Damages for Breach of Contracts with Alternative Performances
Michael G. Pratt
Queen's University - Faculty of Law
THE LAW OF REMEDIES: NEW DIRECTIONS IN THE COMMON LAW, J. Berryman and R. Bigwood, eds., Irwin Law, 2008
The purpose of an award of damages for breach of contract is to place the promisee in as near a position as possible to that she would have occupied had the promisor performed his promises. This raises an interesting problem in cases where the contract permits the breaching promisor a degree of discretion as to how to perform. Consider a seller who breaches a promise to deliver 200 tons of goods, plus or minus five per cent. Or a theatre company that breaches a promise to provide an actor with an engagement at one of several theatres of varying quality and reputation, the choice of venue being left to the discretion of the company. Or an employer that wrongfully dismisses an employee who is entitled to a base salary plus such bonus, if any, that the employer shall from time to time determine.
How are damages to be assessed in cases like these? According to Anglo-Canadian common law damages for breach of a contract with alternative performances are to be assessed by reference to the minimum of these alternatives. This minimum-performance principle precludes any inquiry into how the promisor would in fact have performed the contract had he not breached. It represents an exception to the basic principle of contract damages in cases where the party in breach had a choice between two or more modes of performing the contract.
I argue that this exception is unjustifiable. A party to a contract is entitled upon breach to be placed in the position that she would have occupied had the contract not been breached. That position depends on how the breaching party would have performed his promises, and where this is not fully determined by the content of those promises then the court must speculate as to how the promisor would in fact have chosen to perform them. I argue that the minimum-performance principle typically does not affect the quantum of damages awarded, but that it ought nevertheless to be abandoned because it rests on a misunderstanding of the relationship between contractual rights and remedies and represents an untenable departure from the basic principle of compensation.
Number of Pages in PDF File: 16
Keywords: Contracts, Breach, Damages, Assessment
JEL Classification: K12
Date posted: April 23, 2008 ; Last revised: May 29, 2008