to represent the loss of contractual rights, then it is not obvious why the counterfactual situation which would have prevailed had there been no breach is relevant to an assessment of loss.

Lord Goff’s approach would not be sanctioned by systems such as German law or Scots law,160 neither of which would concede that a party in breach can unilaterally kill of the other party’s right to performance; on the contrary, that right is properly seen as subsisting unless and until the innocent party relinquishes it. Both of those systems place a strong emphasis upon the performance interest of contracting parties, but they recognise that it is entirely consistent with that interest that, where its protection finds expression in the substitutionary remedy of damages, it is properly measured by reference to the actual loss occasioned to the innocent party and not by reference to some supposedly abstract value to be attached to a failure to receive the performance bargained for.

(d)  Mixed legal systems

As a general point, it may be noted that, as in English law, none of the mixed systems requires fault on the promisor’s part to be shown before a claim for damages may be made.

In South African law, damages are usually measured according to the performance interest (or what is usually called in South Africa the ‘positive interest’) of the party suffering the breach.161 Can, however, a party choose to claim damages reflecting a protection of the ‘negative interest’ (that is, the restoration or status quo ante interest) instead?162 Although the Supreme Court has yet to rule definitively on this, there are judgments from a number of the divisions of the High Court supporting the view that the negative interest can be recovered,163 though in the judgment

160The Goff approach was explicitly criticised in the Scottish case McLaren Murdoch & Hamilton Ltd v. The Abercromby Motor Group Ltd 2003 SCLR 323 (OH).

161Thoroughbred Breeders’ Association v. Price Waterhouse 2001 (4) SA 551 (SCA).

162Appropriate terminology to cover the restitutionary interest appears, not yet, to have been developed in South African jurisprudence. This is doubtless because the South African courts have not thus far recognised any distinct protection for this interest in damages. Perhaps, to fit with the existing terms ‘negative’ and ‘positive’, ‘restitutive’ might be appropriate, unless the South African courts adopt supranational terminology, such as that advocated in this work.

163See judgments of the Witwatersrand division of the High Court in Tweedie v. Park Travel Agency 1998 (4) SA 802 (W) and the Cape Division in Mainline Carriers (Pty) Ltd v. Jaad Investments CC 1998 (2) SA 468 (C).

of the Cape Division it was held that the amount of the positive interest should act as a ceiling on a negative interest claim.

The alternative view has been advanced academically that it is fundamentally wrong for South African courts to allow computation of damages according to the negative or so-called reliance interest when breach of contract is the cause of action,164 the argument being that doing so both compensates the plaintiff for having entered into the contract at all, as well as affords an avenue of escape from the consequences of a party’s own bad bargaining. Instead, it is argued, so-called ‘reliance losses’ should be seen as an important component of positive damages; it is the unfounded belief that such losses are recoverable only as part of a party’s negative interest which is responsible for the confusion in some of the South African cases. What is to be made of this argument? It is certainly true that it is possible to see many damages claims for protection of the performance interest as including an element of recovery of wasted expenditure, given that (as mentioned earlier) a claim for lost gross profits can alternatively be framed as one for lost net profits plus wasted preliminary expenditure.165 On the other hand, it is only if claimants are always allowed to opt for protection of the restoration interest over the performance interest, in a way that might permit them to claim more via the former route, that there is a danger of bad bargains being freely avoidable. If, on the other hand, claiming the restoration interest is an exceptional route (as in England and Scotland), or, even if generally available, is capped by the amount of the performance interest (as suggested by the Cape High Court), this danger should not arise. Moreover, a prohibition of claims in any circumstances for the restoration interest would leave claimants in cases where it is impossible to calculate with any precision what performance interest protection is worth with no remedy, which seems inequitable.

In Scotland also, the performance measure is the primary measure of contractual damages, and the starting point for calculating an award of damages. As in other systems, the performance measure encompasses both damnum emergens and lucrum cessans.166 The Hadley v. Baxendale rule is applied to limit recoverable damages. Damages based upon any profit made by a contract breaker are specifically irrecoverable (even if

164See Clive and Hutchison, ‘Breach of Contract’.

165See earlier discussion of this point at p. 374.

166Though there is no established Scottish tradition of the usage of such terms by the courts in their decisions, it is clear from those decisions that both types of loss may be claimed for.

which was taken as providing for fault-based liability (as in French law), albeit that fault was usually presumed as a result of non-performance. No requirement of fault is stipulated in the present wording of the Code. As Article 1995 is tied to the loss of the plaintiff, there is no question of so-called ‘restitutionary damages’ (providing for disgorgement of any gain made by the defendant through non-performance) being awarded, as the famous decision of the Louisiana Supreme Court in City of New Orleans v. Firemen’s Charitable Association174 is said to show.

Given the wording of the right to damages under Article 1995, it is evident that damages are seen as protecting the innocent party’s performance interest. So-called ‘reliance damages’ are the proper province of recovery under the promissory estoppel provision of Article 1967, though occasionally the term ‘reliance damages’ appears to have been used by the courts to refer to the damnum emergens element of a ­damages claim which has, overall, the characteristic of a protection of the performance interest.175 As an example of the calculation of the performance interest, one may take the case of a defendant who refuses to accept and pay for goods it has ordered: the ordinary rule in such cases is that the quantum of damages to which the plaintiff is entitled is the difference between the contract price and the market price of the goods at the date of breach. Thus, in a case where a defendant refused to purchase scrap metal for an agreed price, the plaintiff’s losses were calculated based on the drop of the market value in the metal between the contract date and the date of delivery.176 In so awarding damages, the Court compensated the plaintiff for the likely loss of profit which it would now suffer on a resale (though this ordinary rule is not applied in all cases).177 Because in this case the contract breaker was not in bad faith, the rule that recoverable damages were to be those ‘foreseeable at the time the contract was made’ was applied.178 On the other hand, if the contract breaker is in bad faith (which might be so in the case of

174(1891) 9 So 486. The plaintiff was seeking repetition not damages, however.

175So, for instance, in Southern Tire Services Inc. v. Virtual Point Development LLC 798 So 2d 303 (La App 2001), the Fourth Circuit of the Court of Appeal upheld an arbitrator’s award of damages amounting to $135,000 for ‘estimated net lost sales and reliance damages’.

176Friedman Iron & Supply Co. v. J.B. Beaird Co. Inc. 63 So 2d 144 (1952).

177The rule is not applied if there is no ordinary market price of the goods; instead, full anticipated profits are awarded: see Interstate Electric Co. v Frank Adam Electric Co. 136 So 2d 283 (1931); Security National Bank of Shreveport v Terrell 482 So 2d 919 (La App 2 Cir 1986).

178This rule is found in CC Art. 1996.