( 422 ) General principle. CHAPTER VII. MEASURE OF DAMAGES. We shall now briefly consider the subject of the "measure of damages" as it is technically called in actions of contract, in other words (to borrow Mr. Broom's phrase) "the scale or rule by reference to which damages in any given case to be assessed" (1). The rule of the Common Law, said Baron Parke, is that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages as if the contract had been performed (2). The generality of this rule has, however, been considerably limited by the principle laid down in the leading case of Hadley v. Hadley v. Baxendale (3), and applied in many subsequent cases. Baxendale. These cases establish the following principle as regulating the measure of damages in actions of contract. Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered as either arising naturally, i.e. according to the usual course of things from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it. This principle is well illustrated by a case which was recently decided by the Court of Appeal (4). In this case the plaintiffs bought from the defendant "steam coal," which was to be coal suitable for use on steamers. (1) Drew v. Nunn, 4 Q. B. D. 661. (2) Robinson v. Harman, 1 Ex. 855. (3) Hadley v. Baxendale, 9 Ex. 341. (4) Hammond & Co. v. Bussey, 20 Q. B. Div. 86. Among other cases which may be usefully consulted on the subject of measure of damages are Horne v. Midland Railway Co., L. R. 7 C. P. 583; Simpson v. London and North Western Railway Co., 1 At Q. B. D. 274; Skinner v. City of London Marine Insurance Corporation, 14 Q. B. D. 882; Whitham v. Kershaw, 16 Q. B. D. 613; Kiddle v. Lovell, 16 Q. B. D. 605; Lombard v. Kennedy, 23 L. R. Ir. 1 (as to breach of contract to keep premises in repair) Grand Trunk Railway Co of Canada v. Jennings, 13 App. Cas. 800. the time when the defendant sold the coal he knew that the plaintiffs were buying the coal in order to sell it again to the owners of steamers calling at Dover to be used as steam coal on such steamers; and he therefore knew that the plaintiffs would enter into contracts with others similar to the contract he himself had made with the plaintiffs, that is to say, into contracts for the sale of "steam coal," which would amount to a warranty that the coal was reasonably fit to be used for purposes of steam coal on board steamers. The coal delivered by the defendant to the plaintiffs under the contract and by them delivered in terms to "their subvendees" did not answer such description, but this could not be ascertained by inspection of the coal, and only became apparent upon its use by the sub-vendees. The sub-vendees thereupon brought an action for breach of contract against the plaintiffs. The plaintiffs gave notice of the action to the defendant, who, however repudiated all liability, insisting that the coal was according to contract. The plaintiffs defended the action against them, but at the trial the verdict was that the coal was not according to contract and the sub-vendees accordingly recovered damages from the plaintiffs. The plaintiffs thereupon sued the defendant for breach of contract, claiming as damages the amount of damages recovered from them in the action by their sub-vendees, and the costs which had been incurred in such action. It was held, that the defence of the previous action being, under the circumstances reasonable, the costs incurred by the plaintiffs as defendants in such action were recoverable under the rule in Hadley v. Baxendale. The Judges of the Court of Appeal pointed out that the first part of the rule which has been stated deals with cases where there are no special circumstances and the latter with cases where there are special circumstances, and that this latter part was illustrated or exemplified in Hadley v. Baxendale in the following proposition: "If the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated" (1). (1) Per Lord Esher, M.R., in Hammond & Co. v. Bussey, 20 Q. B. D. 79, 88. Interest. Applying this principle then to the case before them, the Court "considered that the defendants must have contemplated, if there was a breach of the contract, that the plaintiffs' subvendees would make a claim and bring an action against the plaintiffs to enforce such claim; and further, that the plaintiffs would on such an action being brought behave as reasonable men, and would pay without contest if it was unreasonable to defend the action, but would defend the action if it was reasonable to do so. All these matters may be reasonably supposed to have been within the contemplation of the parties. That being so, it follows that the costs of a reasonable defence would be in the contemplation of the parties, and it also followed that the costs of a reasonable defence would be in the contemplation of the parties, if they had worked out the question what the damages were which would reasonably be payable upon a breach of contract" (1). The general rule of the law is that interest on a debt is not recoverable unless there is a contract express or implied to pay it. Where no loss accrues from a breach of contract a plaintiff is nevertheless entitled to a verdict, but for nominal damages only, nominal damages meaning "a sum of money that may be spoken of, but that has no existence in point of quantity" (2); accordingly in an action for the non-payment of a debt, where the debtor gave no promise to pay interest, nothing beyond the principal sum due can be recovered for any loss sustained by the creditor from being kept out of his money, which is not allowed to be taken into account by a jury in assessing damages, unless compensation for such loss was expressly stated to be within the contemplation