Breach of contract
This article is about causation being the legal concept relating to contractual damages. For the statistical one see correlation — which doesn’t imply causation, true, but doesn’t rule it out either.
What happens when you don't do what you oughta.
- 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.
- Causation: The breach needs to be the operating cause of the innocent party’s loss (is that the causa sine qua non?);
- 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 contract.
In theory, these pragmatic considerations of proximity, causation and remoteness do not apply where you have provided an indemnity for your breach of contract. This is why lawyers FREAK OUT about indemnities. By an indemnity you agree to pay a sum on demand in a certain event. The only question becomes whether you paid the amount when it was demanded. Note, in theory:
- Causation: The question of whether the contract has been breached — usually the domain of the Queen’s Bench division — must be determined by the alleging indemnitor. Should that determination be wrong, do you have a counter-breach of contract? A restitutionary action for money had and received?
- Remoteness of damage: Because your indemnity payment is for all losses howsoever caused, whether direct or indirect ... (ad nauseam) you are essentially contracting out of the rules of remoteness of damage, to your own detriment. You can hardly claim loss of profits weren't within the parties reasonable contemplation when you have explicitly contemplated it.
See: consequential loss
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.