BetterLawNotes-5 (2)

CONTRACT LAW

C may be able to claim damages for loss of a chance: in other words, where under the contract D had promised to give C an opportunity of acquiring a valuable benefit, D may be able to claim compensation for the loss of that opportunity, as distinct from the loss of the benefit itself.

A well-known example is Chaplin v Hicks.

Chaplin v Hicks [1911] 2 KB 786 (CA)

C entered a beauty competition organized by D but due to D’s breach of contract C did not participate in the final. C was one of 50 finalists of whom 12 were selected as winners. The court held that C could recover damages representing the loss of a chance of winning.

Allied Maples Group Ltd v Simmons & Simmons [1995] 4 All ER 907 (CA)

C engaged D to act on its behalf in a corporate acquisition. D negligently advised C about C’s potential liabilities arising from certain property included in the deal. C claimed that, properly advised, it would have negotiated a more favourable deal with T. The Court of Appeal held that C could recover substantial damages if it could show that, properly advised, it would have had a substantial chance of negotiating a better deal, the damages being discounted to reflect the chance.

One feature of loss of chance damages is that such damages will not place C in the same position as if the contract been performed. So, in Chaplin v Hicks, C would either have won a prize or not won a prize. She would not have ended up with the sum of money awarded to her as damages.

It should also be borne in mind that not every breach of contract will give rise to a claim for loss of chance damages.

McRae v Commonwealth Disposals Commission (1950) 84 CLR 377 (HCA)

D breached its contractual promise that a wrecked oil tanker containing oil was lying on a named reef. In fact, there was no reef and no tanker. C claimed £300,000as damages, being the estimated value of the vessel and its cargo of oil. The High Court of Australia gave short shrift to the claim for loss of chance damages, dismissing it as ‘manifestly absurd’.

‘The Commission simply did not contract to deliver a tanker of any particular size or of any particular value or in any particular condition, nor did it contract to deliver any oil.’ (Dixon and Fullager JJ).

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