First Principles of Business Law

3. Compensatory damages for personal injury

3.1.a.2. Damages for loss of earning capacity

Read the facts below and then answer the question.

A, a man aged 40, is employed as the manager of a shop at an annual salary of $50,000. The company he works for requires its staff to retire at age 65. A is studying some management subjects at university and hopes to get a job in a year or two as a financial manager at a salary of around $60,000 per year. Then A is injured in an accident caused by B's negligence. As a result of these injuries A will never be able to work full time again: at best he will earn about $10,000 a year as a casual employee doing unskilled work.

How would a court take account of facts such as these to calculate what damages A is entitled to?

 (a) Since such matters cannot be scientifically determined, the courts take a broad approach and award compensation only for the most obvious loss of future earning capacity, and not for more than ten years into the future.

(b) Although it is a difficult task, the courts make every effort to ascertain the extent of future lost earnings, including lost income up to the age of retirement as well as damages for potential increased earning capacity in the future.