Damages

Damages (through O. Fr. damage, mod. Fr. dommage, from Lat. damnum, loss), the compensation which a person who has suffered a legal wrong is by law entitled to recover from the person responsible for the wrong. Loss caused by an act which is not a legal wrong (damnum sine injuria) is not recoverable, e.g. where a father loses a young child by the negligence of a third party.

The principle of compensation in law makes its first appearance as a substitute for personal retaliation. In primitive law something of the nature of the Anglo-Saxon wer-gild, or the ποινή of the Iliad, appears to be universal. It marks out with great minuteness the measure of the compensation appropriate to each particular case of personal injury. And there is a resemblance between the legal compensation, as it may be called, and the compensation which an injured person, seeking his own remedy, would be likely to exact for himself. In such a system the two entirely different objects of personal satisfaction and criminal punishment are not clearly separated, and in fact, criminal and civil remedies were administered in the same proceeding.

Under modern systems of law, the object of legal compensation is to place the injured person as nearly as possible in the situation in which he would have been but for the injury; and the controlling principle is that compensation should be determined so far as possible by the actual amount of the loss sustained. In England, civil proceedings for reparation and criminal proceedings for punishment are with few exceptions carefully kept separate. In Scotland, pursuit of the two kinds of remedies in the same proceeding is possible but very rare; but in France and other European states it is lawful and usual in the case of those delicts which are also punishable criminally.

In the law of England the two historical systems of common law and equity viewed compensation or reparation from two different points of view. The principle of the common law was that the amount of every injury might be estimated by pecuniary valuation. The idea was no doubt derived from the old tariffs of were, bot and wite, in which the valuations were elaborate. Until 1858 (Cairns’ Act) courts of equity had no direct jurisdiction to award damages, and their business was to place the injured party in the actual position to which he was entitled (restitutio ad integrum). This difference comes out most clearly in cases of breach of contract. The common law, with a few partial exceptions, could do no more than compel the defaulter to make good the loss of the other party, by paying him an ascertained sum of money as damages. Equity, recognizing the fact that complete satisfaction was not in all cases to be obtained by mere money payment, compelled those who broke certain classes of contracts specifically to perform them, and in the case of acts or defaults not amounting to breach of contract, on satisfactory proof that a wrong was contemplated, would interfere to prevent it by injunction; while at common law no action could be brought until the injury was accomplished, and then only pecuniary damages could be obtained. Since the Judicature Acts this distinction has ceased and the appropriate remedy may be awarded in any division of the High Court of Justice.

Under the common law damages were always assessed by a jury. Under the existing procedure in England they may be assessed (1) by a jury under the directions of a judge; (2) by a judge alone or sitting with assessors; (3) by a referee, official or special, or officer of the courts with or without the assistance of mercantile or other assessors; (4) by a consensual tribunal such as an arbitrator or valuer selected by the parties. Whatever the mode of assessment, it is subject to review if the assessors have clearly mistaken the proper measure of damage.

In the case of assessment by a jury, the verdict may be set aside because the damages are clearly excessive or palpably insufficient, or arrived at by some irregular conduct, e.g. by setting down the sum which each juryman would give and dividing the result by twelve. The appellate court, however, cannot, without the consent of the parties, itself fix the amount of damages in a case which has been submitted to a jury (Watt v. Watt, 1905, Appeal Cases 115).

The courts have gradually evolved certain rules or principles for the proper assessment of damages, although extreme difficulty is found in their application to concrete cases. A distinction is drawn between general and special Measure of damages. damages. (1) General damage is that implied by law as necessarily flowing from the breach of right, and requiring no proof. (2) Special damage is that in fact caused by the wrong. Under existing practice this form of damage cannot be recovered unless it has been specifically claimed and proved, or unless the best available particulars or details have been before trial communicated to the party against whom it is claimed.

