Contract; damages for breach of contract; the measure of damages claimable
Facts: Clark, a medical practitioner specialising in assisted reproduction, purchased the assets of the St George Fertility Centre Pty Ltd. These assets included a stock of frozen sperm used in fertility treatments. The contract between Clark and St George contained warranties that the donors of the sperm were properly identified as required by law. Macourt, the owner of St George, provided personal guarantees to Clark that the contract would not be breached. However the identification of the sperm donors was not properly documented as promised and as a result the sperm acquired by Clark from St George could not be used. Clark obtained replacement sperm from the only other available source, an American company. This replacement sperm was only available at a very high price, but Clark was ultimately able to recoup most of these costs through higher charges to clients. She then sued Macourt for damages for breach of contract. Although the breach of contract and Macourt's liability was not in issue, the amount of damages payable in the circumstances was disputed.
Issues: What was the proper measure of damages claimable for the breach of contract? To what extent had Clark's losses been mitigated by the purchase and use of alternative sperm?
Decision: Damages for breach of contract should be calculated as the difference between the value of the assets at the date of delivery and the cost of acquiring replacement assets. The sperm delivered being unusable, it had no value. Acquiring replacement assets properly mitigated the losses flowing from the breach.
Reasons: Clark was entitled to the value of the assets contracted for, determined at the date of delivery, regardless of the contract price. This value can be determined by the cost of acquiring replacement assets. Damages for breach of contract have the aim of putting the aggrieved party in the same position as if the contract had been performed, which means the plaintiff is entitled to assets in compliance with the contract or the market value of such assets in the form of damages. Acquiring alternative goods falls within the category of mitigating loss, but what is done with those goods thereafter in the course of business should not be taken into account in assessing the quantum of damages. Clark was therefore entitled to recover the high cost of acquiring alternative sperm as damages.