Damages Following Termination for Repudiation: Taking Account of Later Events

Abstract:     
The decision of the majority of the House of Lords in Golden Strait Corp v. Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] 2 AC 353 has excited considerable interest. A repudiation by the charterers of a time charterparty was accepted by the shipowners. Notwithstanding the existence of an available market, it was held that the assessment of the shipowners' damages should take into account that the charterers would have exercised their rights under a cancellation clause, had the charter not been terminated. That decision raises important questions of principle and policy. We should say at the outset that we consider The Golden Victory was correctly decided. On the facts, although the later events at issue were only known at the date of the arbitration of the dispute, the court was obliged to take them into account. Whether the decision is approached from the perspective of the relevance of later events (actual or contingent) to the assessment of common law damages in general, or from more specific perspectives, the authorities justify the conclusion in The Golden Victory. The more general questions which arise are when it is appropriate to take evidence of later events into account, what later events may be relied on and what degree of certainty must be established in relation to such events. It is, of course, self-evident that courts regularly take into account events following breach which are put forward as evidence of a plaintiff's actual loss. That is not in issue. What is more problematic is whether, in cases of termination following repudiation, damages may be affected by events which would or might have occurred in the period between the date of termination for repudiation and the date when performance of the contract would have been completed. The main point that we seek to make in this paper is that since the value of a bargain may be affected by unfulfilled conditions, and by contingencies which would have occurred had the contract not been terminated, it is generally appropriate for such events to be taken into account when assessing damages following termination for repudiation. That approach is reinforced by the general principle that the assessment of damages in contract should so far as possible reflect realities, as established at the trial. In our view it is also applicable where there is an available market.

Keywords: Damages, contractual damages, actual loss, contractual conditions, contingencies, available market

JEL Classifications: K10, K12, K30

Accepted Paper Series