Damages as a remedy 

Damages are money awarded for a legally recognised loss. Their usual purpose is compensation: to put the claimant, so far as money can, in the position the relevant wrong did not occur. The important qualification is “relevant”. The position to compare depends on the cause of action, not on the label “damages”.

In contract, the usual comparison is with the position the claimant would have occupied if the promise had been performed. In tort, it is usually the position the claimant would have occupied if the wrong had not occurred. A claimant who has more than one cause of action cannot recover the same loss twice, but should identify each measure before assuming they produce the same result.

Choose the measure before calculating money

Start by identifying the legal interest protected and the performance or position that was lost. For breach of a promise about property, the proper measure may be the reasonable cost of restoring the promised position rather than the drop in market value. Tabcorp Holdings Ltd v Bowen Investments Pty Ltd illustrates that the measure follows the value of the promised performance; the Court upheld rectification costs for a breach of a covenant concerning a commercial foyer.¹

The question is not simply “what sum feels fair?” It is whether the proposed sum compensates the particular legal loss without overcompensating the claimant. A different remedy, such as an injunction or restitution, may respond to a different interest and must be analysed separately.

The same facts can support more than one cause of action, but the claimant is not entitled to be compensated twice for the same loss. A careful answer can therefore discuss both contract and tort measures while making clear which counterfactual each measures. It should also distinguish a claim for a debt, where a fixed sum is due under a contract, from a claim for damages for loss caused by breach. The labels may lead to different questions about proof, mitigation and interest.

Test the limits on recovery

Four questions commonly organise a damages analysis.

1. Causation: Was the claimed loss caused by the breach or wrong? Identify the factual and legal connection; a loss that would have occurred anyway is not recoverable from this defendant.
2. Remoteness or scope: Is this kind of loss within the responsibility imposed by the rule or promise? Contract and tort express this question differently, so do not transplant a formula without identifying the cause of action.
3. Mitigation: Has the claimant acted reasonably to avoid avoidable loss after the wrong? This does not require unreasonable risk or expense. Reasonable mitigation costs may themselves be recoverable.
4. Proof and valuation: Has the claimant proved the loss and a rational basis for the amount? Difficulty in valuing loss does not necessarily defeat a claim, but speculation does.

These questions are cumulative. A loss may be caused by a breach yet still be too remote, avoidable, or insufficiently proved.

It is useful to keep past and future loss separate. Past loss is usually supported by records of what has already happened. Future loss requires a reasoned estimate of what probably would have occurred and of contingencies that may affect it. Neither category invites an arbitrary figure: the evidence must connect the claimed head of loss to the chosen measure.

Do not overlook statutory rules

Damages are not governed only by common law. Civil-liability legislation, consumer legislation, employment statutes and procedural rules can change available heads of loss, caps, interest, limitation periods, contributory negligence and the power to award another remedy. A problem answer should name the relevant statute and jurisdiction before asserting a cap or threshold. The general framework here is therefore a starting point, not a substitute for the governing regime.

Keep the remedy proportionate to the loss

Compensation does not normally punish the defendant or reward the claimant for a technical wrong. A claimant may obtain nominal damages where a right has been infringed but no compensable loss is proved. Conversely, a large award can be appropriate where a substantial loss is proved, even though precise calculation is difficult. The task is to value the protected interest consistently with the cause of action and the evidence.

Some awards that are loosely called “damages” have a different function. Exemplary damages, where available, are punitive rather than compensatory. Aggravated damages are compensatory but reflect injury caused by the manner of the wrong. Do not assume either is available in an ordinary breach-of-contract claim, and check statutory restrictions in negligence and personal-injury claims.

Applying this in a problem question

1. Identify the cause of action and the legal interest it protects. Do not start with a dollar figure.
2. State the counterfactual position: performance of the contract, or absence of the tort or other wrong.
3. Select the measure that best values the lost performance or position, explaining why another measure is not appropriate.
4. Take each head of loss through causation, remoteness or scope, mitigation and proof.
5. Apply any jurisdiction-specific statute, then check that the proposed award does not duplicate another remedy or benefit.

Where the authority sits

General compensatory principles are developed in common law and equity. The applicable statute may control the decisive detail: civil-liability legislation for personal injury, consumer legislation for statutory claims, or a procedural statute for interest and costs. For a contract-focused application, continue with Remedies; for tort-specific heads and statutory variation, see Damages.