Lloyd's Maritime and Commercial Law Quarterly
A VOYAGE TO THE HIGHER ALTITUDES OF CONTRACT LAW1
David Winterton *
In The Glory Wealth, Teare J held that, following an actual repudiatory breach of contract, the promisee’s entitlement to recover damages for profits lost on the contract depends (at least) upon proof on the balance of probabilities that, had that repudiatory breach not occurred, the promisee would have performed its own prospective obligations under the contract. This article defends this holding as a matter of authority and fundamental principle, while at the same time identifying various reasons for the law’s present uncertainty. One of these reasons is the existence of two distinct ways in which a money award may accomplish English law’s stated objective of putting a promisee in “the same situation … as if the contract had been performed”. The article concludes by demonstrating the explanatory power and limits of this distinction via a re-examination of the House of Lords’ controversial decision in The Golden Victory.
I. INTRODUCTION
The decision in Flame SA v Glory Wealth Shipping PTE Ltd (The
Glory Wealth)2 raised an important question of legal principle as regards the assessment of “damages”3 for breach of contract. That question was whether, following a promisor’s actual repudiatory breach of contract, the promisee’s entitlement to a money award that aims to place the latter party in “the same situation… as if the contract had been performed” (hereafter “a Robinson v Harman
4 award”) is conditional upon proof, on the balance of probabilities, that the promisee would have been able to perform its own prospective obligations under the contract.
* Lecturer, University of New South Wales. I wish to express my gratitude for helpful comments I received from John Randall QC, Frederick Wilmot-Smith and Denis Harley. All errors remain my own.
1. This refers to Scrutton LJ’s comment in Continental Contractors Ltd v Medway Oil & Storage Co Ltd (1925) 23 Ll L Rep 124, 129, which his Lordship made in the context of considering the Court of Appeal’s decision in Braithwaite v Foreign Hardwood Co [1905] 2 KB 543. See also J Carter, “The Higher Altitudes of Contract Law” [1989] LMCLQ 81.
2. [2013] EWHC 3153 (Comm); [2014] 2 WLR 1405; [2013] 2 Lloyd’s Rep 653 (hereafter cited simply as “The Glory Wealth”).
3. In the present author’s view, there is a critical distinction between two different kinds of money award that give effect to the principle in Robinson v Harman (1848) 1 Exch 850, which use of the word “damages” tends to obscure. The critical distinction, as is explained later in the article, is between awards that substitute for performance and awards that compensate for factual loss. In this article, the term “damages” is sometimes used for the sake of convenience when the distinction is not relevant to the point that is being made.
4. (1848) 1 Exch 850, 855 (Parke B): the aim of awarding “damages” for breach of contract is, so far as money can do it, to put the innocent party into “the same situation… as if the contract had been performed”.
A VOYAGE TO THE HIGHER ALTITUDES OF CONTRACT LAW
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