CML Working Paper: Market Damages or Compensation?

Abstract

This paper deals with the tension between the compensatory role of damages and an approach to damages (the market approach) that calculates damages pragmatically with an eye to ease of assessment. The market damages approach, as it applies, for example, to a buyer’s damages for non-delivery, closes out the contract according to the difference between the contract price and the market price at the due date of performance. It does not require the buyer to purchase substitute goods. In recent times, this market rule has been explained as based on mitigation of damages, which is contestable. Increasingly, moreover, there are signs of a movement away from the market rule in favour of a conventional approach looking to the particular buyer’s actual loss rather than its presumptive loss. It has yet to be seen whether this movement will overturn the standard view that the buyer’s damages will not take account of the buyer’s position in sub-sales concluded before the seller’s breach. This standard view applies also in the case of voyage charterparties. Finally, for sale and charterparties alike terminated before the performance date, there is a movement towards looking at contingencies so as to reduce a seller’s or shipowner’s damages to the extent that the plaintiff would not have been able to perform in full or at all after the date of the defendant’s repudiation of the contract.

Keywords: damages, market, mitigation, sub-sale, charterparty, contingencies, nonconforming, compensation

Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5677204 

or download the paper at: CML Working Paper Series