Business Law - Examine, with Reference to Relevant Case Law, the Extent to Which It Is True to Say That in the Event of a Breach of Contract the Injured Party Can Recover Compensation for All of the Consequences, Both

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1.Examine, with reference to relevant case law, the extent to which it is true to say that in the event of a breach of contract the injured party can recover compensation for all of the consequences, both financial and non-financial, that result from the breach.

The following question asks us to what extent it is right to say that in the event of breach of contract the injured party can recover compensation for all of the consequences, both financial and non-financial. In this essay, I will thoroughly explain what breach of contract is, and then answer the topic question. I will back up my answer by applying it to relevant case laws. A contract is a legally enforceable agreement between two or more parties with mutual obligations. A contract has not been performed until both parties have carried out all of their obligations. If one of the parties does not fulfil its contractual duty, it will result in a breach of contract. The remedy at law for breach of contract is compensation for any damages that were incurred as a result of the breach, and that includes both financial and non-financial losses caused to the injured party (Shavell, 1980). However, to what extent it is true to say that the injured party can recover financial, and non financial losses? To answer this question I will explain the possible remedies in regards to the breach of contract, when it comes to damages and recovering compensation. The major remedy available where it comes to claiming compensation are damages. That includes both financial and non-financial losses. Damages are set by the court to compensate the injured party. And in order to recover any compensation for the damages the injured party must show the he/she suffered a loss. The court has two major concerns to consider, which are remoteness of damage and measure of damages. Remoteness of loss was established in a case Hadley v Baxendale (1854), and it was said that where one party breaks the rules of the contract, the injured party should receive reasonable damages that were incurred as a result of the breach of contract, or if they were in the reasonably foreseeable at the time they made the contract (Danzig, 1975). A great way to explain this principle and to explain what is meant by reasonably foreseeable is to describe a case between Victoria Laundry (Windsor) Ltd v Newman Industries Ltd (1949). Victoria Laundry Ltd ordered a boiler from Newman Industries Ltd. The delivery was delayed by five months, and as a result of not having enough laundry capacity, they lost an important contract. Victoria Laundry sued for both ordinary profit and also for the lost contract with Ministry of Supply. The court decided that injured party would receive compensation for the ordinary profit, but would not be compensated for extraordinary loss of profit, which was not reasonably foreseeable, as Newman Industries could not have the knowledge of the contract between Victoria Laundry and Ministry of Supply (Eisenberg, 1992). Another concern that the court has to consider is measure of damages. This basically means how the court decides of the reasonable amount of compensation that the injured party should receive, and to do that it uses few principles. One of them is that the amount of damage is to compensate the injured party, and not to punish the defendant. In other words, to put the injured party in the same position as it would if there was no breach of contract. A case to explain this principle is Ruxley Electronics and Construction Ltd v Forsyth (1996). Ruxley Electronics was meant to build a seven foot and six inch deep pool, but it was made six foot. Forsyth refused to pay anything for the pool, until it was rebuilded as it should have been. The judge decided to award Forsyth £750 for inconvenience and disappointment and £2500 as a compensation for the pool being shallower than it should be. It was also decided that to award the company nothing would not be fair, and rebuilding the...
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