Calculation of damages for breach of contract

Damages for breach of contract are intended to put the claimant in the position he or she would have been in if the contract had been performed.

Damages for breach of contract may only be claimed for those circumstances which reasonably arise as a natural result of the breach of contract, or that would have reasonably been contemplated by the parties at the time the contract was made. An important component of this principle is that the calculation of damages for losses caused by the breach of contract is governed by the contract itself.

Damages caused by breach

To establish a claim for damages, the claimant will need to show that the breach of contract caused or contributed to the loss suffered. The breach may not be the sole cause, but the claimant will need to show a causal connection between the breach and the loss suffered.

In some circumstances, a person may only be liable for part of the loss suffered as a result of the breach. This is either because of the common law principle of contributory negligence or because of the application of the various state-based laws dealing with proportionate liability.

An award of damages may also be affected by principles of mitigation, which essentially require that a claimant is not to act unreasonably so as to exacerbate the loss resulting from the breach. A claimant cannot recover damages for loss that is exacerbated by unreasonable conduct on its part. However, a claimant may recover expenditure incurred in acting reasonably to avoid, or attempt to avoid, loss. For damages for breach of a statutory duty, a claimant will need to show that the damages caused by the breach are of a kind that the statutory duty was designed to prevent. 

A claim for damages for breach of an indemnity need only show that the damages were intended to fall within the scope of the indemnity.