King & Wood Mallesons

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Contract law update: Macourt v Clark [2012] NSWCA 367

This case concerns the calculation of contractual damages in respect of defective goods. It deals with a situation where there was no clear purchase price for the defective goods and the purchaser had, in any case, been able to fully recoup the cost of acquiring replacement goods. Special leave has been granted to appeal this decision to the High Court.

Damages for breach of contract are intended to be compensatory and aim to place the plaintiff in the position they would have been in had the contract been performed. This case demonstrates that one consequence of this is that damages are not always available for breach of contract.

Where a contract has been breached by the supply of defective goods, damages are usually assessed by calculating the difference between the value of complying goods and the value of the defective goods actually supplied. However, as this case demonstrates, this method is only a rule of thumb and, due to the compensatory nature of contractual damages, it is possible that no damages will be awarded where the purchaser has been able to fully mitigate the loss they have suffered…

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