"There is now considerable uncertainty as to the compass of contractual damages".Discuss.

Essay by tmagnusUniversity, Master'sC, April 2004

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Section 1Introduction

In a successful economy there needs to be a reliable interchange of goods and services. The market place can be seen "as the principal mechanism for the production and distribution of wealth". Contracts are drawn up to make both parties aware of the intentions of each other and to make the exchange legally enforceable. This essay is primarily concerned with what happens when there is a breach in the contract. Most contracts will contain remedies which sets out what will happen in situations where a party breaches a condition in the contract. In some situations no such remedies will have been agreed. If no settlement can be reached between the two parties then the case will often have to be settled by a Judge, who will then award damages to the injured party. In modern day contract law there is however considerable uncertainty with respect to the scope of damages.

The primary focus of this essay will be to examine the area of damages for the loss of a consumer surplus; it will then go on to briefly examine uncertainty in third party contract rights and restitutionary damages.

Section 2 Difficulties when awarding damages for a loss of a consumer surplus

The object at the heart of damages is to put the injured party, so far as money can do it, in the same position as if the contract had been performed . Damages are not designed to punish the defendant but to compensate the injured party for the contract not being performed. A court when awarding damages should ask the questions of 1) what consequences should be compensated for and 2) how should the damages be quantified. The Judge will consider the remoteness of the claim with the precedent being set in Hadley v Baxendale. The...