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Business Law

Incivil law, while every person has rights, those said rights come withresponsibilities to respect other people’s rights. This basicprinciple is the foundation of all laws that regulate privaterelationships among individuals within a particular jurisdiction.

Inthe case at bar, the facts provided that Huang entered into aconstruction agreement with Bill. Huang informed Bill that he intendsto have the project finished by November 1st.Huang did not communicate to Bill the reason why he intended for theproject to be finished on the agreed date. Nevertheless, Billundertook the obligation to finish the contract on the date specifiedby Huang. However, Bill was not able to finish the project on timewhich resulted to the loss of a contract which would amount to aprofit of $150,000. Based on the facts mentioned, two significantevents classify the case at bar as one within the ambit of civil law:the creation and perfection of the contract between the parties andthe subsequent violation of the said contract by Bill. These twoevents give rise to a claim on damages by the party whose right asnot honored by the other.


Damagesare rewarded as a way of compensation to people whose rights hadinjured by another person. In a definition provided by Black’s LawDictionary, damages is a “pecuniary compensation or indemnity,which may be recovered in the courts by any person who has sufferedloss, detriment, or injury, whether to his person, property, orrights, through the unlawful act or omission of another.”1The definition cited above works well on almost all jurisdictionseven if particular private laws usually vary.

Whilethe concept of damages is uniform in almost all jurisdictions, majordifferences lie in the classifications of kinds of damages that maybe awarded and claimed by parties. However, the generalclassification of damages may be divided into two: compensatory andpunitive. Compensatory damages are “intended to place the aggrievedparty back in the position he would have occupied has theinfringement not occurred.”2From this definition, it can be easily understood that throughcompensatory damages, the law tries to restore to the parties whatwould have been theirs if the violation of the contract have notoccurred. On the other hand, punitive damages are intended torecompense an offended party for harms resulting from the acts oromissions of another which may include wounded dignity, injuredfeelings and mental suffering. It can also be awarded to an offendedparty to punish a defendant due to wrongful conduct.3Punitive damages are forms of punishments given to an erring person.Unlike compensatory damages which only serves as a measure to enforcethe provisions of the contract entered upon by the parties, punitivedamages extends beyond what is actually due to the offended party.Because of the difference on the basis of the claims, the amountwhich may be claimed also varies significantly. While compensatorydamages is measured easily because only the terms of the contractshould be used as a basis while in punitive damages, there is no suchclear basis. One basis that the courts have adopted in measuring theextent of punitive damages is the reasonableness of the relationshipbetween the actual damages and the award of punitive damages. 4In a certain case, the US Supreme Court illustrated the saidprinciple on commensurability between actual and punitive damages bydeclaring that an award of punitive damages amounting to four timesthe value of actual damages is already “close to the line” ofbeing regarded as excessive. However, the said amount was stillregarded as constitutional.5Some of the considerations in determining the amount recoverable aspunitive damages are the character or degree of the misconductcommitted by the defendant, the nature as well as the extent of theinjury sustained by the offended party and the defendant’s wealth.6Another difference between punitive and compensatory damages is thatpunitive damages may not be recovered as a matter of right whilecompensatory damages may be.7

Damagesmay be recovered in both criminal and civil cases as both casesinvolve a violation of rights. In the present case involving breachof contract, English common law provides that the aggrieved partyshall be entitled to a claim for compensatory damages as a matter ofright. This is an established principle under English common law thatbegan in 1854.8However as to punitive damages, although the said type of damages maybe recovered in other jurisdictions such as the United States, thesame may only be awarded “in actions in tort, and even then only inthree categories of cases. Punitive damages may not be awarded in anaction for breach of contract”9under the English law. Hence, in the present case, if English lawwill be applied, then only compensatory damages may be recovered byHuang from Bill as a result of the breach of their agreement.Punitive damages will not be applicable because English law does notprovide for the said kind of award.

