coercive order that compels the other party to perform

or its monetary equivalent A contracting party who is awarded one of these ferent monetary substitutes for performance or coercive relief also is entitled to

dif-an award of compensation to make good dif-any additional factual detriment caused

by the breach not made good by the substitutionary order, subject to the various restrictions that limit recoverable loss The fundamental point, however, is that compensatory awards and the restrictions applicable to them are distinct from money awards that substitute for performance and the restrictions that limit the availability of these awards

III The Need for the Proposed Distinction

An objection that might be raised against maintaining the distinction this book proposes is that ultimately both substitutionary and compensatory awards are grounded in the same underlying objective of putting the innocent party into a

6 There is thus more than one way to measure an award of the cost of substitute performance

First, substitute performance may be obtained via the purchase of a market substitute Alternatively, substitute performance may be obtained by paying for the repairs necessary to ensure conformity with the contractual specifi cations All this is outlined more fully in Chapter 5 , where it is explained that, consistent with common sense, in choosing between these two alternatives the law awards the cheaper option See the discussion at 179 – 188

7 As foreshadowed a few paragraphs earlier and explained more fully below, this is a crucial straint upon the availability of substitutionary awards that both signifi cantly narrows the scope of their operation and explains many of the cases that might be thought to be inconsistent with the new account proposed here Note also that substitutionary awards are available not only when all conditions (precedent and subsequent) attaching to this party ’ s right to performance have been satisfi ed, but also when the unsatisfi ed conditions involve the payment of money so that they can be satisfi ed by the court deducting the sum still due from the promisee from the substitutionary award due from the promisor

con-position that approximates that which he would have occupied had the contract been performed Whilst these two awards do share this common theoretical basis,

there are a number of reasons why it is nevertheless necessary, at least at a doctrinal

level, to maintain the proposed distinction First, other than at the highest level

of abstraction, the motivation for each award is different Substitutionary money awards aim to substitute for the performance promised irrespective of the factual detriment that breach has caused the innocent party Compensatory awards aim

to make good certain detrimental factual consequences that a breach has caused

to the victim and thereby ensure that, at least within the limits imposed by the various restrictions that apply to such awards, this party is left no factually worse off as a result of the breach

Secondly, although ultimately both substitutionary and compensatory court orders are grounded in the primary right to performance that is created by con-tract formation, the signifi cance of breach is fundamentally different for each kind

of award With regard to a compensatory money award, breach either generates the secondary right to repair that such awards enforce, or, alternatively, leaves the breaching party liable to be ordered to pay a sum of money later assessed by the court 8 By contrast, breach has no normative signifi cance whatsoever in relation to the availability of a substitutionary money award, though typically it does provide the practical reason for the court order to enforce the innocent party ’ s primary right

Thirdly, and most importantly, the distinction this book proposes has tant practical consequences for both the availability, and the quantifi cation of contractual money awards This can be seen most obviously in relation to the restrictions or conditions that are applicable to the different awards Compensatory awards are subject to restriction on the grounds of ‘ remoteness ’ and ‘ mitigation ’ , 9 and the specifi c rules that limit recovery for non-pecuniary loss Substitutionary awards are not subject to these restrictions since they are not concerned with loss Such awards, however, are subject to different restrictions concerned with placing necessary and reasonable limits upon an innocent party ’ s right to insist upon sub-stitute performance rather than with limiting this party ’ s entitlement to have the factual detriment attributable to the breach made good

The limits imposed on the availability of specifi c performance demonstrate the possibility of restricting the availability of a substitutionary court order In a similar (but not identical) way, there are limits on the availability of specifi c per-formance ’ s monetary equivalent: an award of the cost of substitute performance

In particular, such an award is unavailable when it is unquantifi able because

8 These opposing analyses are examined in Chapter 6 , but regardless of which analysis is preferred, breach has normative signifi cance insofar as the promisee ’ s entitlement to an award that aims to make good the detrimental factual consequences that the breach has caused this party In contrast, although

breach has no normative signifi cance as regards the promisee ’ s entitlement to a monetary substitute for

performance, it generally is of practical signifi cance in giving the court a reason to expend limited state resources on the enforcement of this party ’ s primary contractual right

9 The meaning of these terms is explained in Chapter 6