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Damages, The Measure of

Wasted (Reliance)Expenditure

Law and Sea.

Damages are the pecuniary recompense given by process of law to a person for the actionable wrong that another has done him. Damages may, on occasion, be awarded where the plaintiff has suffered no ascertainable damage: damage may be presumed.

Loss of Profits, Damages in Respect of
Last updated: 21-Jun-2015

Per Robert Goff, J in Satef-Huttenes Albertus SpA v Paloma Tercera Shipping Co SA (The Pegase), [1981] 1 Lloyd’s Rep 175, at p.183:

The two governing principles - the principle of causation and the limiting principle of remoteness of damage - provide, in their developed form, the solution to most problems of damages. Furthermore, I can find in the cases no rule of policy either excluding, or imposing special criteria in respect of, the recovery of damages for loss of profits, whether the relevant contract be a contract of sale or a contract of carriage, whether the breach be non-delivery or delayed delivery, and whether the profits claimed to have been lost are resale profits or profits from loss of use (which I shall call user profits). It is true that, in point of fact, lost profits are seldom recovered as damages; but that appears to follow simply from the application of the ordinary principles of causation and remoteness. This experience is reflected in the prima facie or normal measures of damages that are applied, almost as a matter of course, in so many cases. These prima facie measures of recovery are simply practical rules of thumb, of great usefulness, which are applicable in a large number of cases. Thus in contracts of sale of goods, where there is an available market for the goods the prima facie measure of damages for non-delivery is the difference between the contract price of the goods and their market price at the time when they ought to have been delivered… A similar prima facie measure of damages applies in cases of delayed delivery; and the contrast between contract and market price may similarly provide the prima facie measure of damages for breach of other contracts, e.g., the repudiation of a time-charter. But it is to be observed that, in each of these cases, the prima facie measure of damages presupposes the existence of an available market for the goods at the date of breach. This is because the existence of an available market will generally mean that the innocent party can, at the date of breach acquire a substitute from the market - for example, in cases of sale, the buyer can buy in substitute goods. That being so, he cannot usually say that the breach has caused the loss of any particular profits: the principle of causation normally excludes, in such cases, a recovery of damages in respect of lost profits.

In Polypearl Ltd v E.On Energy Solutions Ltd [2014] EWHC 3045 (QB) by Behrens J at para 64:

64.… The starting point is that, as a matter of general law, a claim for loss of profits may be either a direct or an indirect loss. It will be a direct loss if, at the time the contract was entered into, it was likely to result from the breach in question. [See McGregor on Damages 19th Ed at paragraph 18-167]. It will be indirect if there are special circumstances known to the contract breaker at the time of the contract such that a breach would be liable to cause more loss. [Claimant] submits that the loss of profits claim in this case is a direct loss. He submits that the most obvious (and likely) loss from the breach of an obligation to purchase Product is loss of profit. I agree with that submission though it would be possible to conceive of other claims of loss of profit arising from other breaches which would be categorised as indirect.

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