Causation (Contract)

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Causation limits a plaintiff's ability to recover damages to only those which were actually caused by the defendant's breach. A plaintiff must establish that a defendant's breach caused the damages it seeks to recover.[1] Causation is determined as follows:

  • Traditionally, a 'but-for' test is used (causation is established if but for the breach, the loss would not have occurred).
  • However, the but-for test is just a guide, and the ultimate question is whether, as a matter of commonsense, the relevant act or omission was a cause.[2]

This article is a topic within the subject Contracts.

Required Reading

Paterson, Robertson & Duke, Contract: Cases and Materials (Lawbook Co, 11th ed, 2009), pp. 661 [27.10]; 662-672 [27.20-27.90].

Introduction

[3] Damages will not be awarded unless the plaintiff can prove that a causal connection exists between the defendant's breach and his own loss. Usually, the courts rely on the 'but for' test for causation (but for the breach, the loss would not have occurred). However, the test has its limitations and ultimately, causation is a question of common sense.[4]

Causation is discussed in Alexander v Cambridge Credit Corp:

  • The 'but for' test is a guide and not definitive or ultimate - common sense decides causation really.
    • "...to establish a causal connection between a breach of contract and the damage which the plaintiff has suffered, he needs only to show that the breach was a cause of the loss. This is to be decided by the application of commonsense principles. In general, the application of the “but for” test will be sufficient to prove the necessary causal connection. But that test is only a guide. The ultimate question is whether, as a matter of commonsense, the relevant act or omission was a cause."[5]
  • An intervening act will cut off causation.

References

Casebook refers to Paterson, Robertson & Duke, Contract: Cases and Materials (Lawbook Co, 11th ed, 2009).

Textbook refers to Paterson, Robertson & Duke, Principles of Contract Law (Lawbook Co, 3rd ed, 2009).

ACL refers to the Australian Consumer Law.

  1. Alexander v Cambridge Credit Corp (1987) 9 NSWLR 310, 314
  2. Alexander v Cambridge Credit Corp (1987) 9 NSWLR 310, 358
  3. Casebook, p. 661 [27.10]
  4. March v Stramare (1991) 171 CLR 506
  5. (1987) 9 NSWLR 310, 358
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