Contractual losses and the relevant counterfactual (Medsted v Canaccord)

Table of contents

• What are the practical implications of this case?
• What was the background?
• What did the court decide?
• Case details

Article summary

Dispute Resolution analysis: Damages in contract are intended to place the claimant in the same position as they would have been in if the contract had been performed. But how does the court differentiate between the ‘imaginary world’ in which ‘the contract is performed’ and the events which in fact took place? In this judgment, the court considered the scope of the appropriate counterfactual. The court held that contractual damages are not intended to put the claimant in the position they would have been in but for the breach of contract. Rather, they operate as a substitute for performance. The relevant counterfactual did not, in this case, reflect the likelihood that but for the breach, the level of trading under the contract would have been reduced. No discount on damages was therefore applied. Written by Harriet Campbell, professional support lawyer at Stephenson Harwood LLP.