Quantification of Contractual Damages: Have we moved on from Fuller and Perdue?

Date01 January 2014
AuthorAlan Bunbury
Quantication of Contractual Damages:
Have we Moved on from Fuller and Perdue?
Of the many issues and problems which arise for discussion within the
law of contract, it would seem that the question of remedies—their most
appropriate form and, in the case of damages, their quantum—attracts
particular attention from legal writers. Many extensive and highly regarded
judicial and academic commentaries have come to inform the debate on
how best to enforce contracts when breach occurs. There are, it is suggested,
two principal reasons for this emphasis on contractual remedies. The rst
is that the question of how to enforce contractual obligations prompts the
deeper question of why courts enforce such obligations in the rst place.
This reects “[t]he proposition that legal rules can be understood only
with reference to the purposes they serve.”1 The second is that, from the
perspective of contracting parties, the question of remedies is the most
important question—indeed, in most cases it could be seen as the only
important question—to litigants. Plaintiffs take cases, for the most part, to
obtain remedies for wrongs that they perceive as having been committed
against them. Securing an adequate remedy is the plaintiff’s primary
concern, while the defendant will seek to protect his interests by denying
that the plaintiff is entitled to a remedy or arguing that the least expensive
remedy is the most appropriate.
It is clear, then, why the area of contractual remedies would attract so
much commentary and debate. However, another factor in the proliferation
of debate on this topic is the lack of any clear conceptual framework
capable of uniting and reconciling the case law in this area. In the last 150
years, numerous aberrations have developed to the traditional rule, set out
in Robinson v Harman, that in enforcing a contract the court shall seek to
put the plaintiff, so far as is possible, in the position he would have been in
had the contract been performed properly.2 Several valiant attempts have
been made to rationalise and reconcile these different and often conicting
judicial trends. However, conceptualising a coherent theoretical framework
for the enforcement of contracts is difcult at best and many differences of
opinion have arisen between those who have attempted to do so. Different
1 Lon Fuller and William Perdue, “The Reliance Interest in Contract Damages” (1936–
37) 46 Yale Law Journal 52 (Part 1) & 373 (Part 2), p.52
01 BunburyN.indd 1 29/05/2014 10:49
2  
academic commentators have advanced different and often mutually
exclusive descriptive and normative theories of contractual enforcement.
Furthermore, though all common law jurisdictions share many of the same
legal traditions and principles, some of the fundamental rules relating to
the remedies available for breach of contract have been developed and
interpreted differently in different jurisdictions—indeed, even within some
jurisdictions there are signs of judicial schisms.
The aim of this article is to review and critically analyse these attempts
to rationalise the law of contract, with a view to producing a clearer picture
of why courts decide the way they do and of the more general underlying
principles of law which guide developments in this area. First, we will
examine the traditional legal rules in this area as they have developed
over the past couple of centuries. We will also examine some of the most
inuential academic literature that has dealt with this topic, particularly
Lon Fuller and William Perdue’s famous article, “The Reliance Interest in
Contract Damages,”3 which is one of the most cited articles in modern legal
history and has come to heavily inuence the terminology employed by
academics and judges alike. We will then examine a number of alternative
views of contractual remedies, reviewing literature which criticises Fuller
and Perdue’s treatise and advances theories which attempt to better explain
the behaviour of the courts and the principles underlying the enforcement of
contracts. As part of our examination of these alternative theories, we will
look at the treatment by the courts of the remedy of specic performance
and how it ts into the model proposed by these theories. Finally, we will
test the ability of the theories we have reviewed to explain and reconcile
judicial decisions by undertaking a case study of an area where the
behaviour of the courts has proved difcult to rationalise; namely, the
scenario wherein a party breaches a contract and thereby makes a prot
even after compensating the innocent party for the breach. Our aim will be
to discern which theory, if any, the courts appear to apply in their treatment
of these cases, and the extent to which their behaviour in these cases can be
reconciled with their behaviour in more “standard” cases.
The Traditional Model
The cardinal rule of contractual damages, what has come to be known as
the expectation rule, can be traced back to the 1848 case of Robinson v
Harman.4 In that case, Parke B famously said: “the rule of the common law
is, that where a party sustains a loss by reason of a breach of contract, he is,
so far as money can do it, to be placed in the same situation, with respect to
damages, as if the contract had been performed.5
3 Fuller and Perdue, supra note 1
5 Ibid, p.855
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