This paper explores the compatibility of the compensatory principle with standards of conduct stipulated in English contracts. The compensatory principle, which aims to place the injured party in the position they would have been in had the breach not occurred, is a cornerstone of English contract law. However, its ability to address breaches involving standards of conduct remains contentious. Through an analysis of key cases, including the landmark decision in One Step (Support) Ltd v Morris-Garner, this paper examines whether the compensatory principle can adequately deliver justice in scenarios, where non-monetary interests or incalculable losses are at stake. Applying basic principles of rational choice theory, the discussion proceeds from an understanding of contract as a cooperative game between rational (in the sense of self-interest maximising) actors. Ultimately, this paper argues that the compensatory principle may provide sufficient redress in the envisaged circumstances, if it is implemented on the understanding that the parties would have voluntarily submitted to an expanded interpretation of the agreed standard of conduct, had they properly reflected on what their self-interest requires.

Thursday, 23 January 2025
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