Originally from Handbook on International Commercial Arbitration - Second Edition

Preview Page

The primary purpose of the vast majority of arbitrations is to recover compensation for a breach of contract. The procedural wars are but a means to an ultimate end of how much, if anything, is to be paid. Contracts are concerned with the mutual passing of benefits—generally, money is paid for goods or services. The basic rule, both in common law and civil law jurisdictions, is that if one party defaults on its obligation, the loss is the value of the benefit that the other party has been deprived of by that breach. In doing so, the law does not enquire into whether the bargain struck in making the contract was a good or a bad bargain. It is for that reason that the value deprived of under the contract is important.

A. Common Law and Civil Law Approach

The common law sees the primary remedy for a breach of contract as damages. In contrast, in most civil law countries, the primary remedy is to have the contract performed in the agreed manner. It is the difficulties of specific performance discussed in the following chapter) that usually results in a damages award.

B. General Principle

The guiding principle of damages for a breach of contract is to award “that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation.”