David has communicated his intention of selling the property and ordered Peter to move out in three months. In effect, he has also demanded that Peter must stop catering to the guests who have booked the guest house for the next six months. Peter has also incurred several expenses in the renovation of the guest house. The issue here is the determination of the extent of Peter’ s loss as a result of the breach. Peter may claim damages as a result of one of three interests, those of expectation loss, reliance loss, and restitution loss.
An expectation interest seeks to put Peter in the position he would have been had the contract been fulfilled. The loss incurred is generally understood to be financial, as Parke B pointed out in Robinson v Harman (1848), the claimant should, “ so far as money can do it, be placed in the same situation, with respect to damages, as if the contract had been performed. ” However, the opinion of the courts has changed since, and other non-financial gains may also be taken into account on special occasions (see Ruxley below).
The claim of reliance loss seeks to put the claimant in the same position he was in had he not entered the contract, thus restoring his wasted expenditure. The restitution loss aims to provide the claimant the return of any and all enrichment awarded to the defendant as part of his obligation. For a successful claim, Peter will have to prove that David was enriched at his expense, and it would be unjust to let him keep the enrichment money (Barclays Bank Ltd v. W J Simms Ltd (1980)).
In order to be eligible for a particular loss, Peter must establish a causal link between the loss and the breach of contract. Furthermore, damages must not be too remote and should be in the reasonable contemplation of the parties (Hadley v Baxendale (1849)) and are only awarded if the claimant took reasonable steps to mitigate his loss (British Westinghouse Co v. Underground Electric Ry Co (1912)).
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