1. Independence and compatibility of the right to compensation for damages

Compensation for damages is integrated in the framework of remedies that comprise contractual liability. The breach of the agreed obligation provokes an impairment of the obligee's interest, and the damages serve to compensate for damage that it produces. Thus, the right to be paid damages arises in the presence of any non-performance, provided this is not justified.

In English law, it is said that non-performance of the obligation agreed in the contract (primary obligation) gives rise to the secondary obligation to pay damages (secondary obligation to pay damages), which is the normal remedy, since common law is restrictive in the recognition of the claim for performance [Photo Production Ltd v Securicor Ltd. (1980), UKHL 2].

In the legal systems of the civil law or continental tradition the duty to pay damages for the damage resulting from non-performance of contract is also generally considered (Articles 1.613 et seqq. Colombian Civil Code; Articles 701 et seqq. Costa Rican Civil Code; Article 293 Cuban Civil Code; Articles 1.146 et seqq. French and Dominican Civil Code; Articles 1.433 et seqq. Guatemalan Civil Code; Articles 936 et seqq. Haitian Civil Code; Articles 1.360 et seqq. Honduran Civil Code; Articles 2.107 et seqq. Mexican Civil Code; Articles 1.860 et seqq. Nicaraguan Civil Code; Articles 986 et seqq. Panamanian Civil Code; Articles 1.054 et seqq. Puerto Rican Civil Code; Articles 996 and 1.001 et seqq. Saint Lucian Civil Code; Articles 1.264 et seqq. Venezuelan Civil Code). However, in some systems of this tradition, the question of the independence of the remedy of damages has been raised. This has occurred in Colombia, where the court rulings have accepted the independence of the actions in civil matters, as occurs in commercial matters [Article 925 Colombian Commercial Code; judgment of the Supreme Court of Colombia, Social Cassation Chamber, of 3 October 1977 (Gaceta Judicial, CLV volume no. 2396, 1977, p. 320-335); against, rulings of the Supreme Court of Justice, Social Cassation Chamber, of 2 June 1958, (Gaceta Judicial, volume LXXXVIII, no. 219, pp. 130-134) and of 14 August 1951 (Gaceta Judicial 1951, p. 55-63). Likewise, in Venezuela, the legislator's silence has brought the doctrine to discuss the possibility of exercise of the action for damages regardless of the termination or specific performance, or if it is subordinated to these remedies. The court rulings declared the autonomy of the action in the important judgment of 10 November 1953 (CFC/SCMT, 10/11/1953, Gaceta Forense, 2a E., No 2, pp. 431 ss.), despite the main part of the doctrine continues to have difficulties with the construction of a general rule of the independence of the action. On the other hand, the Dutch and Suriname Civil Codes design a basic regulation applicable to contractual or non-contractual damage, i.e., to any obligation to pay damages in Articles 6:74 et seqq.

In paragraph 1 of this principle the right to contractual damages is comprised as an independent remedy compatible with other remedies. It is independent because, in the framework of these Principles, the injured party can opt to exercise it as a unique remedy for defective or non-conforming performance, or for the impossibility of performance imputable to the obligor. But it can also be exercised with other remedies with which it is compatible, for example, for compensating for the damage resulting from contractual termination related to fundamental non-performance, or combined with the right to specific performance in the case of late performance, for compensating for the damage that the delay has caused to the obligee.

2. Irrelevance of the fault

The majority of the systems of the civil law or continental tradition assume the fault of the non-conforming contracting party as a prerequisite for the granting of the claim for damages to the aggrieved contracting party. They are, then, subjective or “fault-based” systems (Articles 1.147 and 1.148 French and Dominican Civil Code; Articles 937 and 938 Haitian Civil Code; Article 1.424 Guatemalan Civil Code; Articles 1.360 and 1.362 Honduran Civil Code; Articles 1.860, 1.862, 1.863, 1.864 Nicaraguan Civil Code; Articles 986, 988, 989, 990 Panamanian Civil Code; Articles 1.054, 1.056, 1.057 and 1.058 Puerto Rican Civil Code). Other codes, like the Cuban (Article 293), the Saint Lucian (Article 1.002) and the Venezuelan (Article 1.264), appear to opt for the objective thesis; however, in this last-named code in reality liability based on fault is established, which is absolutely presumed by the legislator (Articles 1.271 and 1.272 Venezuelan Civil Code).

