CONTRACT LAW — Damages — Governing Principle of Damages
Principle Statement
The governing purpose of damages is to put the party whose rights have been violated in the same position, so far as money can do, as if the rights had been observed. The aggrieved party is only entitled to recover loss that was at the time of the contract reasonably foreseeable as liable to result from the breach.
Ratio Decidendi (Source)
Per Musdapher, JSC, in G. Chitex Industries Ltd v. Oceanic Bank Int'l (Nig.) Ltd (2005) NLC-1922000(SC) at p. 10; Paras B–C. (Citing Omonuwa v. Wahabi (1976) 4 SC 37 at 41.)
"It is settled that the governing purposes of damages is to put the party whose rights have been violated in the same position, so far as money can do, as if the rights have been observed … In cases of breach of contract the aggrieved party is only entitled to recover such part of the loss actually resulting as was at the time of the contract reasonably foreseeable as liable to result from the breach. What was at that time reasonably so foreseeable depends on the knowledge then possessed by the parties or, at all events, by the party who later commits breach …"
Explanation / Scope
Contract damages aim to restore the injured party to the position had the contract been performed. Recovery is limited to reasonably foreseeable losses at contract formation. The principle applies to contract law and damages. The rule embodies the principle from Hadley v. Baxendale. The claimant cannot recover remote or unforeseeable losses. The test is foreseeability based on knowledge available at contract formation.
