The term damages refers to a form of monetary compensation given by a court of law in a civil action to an aggrieved party due to misconduct or failure to conform to the agreements that the two had made. They exist as of right to the aggrieved party. The person has to be placed financially in the position in which he would have been if the contract had not been breached and if he had been allowed to carry out his part of the contract. It is equally important to note that the defendant is not liable for all the consequences which flow from breach of a contract.
In the scenario above, the contracting parties drew the unusual risk to the attention of the defendant about the loss that he is most likely to obtain. The losses stated were within reasonable contemplation of the parties. The court should be able to find it in favor of the claimant based on the following breaching of their contract; first and foremost, those arising naturally out of the breach, next a consideration that which was in contemplation of the two parties at the time the contract was made- foreseeability and finally those which because of special knowledge would have been within the contemplation of the parties.
In most cases courts consider the test of remoteness to determine entitlement and not quantum. In The Heron II (1969), the House of Lords confirmed that a higher degree of foreseeability is required in contract than in tort. Damages were awarded to cover losses arising from the late delivery of sugar to Basra. The parties must have been aware that the price of sugar in Basra might fluctuate. The court concluded that for a loss not to be too remote there must be first, a real danger’, next ‘a serious possibility’ or the loss must be, ‘not unlikely’ or ‘liable to result’.
There are three main categories of damages. These include compensatory damages, incidental damages and consequential damages. Incidental damages are awarded in a law suit for a breach of contract as compensation for commercially reasonable expenses incurred as a result of the other parties breach such as cost of inspecting and returning goods that do not conform to the contract specifications. It mainly refers to a very limited category of costs incurred by the non-breaching party. They are the expenses incurred by a buyer in connection with rejection of non-conforming goods. They also include expenses incurred by a seller in connection with wrongful rejection of delivered conforming goods. An example of this would be the total storage costs for wrongfully rejected goods, for the period in which a replacement buyer is sought. They are added to compensatory damages. Others include Transportation care and custody of goods after the buyer’s breach. With this in mind, the incidental damages by Barksdale include $500 for the delivery of the replacement engine and actual rental costs for the replacement totaling to $(40,000 x 2) =80,000 .
Compensatory damages refers to the total sum of money awarded in a civil action by a court to indemnify a person for the particular loss as a result of the unlawful conduct of another. They are particular damages recovered in payment for the actual injury or economic loss, which doesn’t include punitive damages. It consists of two types which include specific and general. The general damages usually cover losses that are directly related to the subject matter of the contract such as failing to meet a number of shipments whereas specific damages compensate the plaintiff for losses related to the breach such as damage to a business’ reputation. The compensatory damages here include the 2 days delay totaling to $(40,000 x 2) =80,000 .
Consequential damages are indirect results of a direct loss. These are damages that arise out of special circumstances not ordinarily predictable, rather than arising naturally in the ordinary course of events. They result directly from the breach, but may not be obvious to one of the parties in advance without communication of the other party’s special circumstances. They include lost business opportunity, lost rent and lost profits of any manner. They are generally not recoverable in contract dispute but are available in tort. To be awarded the consequential damages in a law suit there must be a foreseeable result of an act. In the scenario above, at the time of the contract the defendant was made aware of the foreseeable event. In this case the consequential damage awarded was $3,000,000.
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