Basedon the discussion presented earlier, it was clear that the agreementon the date of the completion of the project was an essential elementof the contract entered into between Huang and Bill. As such, theeventual failure of Bill to complete the project on the datestipulated was clearly a violation of the agreement entered uponbetween the parties. As a result, Huang suffered monetary lossesbecause of the lost business opportunities that would have incurredhim profit if the deadline had been met. Under the law, the breach inthe contract entitles Huang to recover damages from Bill. However,the damages Huang may recover under the English law is limited onlyto compensatory damages, meaning, the amount of damages equivalent tothe actual loss sustained by him as a result of the violation of thecontract.

Remotenessof Damage

Asthe entitlement of damages had already been established, the nextissue now revolves around the items that should be considered incoming up with the total amount of actual damages sustained by Huang.Naturally, not all types of damages sustained will be compensated aspart of the compensatory damages. The law instead sets some limits ondamages that should not form part of a plaintiff’s claim, based onthe relationship of the damage with the breach committed by thedefendant. This principle is clearly explained in the followingparagraph:

Even where causation is established, thedefendant will not necessarily be liable for all of the damageresulting from the breach. The question to be asked in determiningthe extent of liability is whether the damage is of such a kind asthe reasonable person should have foreseen, but this does not meanthat the defendant should have foreseen precisely the sequence ornature of the events.10

Asexplained earlier, the amount of damages claimed must arise as anatural consequence of the breach. For the purpose of determining thesaid relationship, the remoteness of damage test was formulated. Thistest was set forth in the landmark case of Hadley vs. Baxendale.11This case involves a certain mill shaft that needed repair. Thecontract agreed upon was breached by the carriers due to delay in thereturn of the mill shaft. The said shaft was the only one the millhad so all the time it was undelivered, the mill remained closed,thus business operations were halted and no profit were incurred bythe mill. This was extended because of the delay in the delivery ofthe shaft. On the issue of whether all losses incurred by the millshould be imposed, the judge ruled that a defendant’s liability asa result of his breach should be either “such as may fairly andreasonably be expected to arise naturally, that is, according to theusual course of things from such breach of contract, or such as mayreasonably be supposed to have been in contemplation of both partiesat the time they made the contract, as the probable result of it.”


Themeasure of liability for the purpose of assessing the extent ofdamages recoverable is likewise measured by the principle offoreseeability laid down in the same case of Hadley vs. Baxendale12where the court ruled that the defendant’s liability is based onlyon the loss he foresaw or the loss which ought to be foreseen by areasonable person placed in his stead at the time when the contractwas made in relation to facts which he ought to know. However, aperson may not properly claim damages based on exceptionallyprofitable contracts such as that illustrated in the case of VictoriaLaundry (Windsor) Ltd. Vs. Newman Industries, Ltd.13In the said case, the plaintiff was engaged in a laundry business whopurchased a boiler with the defendant. The defendant incurredsignificant delay in delivering the equipment which resulted to alost contract which would have profited the plaintiff considerably.The plaintiff asked for the inclusion of the supposed profit from thefrustrated contract as part of the damages. However, the court ruledthat actual damages should not be taken literally to include evenextraordinarily profitable contracts but should only be limited toordinary profit recoverable should the contract had been faithfullycomplied with.

In the case at bar, it may be argued that Billought to have known that Huang has a pending business contract whichshould be perfected on November 1stin order for him to be liable for any damages. However, in applyingthe foreseeability principle, Bill did not need to know why November1stwas chosen by Huang as the delivery date. What mattered was heundertook the obligation without any reservation. Hence, he shall beliable for the loss, but limited only to the amount of lossforeseeable by a reasonable person in his place.

TheMeasure of Damage

Underthe English law, damages may be limited as well by mitigation.Mitigation is defined as “the reduction in the loss or injuryresulting from a tort or breach of contract. The point here is thatthe injured party is under a duty to take all reasonable steps tomitigate loss when claiming damages, and will not be able to claimdamages for losses that could have been avoided by taking reasonablesteps.”14In the case at bar, while non-communication of the pending contractto be executed immediately after November 1stby Huang does not totally exempt Bill from liability, the principleof mitigation may be applicable because if Bill was informed of thepending important contract that will require completion of theproject on November 1st,he might have exerted more effort in meeting the said deadline.