Contracts.—“The law imposes or implies a term that upon breach of contract damages must be paid.” The general tendency of legal decisions in cases of contract is (i.) to make the amount of damages which may be awarded a matter of legal certainty, (ii.) to leave to a jury or like tribunal little more to do than find the facts, (iii.) and to revise the assessment if it is clear that it has been made in disregard of the terms of the contract or of the natural and direct consequences of the breach. The measure of damage, general speaking, is the sum necessary to place the aggrieved party in the same position so far as money will do it as if the contract had been performed. If the breach is proved, but the person complaining has suffered no real damage, he is entitled to have his legal right recognized by an award of what are called nominal damages, i.e. a sum just sufficient to carry a judgment in his favour on the infraction of his rights. Nominal damages, it will therefore be seen, are not the same as “small damages.” He is, however, also entitled to prove and recover the special or particular damage lawfully attributable to the breach. Where the contract is to pay a fixed sum of money or liquidated amount, the measure of damages for non-payment is the sum agreed to be paid and interest thereon at the rate stipulated in the contract or recognized by law.

The law is the same in Scotland and in France (Civil Code, art. 1153). In some contracts the parties themselves fix the sum to be paid as damages if the contract is not fulfilled. These damages are described as liquidated, in Scots law stipulated or estimated. It would be supposed that the sum thus fixed would be the proper damages to be awarded. And under the French Civil Code (arts. 1152, 1153, 1780) the stipulation of the parties as to the damages to be paid for breach of a stipulation other than for paying a sum of money is binding on the courts. But in England, Scotland and the United States, courts disregard the words used, and inquire into the real nature of the transaction in order to see whether the sum fixed is to be treated as ascertained damage or as a penalty to be held in terrorem over the defaulter, and in the latter case, notwithstanding the stipulation, will require proof of the actual loss. In Kemble v. Farren (1829, 6 Bingham, 141), a contract between a manager and an actor provided that for a breach of any of the stipulations therein, the sum of £1000 should be payable by the defaulter, not as a penalty, but as liquidated and ascertained damages. Yet, the court, observing that under the stipulations of the contract the sum of £1000, if it were taken to be liquidated damages, might become payable for mere non-payment of a trifling sum, held that it was not fixed as damages, but as a penalty only. The case in which an agreed sum is most usually treated as a penalty is a bond to pay a fixed sum containing a condition that it shall be void if certain acts are done or a certain smaller sum paid. Another case is where a single lump sum is fixed as the liquidated amount of damage to be paid for doing or failing to do a number of different things of very varying degrees of importance (Elphinstone v. Monkland Iron Co., 1887, 11 A.C. 333). But the courts have accepted as creating a contractual measure of damage a stipulation to finish sewerage works by a given day (Law v. Redditch Local Board, 1892, 1 Q.B. 127); or to complete torpedo boats within a limited time for a foreign government (Clydebank Engineering Co. v. Yzquierda, 1905, A.C. 6). In this last case the law lords indicated that the provision of an agreed sum was peculiarly appropriate in view of the difficulty of showing the exact damage which a state sustains by non-delivery of a warship. Where the damage is not liquidated or agreed it is assessed to upon evidence as to the actual loss naturally and directly flowing from the breach of contract.

In contracts for the sale of goods the measure of damages is fixed by statute. Where the buyer wrongfully refuses or neglects to accept and pay for, or the seller wrongfully neglects or refuses to deliver the goods, the measure is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer’s or seller’s breach of contract. Where there is an available market for the goods in question, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted or delivered, or if no such time was fixed for acceptance or delivery, then at the time of refusal to accept or deliver (Sale of Goods Act 1893, §§ 50, 51).

Where there is no market, the value is fixed by the price of the nearest available substitute. Where the sufferer, at the request of the person in default, postpones purchase or sale, any increased loss thereby caused falls on the defaulter. If the buyer, before the time fixed for delivery, has resold the goods to a sub-vendor, he cannot claim against his own vendor any damages which the sub-vendor may recover against him for breach of contract, because he ought to have gone into the market and purchased other goods. But this is subject to modification in cases falling within the rule in Hadley v. Baxendale (1854, 9 Exchequer, 341). But trouble and expense incurred by the seller of finding a new purchaser or other goods may be taken account of in assessing the damages.

Where the goods delivered are not as contracted the buyer may as a rule sue the seller for a breach of warranty, or set it up as reduction of price. Where the warranty is of quality the loss is prima facie the difference between the value of the goods delivered when delivered and the value which they would have then had if they had answered to the warranty (Sale of Goods Act 1893, § 53). In an American case, where a person had agreed with a boarding-house keeper for a year, and quitted the house within the time, it was held that the measure of damages was not the price stipulated to be paid, but only the loss caused by the breach of contract. In contracts to marry, a special class of considerations is recognized, and the jury in assessing damages will take notice of the conduct of the parties. The social position and means of the defendant may be given in evidence to show what the plaintiff has lost by the breach of contract.

