Contract Damages and the Promisee's Role in its Own Loss

Abstract

In a claim for compensation for breach of contract, various principles take account of the injured party’s own involvement in its loss. This article considers the interaction of three of them: intervening causation, mitigation as avoidable loss, and reliance upon the contract. Judges and academics alike have suggested that there is a connection between causation and the avoidable loss rule. This article builds on those suggestions, to present a model which integrates the avoidable loss rule with other causal norms typically applied to contract.

The first part of the article shows that the avoidable loss rule can be implemented in way that is compatible with a causal framework. The second part reveals a deeper, normative connection between avoidable loss and causation, which concerns reliance upon the contract. The avoidable loss rule, in particular, is underpinned by the idea of a transfer in reliance: from promisor-reliance to promisee (self)-reliance.

Keywords: contract, damages, causation, mitigation, avoidable loss

JEL Classification: K12