of the parties at the time the debt was incurred. To this rule, bills of exchange, promissory notes and overdue bonds are generally said to be exceptions; but, in a case decided by the Court of Appeal in 1887, the law was stated to be that interest could not be claimed on a bill of exchange or a promissory note as part of the contract, unless there was an express agreement to pay interest, and that interest could only be given by way of damages; that in an action on the bill, the jury could give interest as damages, but they were at liberty to refuse to do so, as the interest was no part of the debt, and that now that actions could be tried without a jury, the judge could give or refuse to give interest (3). (1) Per Fry, L.J., in Hammond & Co. v. Bussey, 20 Q. B. D. 79, 100. (2) Per Maule, J., in Beaumont v. Greathead, 2 C. B. 494. (3) Per Lord Esher, M.R., in Ex parte Charman, In re Clagett, W. N. Interest is recoverable where there is an express agreement Interest. to pay it (1), and where, from the course of dealing between the parties a contract to pay interest may be implied (2). It is also provided by statute (3) that upon all debts or sums certain, payable at a certain time or otherwise, the jury may, if they shall think fit, allow interest to the creditor at a rate not exceeding the current rate of interest, if such debts or sums be payable by virtue of some written instrument at a certain time; or, if payable otherwise, then from the time when demand of payment was made in writing with notice to the debtor that interest would be claimed from the date of the demand (*). (1887) p. 184. See In re Roberts. Goodchap v. Roberts, 14 Ch. D. 49; Ward v. Eyre, 15 Ch. D. 130; Ex parte Furber. Re King, 17 Ch. D. 191. In the former of these cases, Jessel, M.R., said, "In an action at law for the non-payment of money on a day certain, where it is an interestbearing debt, the rule has always been to recommend the jury to give 5 per cent., because that is the usual commercial value of money. If there ever should come a time when it fell very much, juries might give less, or if it rose very much, they might give more; but that is the reason of the rule. The fact of the parties having bargained for a higher or lower rate of interest for a time certain is always to be taken into consideration as shewing the value of money, but it does not decide the question." It always, we are told in Daniell's Chancery Practice, was the practice in equity to allow interest to be computed upon bills of exchange and promissory notes, and upon all other sums payable on demand, or on a day certain, upon which interest might, according to the practice of the Court of law, be calculated either from the time of the demand made, or from the fixed period of payment. The practice seems now to be, to allow interest at 5 per cent. on bills (1) Foster v. Weston, 6 Bing. 714. 242. (3) 3 & 4 Will. 4, c. 42, s. 28. Mowatt v. Lord Londesborough, 3 E. & B. 307, 336, and 4 Id. I.; Harper v. Williams, 4 Q. B. 219; Atwood v. Taylor, 1 M. & Gr. 279, 332; Edwards v. Great Western Railway Co., 11 C. B. 588, 650. See also Cook v. Fowler, 7 H. L. 27. If a party not entitled to interest makes a claim for it to gain an improper advantage, the Court may set aside the judgment and compel the solicitor making such indorsement to pay the costs: Rodway v. Lucas, 24 L. J. Ex. Hil. Term, 1858, p. 155, where, however, the Court refused to set aside the judgment, as the defendant was considered to have admitted the contract by failing to appear. See cases collected, Seton on Decrees, vol. ii., p. 798; Chitty on Contracts, 12th ed. p. 658, et seq; see also Phillips v. Homfray, 44 Ch. D. 694; Rhymney Railway Co v. Rhymney Iron Co., 25 Q. B. D. 146; and articles in Law Journal for Oct. 18 and 25, 1890. Discharge by consent. CHAPTER VIII. DISCHARGE OF CONTRACTS. Having now considered the nature, mode of formation, and results of the contractual obligation, we proceed to explain the principal modes by which this obligation may be got rid of, or as it is technically expressed, "discharged." These are:— (1) By mutual consent, i.e. the parties may, subject to the rules hereinafter mentioned, agree that the contract between them shall be waived. (2) By performance. (3) By breach. (4) By impossibility of performance. (5) By operation of law. (6) By novation. 1. Contracts of records and specialties, as before stated, must be released by an instrument under seal, but a parol or simple contract may be discharged by writing or word of mouth, whether or no the original contract be in writing, as the writing is not the contract, but the evidence of it. The rule is different where a contract is required by statute to be in writing. If the discharge is only such as would be implied from the making of a new contract inconsistent with the old one, then there must be writing such as would satisfy the statutory requirement in respect to the original contract (1). An agreement entered into to discharge a pre-existing contract is subject to the rule governing all simple contracts with respect to consideration. The rule that a simple contract may before breach be waived or discharged without a deed and without consideration refers only to an executory contract where no further consideration is needed for an agreement to rescind than the discharge of each party by the other from his liabilities. The rule is otherwise in respect to an executed contract. Baron Parke in Foster v. Dawber (2) states the law in reference to the discharge of executory and executed contracts in the (1) Noble v. Ward, L. R. 2 Ex. 135; Goss v. Lord Nugent, 5 B. & Ad. 65. Sce Chitty on Contracts, 12th ed. p. 162; but see also Fry on Specific |