How may expectation damages be calculated?

Question

Bob wins an auction for an uncommon item for £100. The seller fails to take payment or deliver the goods. There weren't that many other equivalent items available online at the moment.

Bob's purchase was used, but very lightly and in nearly new condition. All of the other items currently available online are either of a different model/size, or come without certain components included in the price, or are in significantly more dilapidated condition, or all of the above, and are in any event selling for at least £250 and up.

New units of this product retail for £450.

Expectation damages are supposed to put a claimant in the same position they would be in as if the contract had been performed. But if this is not possible in the current market climate, then is it fair to claim for a new unit at the price sold at by the manufacturer? This puts Bob in a better position then he would have had if the contract had been completed.

Suppose the defendant defends the claim and instead of paying Bob the price of a new one proposes to the court to simply fulfill the original contract by selling Bob their used one at the original price and pay Bob's legal costs.

Is this still open to the seller?

Finally, is the original contract price of £100 that Bob would have paid for the used unit to be subtracted from the calculation of expectation damages?

Answer 1

canada

As a starting point, courts are likely to view the market value of the contract (e.g. £100) as the floor for expectation damages, but it is open to Bob to prove higher expectation damages by demonstrating the cost of obtaining a sufficiently similar alternative, while reasonably attempting to mitigate damages.

See Chaplin v. Hicks [1911] 2 K.B. 786, quoted with approval in 2002 BCCA 2017:

In the case of a breach of a contract for the delivery of goods the damages are usually supplied by the fact of there being a market in which similar goods can be immediately bought, and the difference between the contract price and the price given for the substituted goods in the open market is the measure of damages; that rule has been always recognized.

Expectation damages in such a circumstance is a question of fact, left to the trier of fact (judge or jury) and is assessed based on what they view a reasonable person to have done. If obtaining a device with slightly different properties allowed Bob to get a substitute for £250 that might be considered reasonable mitigation when considered alongside the alternative of buying a completely new identical item for £450.

Bob doesn't actually have to take the mitigating steps in buying an alternative. This can all be argued in the hypothetical (i.e. what would put Bob in the position expected by performance of the contract). But damages will be limited to the costs Bob would have incurred, while reasonably mitigating the costs, in placing himself in the same position had the contract been performed.