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Avoid the Hustle

non-compensatory damages for breach of contract

Category: Law

Mason CJ in Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 362, speaking of the restriction of contractual non-economic damages for mental distress, said that “rule … rests on flimsy policy foundations and conceptually is at odds with the fundamental principle governing the recovery of damages, the more so now that the approaches in tort and contract are converging”. In the same case, McHugh J said at 395: “Various explanations of the rationale of this rule have been proffered. None of them is satisfactory”, while Brennan J summed up some of the policy reasons for restricting damages for breach of contract at 369: “The institution of contract … can operate effectively only if the parties, at the time when they create their charter, can form some estimate of liability in the event of default in performance. … If a promisor were exposed to such an indefinite liability in the event of breach, the making of commercial contracts would be inhibited, the assignment of a contractual right would carry new risks for the party subject to the reciprocal obligation, and trade and commerce would be seriously impeded. This policy has no relevance to the measure of damages in tort …”.

With reference to these comments, should the range of monetary remedies available for a breach of contract be expanded? Note: This is an extremely broad and general question and you will need to confine your answer. You might for example focus on policy considerations underpinning contract or the differences between contract and tort, or on a particular category of contract (eg insurance contracts or employment contracts), or a particular type of non-compensatory damages (non-economic damages for mental distress, restitutionary damages reflecting the defendant’s profit, or exemplary damages).