Performance and Compensation: An Analysis of Contract Damages and Contractual Obligation

Although there is an increasing body of opinion that awardsof damages for breach of contract should take account of theclaimant’s performance interest, there has been littlein the way of analysis of what the performance interest is.Commonly the concept is put forward as simply a reformulationor reconceptualization of the expectation interest, itself hithertoregarded as the one true contractual interest. Such thinkingis flawed. A closer analysis of contract doctrine shows thereto be two distinct contractual interests; in receiving performance,and in being compensated for losses caused by non-performance.Receiving compensatory damages for non-performance is not thesame as receiving performance. At present, this important differenceis not fully appreciated, resulting in a failure to developa principled approach to the claims that can be made followinga breach of contract. Recognition of this distinction forcesus to confront the fundamental question of how committed weare to the notion that contracts entail a right to performance.This article examines the distinction between these two interests,how the performance interest may be given effect by a damagesaward, and what the consequences of this analysis are for ourunderstanding of the nature of contractual obligation.