The Dutch and Suriname legal systems, although they reflect a spirit of objectivity, do not manage to dissociate themselves entirely from the fault. Thus, article 6:75 Dutch and Suriname Civil Code establishes that for a duty to pay damages to exist the non-performance must to be imputable to the obligor, either because it has been due to its fault, or because it is a risk which it must tolerate based on a law, a legal transaction or a “generally accepted opinion” (of in het verkeer geldende opvatting). As can be seen, reference is made to the imputation through fault and also through risk (subjective and objective imputation).

Among the clearly objective systems are the laws of the Anglo-American sphere, where the obligor incurs liability through the mere fact of non-performance, if there are no positive reasons that can excuse it, and this without the need to find out whether or not it has incurred fault. In this same vein, the Article 77 CISG regulates the remedy for damages objectively, providing in Article 79 that this will only occur if a ground for exemption provided in this provision applies. The UP is also found in this group (Article 7.4.1) and the two harmonisation proposals of the law in Europe: Articles 9:501 (1) PECL and III-3:701 (1) DCFR. And likewise, Article 159.1 CESL opts for the objective system.

In accordance with this tendency to objectification, and in accordance with the adoption of a concept of objective non-performance (commentary at Article 7.1.1 of these Principles), the fault of the non-conforming obligor has been dispensed with in the proposed rule for granting the injured party the right to damages. Consequently, this will occur provided that the non-performance by the obligor is not justified due to the concurrence of force majeure (Article 7.1.8) or is covered by a clause of exemption or limitation of liability (Article 7.1.7).

3. Irrelevance of the declaration that the obligor is in default

On the other hand, in the majority of the Caribbean civil law or continental legal systems, in the case of delay in the performance there will not be liability if there is no declaration that the non-conforming contracting party is in default. In these laws, the declaration that the obligor is in default marks the beginning of the transfer of the risks for the loss of the goods due and also of the duty to pay damages for the damage caused by the delay in the performance (Article 1.615 Colombian Civil Code; Article 1.084 Costa Rican Civil Code; Article 255 Cuban Civil Code; Article 1.146 French and Dominican Civil Code; Article 1.433 Guatemalan Civil Code; Article 936 Haitian Civil Code; Article 1.364 Honduran Civil Code; Article 2.105 Mexican Civil Code; Article 1.859 Nicaraguan Civil Code; Article 985 Panamanian Civil Code; Article 1.053 Puerto Rican Civil Code; Article 999 Saint Lucian Civil Code; Article 1.269 Venezuelan Civil Code). In the same way, the Dutch and Suriname Civil Code requires the declaration that the obligor is in default in the cases in which the performance is however possible or if it is only temporarily impossible (Article 6:74.2º). However, some codes of commerce dispense with the requirement of the declaration that the obligor is in default for there to be liability for the delay in the performance of the commercial obligations (Article 418 Costa Rican Commercial Code; Article 63 Cuban Commercial Code; Article 677 Guatemalan Commercial Code; Article 85 Mexican Commercial Code; Article 232 Panamanian Commercial Code; Article 94 Puerto Rican Commercial Code).

For the lawyers of the Anglo-American sphere, default is an alien concept. In the case of non-performance, the duty to pay damages runs from the date agreed in the contract for the performance of the obligation. If no day for the performance has been agreed, the obligor must perform in a reasonable period of time and the right to damages will come into existence when that period expires, without which the obligee must meet some requirement. In the same way, from the time when it does not perform, the contracting party assumes the risks (section 20 United Kingdom Sale of Goods Act and 1979; section 22 Sale of Goods Act of Bahamas, Montserrat, Barbuda, Trinidad and Tobago and Belize; and section 21 Sale of Goods Act of Jamaica), and will not already be able to claim frustration for being released from the obligation in the case of impossibility of the performance, since it will be considered that self-induced frustration exists.

Following the slipstream marked by the common law systems, the declaration that the obligor is in default or the communication of the non-performance is not necessary, as a condition for being able to claim damages for the delay in the CISG, UP, PECL and DCFR.

In the proposed rule, in accordance with the explanations in the commentary of article 7.1.1 in connection with the concept of non-performance, the requirement of the determination that the obligor is in default for the duty to pay damages to arise has been omitted. And this is the case despite, as we have seen, a great number of systems of the Caribbean area making the obligation to pay damages of the delayed performance dependent on the obligor having been summoned. However, this option will clash directly with the Anglo-American legal conceptions, for which default is a “disruptive” institution, as well as that it constitutes a more practical, rapid and secure system, as required by commercial transactions.