On a breach of contract to replace stock lent, the measure of damages is the price of the stock on the day when it ought to have been delivered, or on the day of trial, at the plaintiff’s option.

In contracts for the sale of realty, the measure of damage for breach by the vendor is the amount of any deposit paid by the would-be purchaser and of the expenses thrown away. But the purchaser may, in a proper case, obtain specific performance, and if he has been cheated may obtain damages in an action for deceit.

Breaches of trust are in a sense distinct from breaches of contract, as they fell under the jurisdiction of courts of equity and not of the common law courts. The rule applied was to require a defaulting trustee to make good to the beneficiaries any loss flowing from a breach of trust and not to allow him to set off against this liability any gain to the trust fund resulting from a different breach of trust or from good management (Lewin on Trusts, ed. 1904, 1146).

In estimating the proper amount to be assessed as damages for a breach of contract, it is not permissible to include every loss caused by the act or default upon which the claim for damages is based. The damage to be awarded must be that fairly and naturally arising from the breach under ordinary circumstances or the special circumstances of the particular contract, or in other words, which may reasonably be supposed to have been in the contemplation of the parties at the time of making the contract. The chief authority for this rule is the case of Hadley v. Baxendale (1854, 9 Exch. 341), which has been accepted in Scotland and the United States and throughout the British empire, and often differs little, if at all, from the rule adopted in the French civil code (art. 1150). In that case damages were sought for the loss of profits caused by a steam mill being kept idle, on account of the delay of the defendants in sending a new shaft which they had contracted to make. The court held the damage to be too remote, and stated the proper rule as follows:—

“Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e. according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it. Now if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from such contract which they would reasonably contemplate would be the amount of injury which would ordinarily flow from a breach of contract under these special circumstances so known and communicated. But on the other hand, if those special circumstances were wholly unknown to the party breaking the contract, he at the most could only be supposed to have had in his mind the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such breach of contract.”1

The rule is, however, only a general guide, and does not obviate the necessity of inquiring in each case what are the natural or contemplated damages. In an action by the proprietor of a theatre, it was alleged that the defendant had written a libel on one of the plaintiff’s singers, whereby she was deterred from appearing on the stage, and the plaintiff lost his profits; such loss was held to be too remote to be the ground of an action for damages. In Smeed v. Foord (1 Ellis and Ellis, 602), the defendant contracted to deliver a threshing-machine to the plaintiff, a farmer, knowing that it was needed to thresh the wheat in the field. Damages were sought for injury done to the wheat by rain in consequence of the machine not having been delivered in time, and also for a fall in the market before the grain could be got ready. It was held that the first claim was good, as the injury might have been anticipated, but that the second was bad. When, through the negligence of a railway company in delivering bales of cotton, the plaintiffs, having no cotton to work with, were obliged to keep their workmen unemployed, it was held that the wages paid and the profits lost were too remote for damages. On the other hand, where the defendant failed to keep funds on hand to meet the drafts of the plaintiff, so that a draft was returned dishonoured, and his business in consequence was for a time suspended and injured, the plaintiff was held entitled to recover damage for such loss.

The rule that the contract furnishes the measure of the damages does not prevail in the case of unconscionable, i.e. unreasonable, absurd or impossible contracts. The old school-book juggle in geometrical progression has more than once been before the courts as the ground of an action. Thus, when a man agreed to pay for a horse a barley-corn per nail, doubling it every nail, and the amount calculated as 32 nails was 500 quarters of barley, the judge directed the jury to disregard the contract, and give as damages the value of the horse. And when a defendant had agreed for £5 to give the plaintiff two grains of rye on Monday, four on the next Monday,2 and so on doubling it every Monday, it was contended that the contract was impossible, as all the rye in the world would not suffice for it; but one of the judges said that, though foolish, it would hold in law, and the defendant ought to pay something for his folly. And when a man had promised £1000 to the plaintiff if he should find his owl, the jury were directed to mitigate the damages.

Interest is recoverable as damages at common law only upon mercantile securities, such as bills of exchange and promissory notes or where a promise to pay interest has been made in express terms or may be implied from the usage of trade or other circumstances [Mayne, Damages (7th ed.) 166]. Under the Civil Procedure Act 1833, the jury is allowed to give interest by way of damages on debts or sums payable at a certain time, or if not so payable, from the date of demand in writing, and in actions on policies of insurance, and in actions of tort arising out of conversion or seizure of goods.

