Title

VII.3.2 - Calculation of damages

Content

No. VII.3.2 - Calculation of damages

(a) Damages to which the party who suffers a loss from the failure of the other party to deliver is entitled are typically measured by the market value of the benefit of which the aggrieved party has been deprived through the breach, or the costs of reasonable measures to bring about the situation that would have existed had the contract been properly performed.

(b) The aggrieved party may calculate his loss

i)

based on the difference between the contract price and the price of a replacement transaction (e.g. substitute sale or substitute purchase) concluded within a reasonable time and in a reasonable manner or,

ii)

based on the difference between the price in the unexecuted contract and the market price current at the date of default and at the place where the contract should have been performed, or, if there is no current price at that place, the current price at such other place that appears reasonable to take as a reference.

Commentary

1 The Principle is based on the idea of damages as full compensation of the losses sustained by the aggrieved party and specifies the ways in which the aggrieved party may calculate the losses to be compensated by the damages.

2 Subsection (a) provides a general guideline for the calculation of the aggrieved party's direct loss resulting from the other party's breach. Such damage is typically measured by the difference between the value to the aggrieved party of the performance that should have been received and the value to that party of what, if anything, actually was received by it from the party in breach. The value is to be determined by reference to the market value of the benefit. Alternatively, the aggrieved party is entitled to recover the costs of measures it undertook to place it in the same position that it would have been in had the contract been properly performed by the party in breach, provided that such measures were reasonable.

3Subsection (b) is modelled after Artt. 75, 76 CISG. It provides the aggrieved party with alternative ways of calculating its damage. The aggrieved party may calculate its direct loss with reference to a replacement transaction actually concluded by it, provided that this transaction is concluded, for the protection of the non-performing party, within a reasonable time and in a reasonable manner, or with reference to the market price at the date of default and at the place where the contract should have been performed, or, if there is no current price at that place, the current price at such other place that appears reasonable to take as a reference.

References

Arbitral Awards

ICC award in case no. 8362 of 1995, YCA 1997, at 164 et seq.ICC Award No. 10329, YCA 2004, at 108 et seq.ICC Award No. 10422, Clunet 2003, 1142 etseq.ICC Award No. 10988, Clunet 2006, at 1408 et seq.ICC Award No. 1250, YCA 1980, at 168 et seq.ICC Award No. 13133, YCA 2010, 129 et seq.ICC Award No. 5418 of 1987, YCA 1988, at 91 et seq.ICC Award No. 7081, Clunet 2003, at 1131 et seq.ICC Award No. 8501, Clunet 2001, at 1164 et seq.ICC Award. No. 9800, Clunet 2004, 1284 et seq.ICC Final Award No. 11849, YCA 2006, at 148 et seq.ICSID Award of December 29, 2004, Ceskoslovenska Obchodni Banka A.S. v. The Slovak Republic, Case No. ARB/97/4, http://ita.law.uvic.ca/documents/Cesk-Slovakia-AwardDec2004.pdf

Court Decisions

Chaplin v. Hicks [1911] 2 KB 786

Doctrine

Blase, Friedrich/Höttler, Philipp, Remarks on the Damages Provisions in the CISG, Principles of European Contract Law (PECL) and UNIDROIT Principles of International Commercial Contracts (UPICC)Derains, Bertraud, Note to ICC Award No. 10988, Clunet 2006, at 1413 et seq.Domingo, Ortega, Rodriguez-Antolin, Zambrana, Principios de Derecho Global, Navarra, 2006Gotanda, John Y, Recovering Lost Profits In International Disputes, Georgetown Journal of International Law, Vol. 36 No.1, at 61 et seq.Jolivet, Emmanuel, Note to ICC Award No.10422, Clunet 2003, 1150 et seq.Note to ICC Award No. 7081, Clunet 2003, at 1137 et seq.

International Legislation

Fontaine, Marcel, OHADA Uniform Act On Contract Law Preliminary DraftUnited Nations Convention on Contracts for the International Sale of Goods (CISG)

Miscellaneous

CISG Advisory Council Opinion No. 6: Calculation of Damages under CISG Article 74CISG Advisory Council Opinion No. 8: Calculation of Damages under CISG Articles 75 and 76Decision taken by the Governing Council of the United Nations Compensation Commission, S/AC.26/1992/9, 06 March 1992

Model Terms

Standard Contracts for the UK Offshore & Gas Industry, General Conditions of Contract (inlcuding Guidance Notes) for Marine Construction, 2nd Ed., Aberdeen 2003, at 1 et seq.

National Legislation

GIW DDRUK Sale Of Goods Act 1979, Chapter 54

Principles / Restatements

Principles of European Contract Law - PECLUNIDROIT Principles of International Commercial Contracts 2016

Contract Clauses

1. Equitable RemediesEmployment ContractEquitable Remedies (Further Damages)

I agree that it would impossible or inadequate to measure and calculate the company's damages from any breach of the covenants set forth in Section X herein. Accordingly, I agree that if I breach any of such sections, the Company will have available, in addition to any other right or remedy available, the right to obtain an injunction from a court of competent jurisdiction restraining such breach of threatened breach and to specific performance of any such provision of this agreement. I further agree that no bond or other security shall be required in obtaining such equitable relief and I hereby consent to the issuance of such injunction and to the ordering of specific performance.


2005Sales & Purchase ContractRemedies

Except as set forth in Sections X the rights and remedies expressly conferred upon a Party herein shall be cumulative and not exclusive of any other rights or remedies of a Party herein and (ii) the Parties agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that any provision of this Agreement (including failing to take such actions as are required of it hereunder to consummate any of the Transactions) is not performed in accordance with its specific terms or is otherwise breached, and agree that each Party shall be entitled to an injunction or injunctions to specifically enforce the terms hereof and to obtain injunctive relief or any other equitable remedy in the event of or to prevent any breach or threatened breach of this Agreement, including Sellers' obligation to consummate the Initial Repurchase and the disposition described in Section X on the terms and subject to the conditions of this Agreement, without the necessity of posting a bond or other undertaking in connection therewith, and each Party hereby waives the defense that an adequate remedy exists at Law for any breach or threatened breach by a Party of this Agreement with respect to which the non-breaching Parties are entitled hereunder to specific performance or other equitable remedies.


20122. Specific PerformanceSales & Purchase ContractSpecific Performance

The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity.


2014