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Lloyd's Maritime and Commercial Law Quarterly

MONEY AWARDS SUBSTITUTING FOR PERFORMANCE David Winterton The expectation principle is indeterminate. Parke B’s classic formulation in Robinson v Harman leaves open whether damages for breach of contract compensate for loss alone or may alternatively substitute for performance. Challenging the accepted orthodoxy, this article argues that English law is more consistent with the latter interpretation. After outlining some clear examples of such awards, it identifies two distinct kinds of monetary substitute for performance. The first is an award of the cost of equivalent performance. The second is a reasonable approximation of the price of release. At a higher level of abstraction, both awards share the common goal of providing the closest monetary substitute for performance in the circumstances. I. INTRODUCTION English orthodoxy, as expressed by Parke B in Robinson v Harman , 1 dictates that money awards for breach of contract aim to put the innocent party in the same position “as if the contract had been performed”. Ever since Fuller and Perdue’s famous critique of this objective, 2 it has commonly been described as the “expectation principle”. 3 It is also conventionally understood as a measure of loss. This assumes that contractual awards quantify the difference between the innocent party’s hypothetical position following performance and his, her or its actual position following breach. Fuller and Perdue questioned the normative primacy of this measure but ultimately concluded that its adoption was justified. 4 Despite the significant academic debate that ensued, 5 courts consistently reaffirm the governing status of the expectation principle, generally acknowledging that awards compensating for reliance loss are based on a rebuttable presumption, 1. (1848) 1 Exch 850, 855. 2. See L Fuller and W Perdue, “The Reliance Interest in Contract Damages” (1936) 46 YLJ 52. 3. The “expectation” terminology was criticised, and the primacy of the “performance interest” powerfully reasserted, in D Friedmann, “The Performance Interest in Contract Damages” (1995) 111 LQR 628. For further criticism, see C Webb, “Performance and Compensation: An Analysis of Contract Damages and Contractual Obligation” (2006) 26 OJLS 41. 4. Fuller & W Perdue (1936) 46 YLJ 52. 60. This was on the basis that it encourages efficient bargaining by facilitating reliance and is a good “proxy” for difficult to quantify reliance losses. 5. For Professor Atiyah’s defence of the reliance measure, see P Atiyah, Essays on Contract (OUP 1986), Essays 2, 4, 6 and 7. More recent contributions to the debate include R Craswell, “Against Fuller and Perdue” (2000) 67 U of Chicago L Rev 99; S Smith, “The Reliance Interest in Contract Damages and the Morality of Contract Law” (2001) Issues in Legal Scholarship ( 36; and D Kimel, “Remedial Rights and Substantive Rights in Contract Law” (2002) 8 Legal Theory 313. MONEY AWARDS SUBSTITUTING FOR PERFORMANCE 447

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