When you’re involved in a legal dispute, especially in cases like breach of contract or negligence, one of the key concepts you might encounter is the “remoteness of damages.” While it sounds technical, understanding this principle is crucial if you want to grasp how courts decide the amount of compensation (or “damages”) you’re entitled to claim.
What is remoteness of damages?
In legal terms, “damages” refer to the compensation that a court may order one party to pay to another if they’ve suffered a loss. However, not all losses can be compensated. The principle of remoteness of damages helps to determine which losses are too far removed from the wrongful act to be recoverable. Essentially, it places a limit on the amount of compensation you can claim.
The law recognises that it would be unfair to make someone pay for all the possible consequences of their actions, especially those that are unexpected or unforeseeable. For instance, if someone breaches a contract or causes an accident, they shouldn’t have to compensate for every conceivable loss that the other party might suffer – only for those that are reasonably foreseeable.
How does the Court decide what’s too remote?
The court generally use two main tests to decide whether damages are too remote:
Foreseeability test:
This is the most common test in negligence cases. The court will ask: was the damage a foreseeable result of the defendant’s actions?
For example, if a driver negligently crashes into your car, it’s foreseeable that you might suffer damage to your vehicle and perhaps some injuries. However, if this accident somehow causes you to lose out on a major business deal that you never mentioned, the court might decide that this loss is too remote.
Contemplation of the parties test:
Used mainly in contract law, this test considers what both parties could have reasonably contemplated at the time the contract was made.
If you enter a contract to deliver goods, and a delay occurs, it’s foreseeable that the buyer might claim damages for that delay. But if the delay leads to the buyer losing a separate, unrelated contract, the court may find this loss too remote unless it was specifically discussed during the contract negotiations.
Examples
- In a negligence claim, suppose a company negligently installs a faulty pipe in a building, causing flooding. The cost of repairs and temporary relocation of residents is foreseeable and can be claimed as damages. However, if a resident misses an opportunity to win a business contract due to the flood, claiming compensation for this lost opportunity might be too remote.
- In a breach of contract claim, if a supplier fails to deliver goods on time, the buyer can claim damages for the cost of buying replacement goods. But if the buyer also claims compensation for a fine imposed by another third party due to the delay, this might be considered too remote unless it was specifically anticipated by both parties.
The principle of remoteness of damages is a safeguard to ensure fairness in legal claims. It ensures that compensation is reasonable and reflects only those losses that are directly linked to the wrongful act or breach of contract. If you’re involved in a legal dispute, understanding this principle can help you better assess the strength of your claim and the likely outcomes in court.
If you think your situation involves a potential claim for damages and you require tailored advice, please get in touch with our Dispute Resolution department at info@bhwsolicitors.com or alternatively on 0116 289 7000.