4. The requirement of certainty of the recoverable damage

The remedy of damages has a compensatory function, and consequently the simple non-performance of the contract is not sufficient for the duty to pay damages to arise, but the said non-performance needs to cause damage to the obligee and this needs to be certain (paragraph 2).

Example 1: A, company of country X, has not performed its obligation to deliver to the company B, of country Y, certain unascertained goods whose price is decreasing. Since B has not paid the price, however, if it manages to buy the goods from another provider for a price lower than that agreed in the original contract, it will not have suffered any damage, and consequently A will not have to pay damages to it although it has not performed the contract.

Example 2: Advised negligently by its attorney who spotted some unfounded prospects of benefit, A decides to invest its savings in a transaction. If finally it turns out that, by chance, the economic results that it obtains are beneficial, A will not be able to claim damages from its attorney, despite the fact that he/she has not performed though not acting with the due diligence according to his/her lex artis, since no effective damage exists.

An exception to this affirmation which is the golden rule in the majority of the legal systems, are the so-called nominal damages of common law. The symbolic damages are granted to the plaintiff through the mere fact of non-performance, although this has not caused it effective damage [Surrey Civil Code v Bredero Homes Ltd (1993), 1 WLR 1361] or, if there is damage, it is not possible to prove its existence [Columbus & Co Ltd v Clowes (1903), 1 KB 244] or its amount [Erie County Natural Gas and Fuel Co Ltd v Carrol (1911), AC 105]. However, the usual objective of nominal damages is no other than to confirm the breach of the plaintiff's right.

As well as this particular feature of common law, and although much less known, there also exists in France an exception to the principle of the compensatory nature of damages in article 1.145 French Civil Code, according to which, concerning a particular obligation not to make, the obligor will be obliged to pay damages for the simple breach of the obligation. This same exception is found in Articles 1.612 Colombian Civil Code, 1.145 Dominican Civil Code, 1.326 Guatemalan Civil Code, 2.104 in fine Mexican Civil Code, 1.001 Saint Lucian Civil Code, and 1.266 Venezuelan Civil Code. In addition, all the systems consider another exception for the pecuniary obligations (commentary at Article 7.4.6 OHADAC Principles).

It is implicitly required that the damage results from non-performance, i.e., that it is a consequence of this, which presupposes a sufficient causal nexus between the non-performance and the damage caused.

The rule of this paragraph 3 also includes the obligation to pay damages for the future damage, namely, which however has not occurred but can be established with a reasonable degree of certainty. Hypothetical damage or damage based on mere conjectures or hopes is excluded. Future damage often takes the form of loss of profits or loss of opportunity. Articles 74 CISG, 7.4.3 UP, 9:501 (2) (b) PECL and III-3:701 (2) DCFR refer to future damage in the uniform law.

5. The principle of full reparation

The principle of the full reparation of the damage, according to which the damages aim to re-establish as far as possible the balance of interests destroyed by the non-performance of the contract and place the aggrieved party in the situation in which it would have been in if this had not taken place, represents the essence of the remedy of damages, has to be considered the axis of the calculation of the damages in all of the OHADAC legal systems [Article 1.613 Colombian Civil Code; Article 1.149 French and Dominican Civil Code; Article 1.434 Guatemalan Civil Code; Article 939 Haitian Civil Code; Articles 6:95 and 6:96 Dutch and Suriname Civil Code; Article 1.365 Honduran Civil Code; Articles 2.108, 2.109 and 2.115 Mexican Civil Code; Article 1.865 Nicaraguan Civil Code; Article 991 Panamanian Civil Code; Article 1.059 Puerto Rican Civil Code; Article 1.004 Saint Lucian Civil Code; Article 1.273 Venezuelan Civil Code; section 1-106 UCC; section 347 Restatement (Second) of Contracts; judgment of the High Court of Barbados in Vaugh v Odle (1982), No. 765, Carilaw BB 1982 HC 44; Article 74 CISG; Articles 7.4.2 and 7.4.3 UP; Article 169 CESL).