In the United States, interest is in the discretion of the court, and is made to depend on the equity of the case. In both England and America compound interest, or interest on interest, appears to have been regarded with the horror that formerly attached to usury. Lord Eldon would not recognize as valid an agreement to pay compound interest. And Chancellor Kent held that compound interest could not be taken except upon a special agreement made after the simple interest became due.

In Scotland compound interest is not allowed by way of damages.

Torts.—In actions arising otherwise than from breach of contract (i.e. of tort, delict or quasi-delict), the principles applied to the assessment of damage in cases arising ex contractu are generally applicable (The Notting Hill, 1884, 9 P.D. 105); but from the nature of the case less precision in assessment is attainable. The remoteness of the damage claimed is a ground for excluding it from the assessment. In some actions of tort the damages can be calculated with exactness just as in cases of contract, e.g. in most cases of interference with rights of property or injury to property. Thus, for wrongful dispossession from a plantation (in Samoa) it was held that the measure of damage was the annual value of the produce of the lands when wrongfully seized, less the cost of management, and that the wilful character of the seizure did not justify the infliction of a penalty over and above the loss to the plaintiff (McArthur v. Cornwall, 1892, A.C. 75). Where minerals are wrongfully severed and carried away, the damage is assessed by calculating the value of the mineral as a chattel and deducting the reasonable expense of getting it. But where the interference with property, whether real or personal, is attended by circumstances of aggravation such as crime or fraud or wanton insult, it is well established that additional damages may be awarded which in effect are penal or vindictive. In actions for injuries to the person or to reputation, it is difficult to make the damages a matter for exact calculation, and it has been found impossible or inexpedient by the courts to prevent juries from awarding amounts which operate as a punishment of the delinquent rather than as a true assessment of the reparation due to the sufferer. And while a bad motive (malice) is seldom enough to give a cause of action, proof of its existence is a potent inducement to a jury to swell the assessment of damages, as evidence of bad character may induce them to reduce the damages to a derisory amount. In the case of injuries to the person caused by negligence, the tribunal considers, as part of the general damage, the actual pain and suffering, including nervous shock (but not wounded feelings) and the permanent or temporary character of the injury, and as special damage the loss of time and employment during recovery and the cost of cure. It is difficult by any arithmetical calculation to value pain and suffering; nor is it easy to value the effect of a permanent injury; and in the Workmen’s Compensation Act and Employers’ Liability Act, an attempt has been made in the case of workmen to assess by reference to the earnings of the injured person.

In the case of such wrongs as assault, arrest or prosecution, the motives of the defendant naturally affect the amount of general damage awarded, even when not essential elements in the case, and the damages are “at large.” Any other rule would enable a man to distribute blows as he can utter curses at a statutory tariff of so much a curse, according to his rank. This position was strongly asserted in the cases arising out of the celebrated “General Warrants” (1763) in the time of Lord Camden, who is reported in one case to have said, “damages are designed not only as a satisfaction to the injured person, but as a punishment to the guilty, and as a proof of the detestation in which the wrongful act is held by the jury.” In another case he mentioned the importance of the question at issue, the attempt to exercise arbitrary power, as a reason why the jury might give exemplary damages. Another judge, in another case, said “I remember a case when the jury gave £500 damages for knocking a man’s hat off; and the court refused a new trial.” And he urged that exemplary damages for personal insult would tend to prevent the practice of duelling.

The right to give exemplary or punitive or (as they are sometimes called) vindictive damages is fully recognized both in England and in the United States, and especially in the following cases. (1) Against the co-respondent in a divorce suit. This right is the same as that recognized at common law in the abolished action of criminal conversation, but the damages awarded may by the court be applied for the maintenance and education of the children of the marriage or the maintenance of the offending wife. (2) In actions of trespass to land where the conduct of the defendant has been outrageous. (3) In actions of defamation spoken or written, attended by circumstances of aggravation, and the analogous action of malicious prosecution. (4) In the anomalous actions of seduction and breach of promise of marriage.

In actions for wrongs, as in those ex contractu, the damages may be general or special. In a few cases of tort, the action fails wholly if special damage is not proved, e.g. slander by imputing to a man vicious, unchaste or immoral conduct, slander of title to land or goods or nuisance.

