Originally from World Arbitration And Mediation Review (WAMR)

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ARTICLES

LOST PROFIT AND CAPITAL INVESTMENT
By Michael Pryles

I. INTRODUCTION
The aim of damages is to compensate a claimant for the loss it has
suffered at the hand of the respondent. In expropriation cases, the claimant
must be provided with the pecuniary value of the asset(s) taken.1 For
breaches of contract, unless specific performance is awarded, claimants are
compensated by an award of damages which aims to place them in the same
pecuniary position they would have been in had the contract been
performed.2 Limitations are imposed on the award of damages. Damages
which are not foreseeable or are too remote will not be awarded. As stated
by Alderson in the famous case of Hadley v Baxendale:3
Where two parties have made a contract which one of them has broken, the
damages which the other party ought to receive in respect of such breach of
contract should be such as may fairly and reasonably be considered either
arising naturally, i.e., according to the usual course of things, from such
breach of contract itself, or such as may be reasonably be supposed to have
been in the contemplation of both parties, at the time they made the
contract, as the probable result of the breach of it.