A consequence of the principle of full reparation is the preference in the majority of the systems for positive interest or performance as a general measure of the damages related to contracts. The compensation for damages for positive interest involves placing the obligee in the same situation and with the same economic results that it would have been in if the non-performance had not occurred. On the other hand, the so-called “negative or confidence interest” strives to place the obligee in the situation that it was in before the conclusion of the contract.

In English law, the rule of the payment of damages for positive interest is included in the judgment of the case Robinson v Harman in 1848 (1 Ex Rep 850) even though, sometimes, the contracting party can claim only the negative interest, for example because the loss of benefit is very difficult to prove [Anglia TV v Reed (1971), 3 All ER 690; McRae v Commonwealth Disposals Commission (1951), 84 CLR 377]. United States law, in the same vein, permits the aggrieved party to choose between positive or negative interest (sections 347 and 349 Restatement (Second) of Contract), which is the practical result to which English law likewise leads.

The Caribbean systems of the civil law or continental tradition do not dogmatically include the distinction between positive or negative interest, despite the courts indeed having picked up the difference. In the PECL and DCFR it is expressly recognised in both provisions (Article 9:502 and III-3:702) under the heading “general calculation of the damage”, and equally positive interest is present in Article 160 CESL.

However, despite being considered the most appropriate form for providing a response to the principle of full reparation and to promote confidence in contracts, preference has been given not to establish definitively the option for the obligation to pay damages for the interest of performance in this Principle. Sometimes, it will be difficult to calculate and to grant, and consequently preference has been given to an open rule that permits the aggrieved contracting party (or the judge or arbitrator) to establish a calculation of the damage adequate to the circumstances.

The principle of full reparation also functions as a limit to the remedy of damages, in order to avoid the enrichment of the victim, and involves the prohibition of so-called “punitive damages”, whose nature is sanctionary. In English law, although admitted in some cases of non-contractual civil liability, non-performance of contract cannot substantiate the award of punitive damages, rejected in the judgment Addis v Gramophone Co. Ltd (1909, AC 488). In the United States this rule contrary to punitive damages is enshrined in numerous statutory rules and in Section 1-106 UCC, although the courts indeed grant it in cases of non-contractual liability and, including, in cases in which, having non-performance of contract, an action of tort is exercised jointly [St Louis and SFR Cov v Lilly (1916), 162 SW 266; Armada Supply Inc v S/T Agios Nocolas (1986), 639 F. Supp. 1161, 1162; Thyssen Inc v SS Fortune Star (1985), 777 F.2d 57, 63].

6. Emerging damage and loss of profits

According to paragraph 3 of the proposed Principle, damage includes what is known as emerging damage (damnum emergens) and loss of profits (lucrum cesans) under Roman law. Emerging damage consists of the effective and known loss suffered and covers, firstly, intrinsic damage, namely, the value of the performance not rendered (or the additional work on the defectively rendered performance), but also any expense incurred by the obligee and which has become useless through the non-performance or the impairment to the obligee's goods, including non-patrimonial ones, resulting from the non-performance of the performance due. The loss of profits concerns the reasonable gains which have ceased to be obtained, i.e., the advantages whose acquisition has been frustrated by the non-performance. The obligation to pay damages of both concepts is commonplace [Article 1.613 Colombian Civil Code; Article 1.149 French and Dominican Civil Code; Article 1.434 Guatemalan Civil Code; Article 939 Haitian Civil Code; Article 6:96.1º Dutch and Suriname Civil Code; Article 1.365 Honduran Civil Code; Articles 2.108 and 2.109 Mexican Civil Code; Article 1.865 Nicaraguan Civil Code; Article 991 Panamanian Civil Code; Article 1.059 Puerto Rican Civil Code; Article 1.004 Saint Lucian Civil Code; Article 1.273 Venezuelan Civil Code; Article 74 CISG; Article 7.4.2 (1) UP; Article 9:502 PECL; Article III-3:702 DCFR; Article 160 CESL]. In common law, there is no doubt that the expectation interest covers the two elements, although the distinction is not used very much by the courts.

The loss of profits involves a certain degree of uncertainty and randomness, by taking concrete shape normally when moving forward towards the future. Hence, the simple possibility or hope of realising gain is not sufficient for its determination, but a certain objective and reasonable probability that it will occur has to exist. This “reasonableness” referred to in paragraph 3 of the provision will be an advantage taking into account the ordinary course of events and the special circumstances of the specific case.

