Assessment of damages for breach of contract of affreightment

It is a fundamental principle of English law that when assessing damages for breach of contract, any damages awarded should compensate the innocent party for the loss of its contractual bargain. In other words, the innocent party should be put in the same position that it would have enjoyed had the contract been performed.

In Flame SA v Glory Wealth Shipping Ltd [2013] EWHC 3153 (Comm), the Commercial Court has now clarified that, when assessing damages for repudiatory breach of contract, it is necessary for the innocent party to prove its damages by showing that had the other party performed its obligations the innocent party would have been able and willing to perform its side of the bargain. An innocent party, who at the time of the repudiatory breach would have been unable to perform its side of the bargain, and therefore would have been unable to earn the contract price, is not entitled to be placed in a better position by an award of damages than it would have been in if the contract had not been repudiated.

The parties agreed, under a contract of affreightment (COA), that the owners would carry cargoes of coal between 2009 and 2011. The charterers failed to provide laycans for some of the shipments and the owners accepted the breach as a repudiatory breach, terminated the COA and sought damages from the charterers in arbitration proceedings…

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