Breach of contract
What happens when you don't do what you oughta.
Quelle domage
Just because one party breaches the contract, it doesn't mean the other suffers a loss.
Just because one party suffers a loss, it doesn't mean the other breached the contract.
For very sound reasons the law of contract imposes limitations (“causation”, “proximity” and “remoteness of damage”) on the damages a party may recover for breach of contract:
- Causation: The breach needs to be the operating cause of the innocent party's loss;
- Remoteness: They need to have been the sorts of losses the parties reasonably contemplated might arise from a breach when they entered the contract – i.e. they need to be reasonably foreseeable - the "usual consequences" of a breach of the contract.
These ordinary principles apply pragmatically to limit the damages a party must pay to what is reasonable for what that party was responsible.
Compare with an Indemnity where one party agrees to be responsible for a loss the other suffers even when the first doesn't breach the contract.