Example: The vessel “Calixto”, owned by the company A of country X, was brought to the shipyard of B of country Y, for cleaning and painting work of its bottom to be carried out in the same. For carrying out the construction not in accordance with the professional expertise required, a slippage of the vessel occurred, due to which it has been stranded in a defective manner, causing it significant damage which resulted in a delay of three months in its delivery to A. The merchant A requested damages, comprising the loss of gain through the stoppage of the vessel that it could not carry out the fishing chores during these three months. In the estimation of this loss of profits, the average of the catch made by the boat in the same months in previous years will be referred to, cautiously assessing and excluding the doubtful or unfounded gains or gains founded only on hopes.

7. Contractual moral damage

Even though it will not be very frequent in commercial contracts, paragraph 4 of the Principle provides that recovery of the damage resulting from the non-performance of contract will also include, where appropriate, non-economic damage or moral damage.

In the OHADAC area, however, there is no common position regarding the obligation to pay damages for this damage. The starting point in English law is the negative position, represented in the well-known judgment in the case Addis v Gramophone (1909, AC 488), and repeated in a multitude of cases, including the recent case [Johnson v Gore Wood & Co (2002), UKHL 65]. However, in recent times, the misgivings have been softening and the English courts and courts of the Caribbean States of the common law tradition have admitted the compensation of the contractual moral damage in two types of cases: firstly, if the contract consists in providing pleasure, relaxation or peace [cases Jarvis v Swans Tours (1973), QB 233; Ruxley Electronics and Construction v Forsyth (1996), UKHL 8; Farley v Skinner (2002), AC 732; judgment of the High Court of Barbados in Brathwaite v Bayley (1992), Carilaw BB 1992 HC 23; Jamaica Telephone Co Ltd v Rattray (1993), 30 JLR 62]; secondly, if the non-performance of contract causes physical disadvantages and discomforts [Watts v Morrow (1991), 4 All ER 937; judgment of the High Court of Barbados in Harvey-Ellis v Jones (1987), Carilaw BB 1987 HC 44].

In French law, although the Civil Code does not consider it expressly, the doctrine and the court rulings have defended the view that moral damage is generally recoverable. Equally, the judgment of 9 December of 2010 of the Plenary Council of the Colombian Constitutional Court in the judgment C-1008/10 has established the reparation of the patrimonial and non-patrimonial damage in contractual matters, consequently with the principle of full reparation. In Cuba, the doctrine favours the obligation to pay damages, based on Article 294 Cuban Civil Code, which refers to non-contractual liability for the stipulation of damages for non-performance of contract. However, in other civil law or continental legal systems, given the silence of the civil codes, the courts show themselves restrictive in its recognition: hence, it occurs in Mexico or in Venezuela, where the judgment of the Supreme Court of Justice, Social Cassation Chamber of 12 August 2011, declared that the damages for contractual moral damage occurs only in the cases in which, together with contractual liability, non-contractual fault occurs. In Holland, moral damage appears to be limited to the cases of Aquilian liability, although, based on article 6:106 Dutch and Suriname Civil Code, it is also maintained regarding contractual liability. At the European Community level, the judgment of the Court of Justice of the European Community of 12 of March of 2002 (As. C-168/00: Simone Leitner/TUI Deutschland GmbH & Co KG) declares the obligation to pay damages for moral damage.

Equally, the doctrinal proposals of the uniform law recognise that the repairable damage is not limited to pecuniary damage, but includes the pains, discomforts, the psychological stress or, in general, the “moral damage” that the non-performance can cause to the other contracting party [Article 7.4.2. (2) UP; Article 9:501 (2) PECL: Article III-3:701 DCFR].

Under the proposed rule the suffering or the emotional anxiety, the loss of leisure or pleasure, as well as the injury to the personal or professional reputation will be recoverable. The damages can come from economic damage, which will be the most normal course of action, or of other measures that are adequate to the case in question, such as the publication of a press notice or notice of relief, etc.

Example: A, a known tenor of the country X, is contracted for the inauguration of the new national opera theatre of the country Y. If there are a few months before the start and the action of A having been published in national and international media, the organizers of the event decide to contract a ultimately fashionable young European tenor, terminating the above contract. A will then be able to claim damages, not only for the economic injury that involves not obtaining the remuneration agreed by the action and other expenses made in view of the performance, but also for the damage caused to his reputation, being demeaned by the artist, with an international broadcast.