In theory, English law does not recognize “moral or intellectual” damage, such as was claimed by the South African Republic after the Jameson Raid. The law of Scotland allows a solatium for wounded feelings, as does French law under the name of dommage moral, éprouvé par la partie lésée dans sa liberté, sa sûreté, son honneur, sa considération, ses affections légitimes ou dans la jouissance de son patrimoine. Under this head compensation is awarded to widow, child or sister, for the loss of husband, parent or brother, in addition to the actual pecuniary loss (Dalloz, Nouveau Code civil, art. 1382). Claims of damage for negligence are defeated by proof of what is known as contributory negligence (faute commune). In other claims of tort, as already stated, the conduct of the claimant may materially reduce the amount of his damages.

In cases of damages to ships or cargo by collision at sea, the rule of the old court of admiralty (derived from the civil law and preserved by the Judicature Acts) is that when both or all vessels are to blame, the whole amount of the loss is divided between them. The rule appears not to apply to cases where death or personal injury results from the collision (“Vera Cruz,” 1884, 14 A.C. 59. “Bernina,” 1888, 13 A.C. 1).

Costs.—The costs of a legal proceeding are no longer treated as damages to be assessed by the jury, nor do they depend on any act of the jury. The right to receive them depends on the court, and they are taxed or assessed by its officers (see Costs). In a few cases where costs cannot be given, e.g. on compulsory acquisition of land in London, the assessing tribunal is invited to add to the compensation price the owner’s expense in the compensation proceedings.

Death.—In English law a right to recover damages for a tort as a general rule was lost on the death of the sufferer or of the delinquent. The cause of action was considered not to survive. This rule differs from that of Scots law (under which the claim for damages arises at the moment of injury and is not affected by the death of either party). The English rule has been criticized as barbarous, and has been considerably broken in upon by legislation, in cases of taking the goods of another (4 Edw. III., c. 7, 1330), and injuries to real or personal property (3 & 4 Will. IV., c. 42, 1833), but continues in force as to such matters as defamation, malicious prosecution and trespass to the person. By the Fatal Accidents Act 1846 (commonly called Lord Campbell’s Act), it is enacted that wherever a wrongful act would have entitled the injured person to recover damages (if death had not ensued), the person who in such case would have been liable “shall be liable to an action for damages for the pecuniary loss which the death has caused to certain persons, and although the death shall have been caused under such circumstances as amount in law to felony.” The only persons by whom or for whose benefit such an action may be brought are the husband, wife, parent and child (including grandchild and stepchild, but not illegitimate child) of the deceased. The right of action and the measure of damages are statutory and distinct from the right which the deceased had till he died. It was held in Osborne v. Gillett, 1873, L.R. 8 Ex. 88, and has since been approved (Clark v. London General Omnibus Co., 1906, 2 K.B. 648), that no person can recover damages for the death of another wrongfully killed by the act of a third person, unless he claims through or represents the person killed, and unless that person in case of an injury short of death would have had a good claim to recover damages.

In Scotland the law of compensation for breach of contract is substantially the same as in England. In cases of delict or quasi-delict, the measure of reparation is a fair and reasonable compensation for the advantage which the sufferer would, but for the wrong, have enjoyed and has lost as a natural and proximate result of the wrong, coupled with a solatium for wounded feelings. The claim for reparation vests as a debt when it arises and survives to the representatives of the sufferer, and against the representatives of the delinquent. In other words, the maxim actio personalis moritur cum persona does not apply in Scots law; and even in cases of murder there has always been recognized a right to “assythement.”

See also Mayne on Damages, 7th ed.; Sedgwick on Damage; Bell, Principles of Law of Scotland.

(W. F. C.)

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1 In the Indian Contracts Code (Act xii. of 1872), the rule is thus summarized:—

“When a contract has been broken, the party who suffers by such breach is entitled to receive from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew when they made the contract to be likely to result from the breach of it. Such compensation is not to be given for any remote or indirect loss or damage sustained by reason of the breach.... In estimating the loss or damage arising from a breach of contract, the means of remedying the inconvenience caused by the non-performance must be taken into account” (§ 73).

2 Quolibet alio die lunae, which was translated by some every Monday, and by others every other Monday. The amount in the latter case would have been 125 quarters, in the former 524,288,000 quarters.

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