Inthis case involving breach of contract, the assignment ofcompensatory damages recoverable by Huang is limited by three legalprinciples namely, the remoteness of damage, foreseeability andmitigation. While Bill is undoubtedly liable for the economic orbusiness injuries sustained by Huang, not all the possible profitscollectible by Huang should the contract had been timely compliedwith should be included for purposes of computing the total damagesto be claimed. The amount should not include those that are remote,cannot be foreseen or those that may be avoided had Huang informedBill of the real reason why he intended for the project to befinished on November 1st.


Bayliss,Geoffrey, et al. Punitive damages as a contentious issue ofIntellectual Property Rights. (April 2014) AssociationInternationale pour la Protection de la Propriété Intellectuelle&lthttp://www.aippi.org.uk/docs/q186_uk.pdf&gt.

Black`s Law Dict.(4th ed. 1951) p. 466, col. 2.

BMW, Inc. vGore&nbsp(1996) 517 US 559,134 L Ed 2d 809, 829, 116 S Ct 1589

Coats vConstruction &amp Gen. Laborers Local No. 185&nbsp(1971)15 CA3d908, 916, 93 CR 639

Hadley vs.Baxendale (1854) EWHC J70

Haigh, Rupert,Legal English (Routledge, 1st edition, 2009).

Huckle vMoney&nbsp(KB 1763) 95 Eng Rep 768

McAllister vSouth Coast Air Quality Management Dist.&nbsp(1986)183 CA3d 653,659, 228 CR 351

Pacific Mut.Life Ins. Co. v Haslip&nbsp(1991) 499 US 1, 22, 113 L Ed 2d 1,22, 111 S Ct 1032

Redfern, A. andM. Hunter, Law and Practice of International CommercialArbitration (Sweet and Maxwell Limited, First Edition, 2004).

Schaffer,Richard, Filiberto Agusti, Lucien Dhooge, Beverley Earle,International and Its Environment (South-WesternCengage Learning, Eighth Edition, 2009).

Slapper, Gary andDavid Kelley, The English Legal System: 2011-2012 (Routledge,12th Edition, 2011).

VictoriaLaundry (Windsor) Ltd. Vs. Newman Industries, Ltd. (1949) 2 K.B.528, C. A.

1 Black`s Law Dict. (4th ed. 1951) p. 466, col. 2.

2 Bayliss, Geoffrey, et al. Punitive damages as a contentious issue of Intellectual Property Rights. (April 2014) Association Internationale pour la Protection de la Propriété Intellectuelle &lthttp://www.aippi.org.uk/docs/q186_uk.pdf&gt.

3 Huckle v Money&nbsp(KB 1763) 95 Eng Rep 768

4 BMW, Inc. v Gore&nbsp(1996) 517 US 559,134 L Ed 2d 809, 829, 116 S Ct 1589

5 Pacific Mut. Life Ins. Co. v Haslip&nbsp(1991) 499 US 1, 22, 113 L Ed 2d 1, 22, 111 S Ct 1032

6 Coats v Construction &amp Gen. Laborers Local No. 185&nbsp(1971)15 CA3d 908, 916, 93 CR 639

7 McAllister v South Coast Air Quality Management Dist.&nbsp(1986)183 CA3d 653, 659, 228 CR 351

8 Richard Schaffer, Filiberto Agusti, Lucien Dhooge, Beverley Earle, International and Its Environment (South-Western Cengage Learning, Eighth Edition, 2009).

9 A. Redfern and M. Hunter, Law and Practice of International Commercial Arbitration (Sweet and Maxwell Limited, First Edition, 2004).

10 Gary Slapper and David Kelley, The English Legal System: 2011-2012 (Routledge, 12th Edition, 2011).

11 Hadley vs. Baxendale (1854) EWHC J70

12 Ibid.

13 Victoria Laundry (Windsor) Ltd. Vs. Newman Industries, Ltd. (1949) 2 K.B. 528, C. A.

14 Rupert Haigh, Legal English (Routledge, 1st edition, 2009).