A Critical Consideration of Substitutive Awards in Contract Law
| Published date | 01 November 2018 |
| DOI | http://doi.org/10.1111/1468-2230.12382 |
| Author | Katy Barnett |
| Date | 01 November 2018 |
bs_bs_banner
REVIEW ARTICLE
A Critical Consideration of Substitutive Awards
in Contract Law
Katy Barnett∗
David Winterton,Money Awards in Contract Law, Oxford: Hart Publishing,
2015, xxxii +335 pp, hb £55.00.
Substitutive accounts of contract damages have burgeoned over the last twenty
years. Although these accounts differ in their detail, in broad terms they con-
ceptualise at least some forms of damages for breach of contract as providing
a pecuniary substitute either for the claimant’s ‘performance interest’,1or a
purported right to performance.2Such damages are usually distinguished from
damages which compensate for pecuniary losses flowing from the breach.
David Winterton’s book, Money Awards in Contract Law is a thought-
provoking and lucid addition to the literature postulating that there is a substi-
tutive nature to damages awarded for breach of contract. It represents the best
‘hard substitutivist’ account thus far because, unlike other accounts, his analy-
sis accommodates both contract damages measured according to difference in
value and cost-of-cure under the substitutionary umbrella. The other significant
observation made by Winterton is that any entitlement to substitutive awards
must be subject to a condition that the party seeking those damages performs
her part of the bargain. If she cannot perform, then she will not be entitled to a
substitutive measure. This makes sense, particularly given that there is already a
requirement that the claimant be ready and willing to perform in order to obtain
∗Associate Professor, Melbourne Law School, University of Melbourne. Based on a commentary on
Dr Winterton’spaper, ‘TwoConceptions of the Performance Interest’ at the Legal Theory Workshop
at Melbourne Law School on 1 September 2017. Thank you to Sol`
ene Rowan, Jeannie Paterson
and the anonymous reviewer for their helpful comments. All errors are my own.
1 See, for example, B. Coote, ‘Contract Damages, Ruxley, and the Performance Interest’ (1997)
56 Cambridge Law Journal 537; E. McKendrick, ‘The Common Law at Work: the Saga of
Alfred McAlpine Construction Ltd vPanatown Ltd’ (2003) 3 Oxford University Commonwealth Law
Journal 145; C. Webb, ‘Performance and Compensation: An Analysis of Contract Damages and
Contractual Obligation’ (2006) 26 Oxford Journal of Legal Studies 41; D. Pearce and R. Halson,
‘Damages for Breach of Contract: Compensation, Restitution and Vindication’ (2008) 28 Oxford
Journal of Legal Studies 73; S. Smith, ‘Substitutionary Damages’ in C. E. F. Rickett (ed), Justifying
Private Law Remedies (Oxford: Hart Publishing, 2008) 93; J. Edelman, ‘Money Awards of the
Cost of Performance’ (2010) 4 Journal of Equity 122.
2 R. Stevens, ‘Damages and the Right to Performance: A Golden Victory or Not?’ in J. Neyers,
R. Bronagh and S. Pitel (eds), Exploring Contract Law (Oxford: Hart Publishing, 2009); D
Winterton, Money Awards in Contract Law (Oxford: Hart Publishing, 2015).
C2018 The Author. The Modern Law Review C2018 The Modern Law Review Limited. (2018)81(6) MLR 1064–1082
Published by JohnWiley & Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 101 Station Landing, Medford, MA 02155, USA
Katy Barnett
an award of specific performance.3As a matter of fairness, it follows that if an
award substitutes for specific performance, considerations of readiness and will-
ingness should operate. (However, other considerations which may preclude an
award of specific performance, such as continuous supervision4and compulsion
of personal services,5will not be relevant to a substitutive money award.)
In Part I of the book, Winterton outlines the inadequacy of the orthodox
understanding of contractual money awards. He notes that the starting point
for understanding contract damages is the statement by Parke B in Robinson v
Harman:
The rule of the common law is, that where the 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.6
He argues that there is indeterminacy about two aspects of this statement. First,
the meaning of ‘loss’ is indeterminate. Typically, under orthodoxaccounts, ‘loss’
has been taken to mean simply the making good of a financial loss.7Secondly,
it is unclear what it means to put someone ‘in the same situation . . . as if the
contract had been performed.’ Winterton’s thesis is that damages for breach
of contract should be understood to encompass substitutes for performance,
and not simply making good the financial losses which occur as a result of
breach. Winterton argues that there are already contractual awards that do
not compensate for factual loss, including nominal damages and gain-based
damages. But even in the context of loss-based awards, he argues that courts
make substitutive awards in some circumstances: in the cases where awards are
made in favour of promisees even though a third party obtains the benefit
of performance; in circumstances where awards are made by reference to a
hypothetical release bargain; awards where the damages for breach exceed the
promisee’s factual loss; and awards where the damages for breach exceed the
promisee’s factual loss because of post-breach benefits. Winterton argues that
these cases, and the difficulty of defining such terms as ‘loss’ or ‘damages’ in
this context, illustrate that a new understanding of contract damages is required
to understand why courts make these awards.
In Part II of the book, Winterton poses his new account of contractual
money awards, in which he seeks to distinguish between two different kinds
of awards. On the one hand, there are awards which seek to compensate for
factual losses flowing from the breach, but on the other hand, Winterton argues,
there are substitutive awards which seek to directly enforce the claimant’s right
to performance. It follows, of course, that in Winterton’s view, English law
recognises a right to performance, notwithstanding that common law courts
prefer to award damages rather than specific performance. In fact, the presence
3Green vSommerville (1979) 141 CLR 594.
4 See, for example, Cooperative Insurance Society Ltd vArgyll Stores (Holdings) Ltd [1998] AC 1,
13–14.
5 See, for example, Giles & Co Ltd vMorris [1972] 1 WLR 307, 318 per Megarry VC; Tito v
Waddell(No 2) [1977] Ch 106, 321–323 per Megar ry VC; Posner vScott-Lewis [1997] Ch 25, 36.
6Robinson vHarman (1848) 1 Ex 850, 855; 154 ER 363, 365.
7 See, for example, Ford vWhite & Co [1964] 1 WLR 885.
C2018 The Author. The Modern Law Review C2018 The Modern Law Review Limited.
(2018) 81(6) MLR 1064–1082 1065
To continue reading
Request your trial