Debt and Damages: (2201) Reason For Distinguishing Debt and Damages. The Action To Recover A Debt Due For
Debt and Damages: (2201) Reason For Distinguishing Debt and Damages. The Action To Recover A Debt Due For
Debt and Damages: (2201) Reason For Distinguishing Debt and Damages. The Action To Recover A Debt Due For
( 2201 ) Reason for distinguishing debt and damages. The action to recover a debt due for
payment has a longer history than the action to recover damages for breach of contract. 2
moreover, although development of the action for breach has madae the distinction between
debt and damages less important than formerly, for two main reason it is still important.
First, there are procedural advantages in recovering a sum payable as a debt due. 3
Generally, a plaintiff can invoke a procedure under which judgement can be obtained with a
minimum of supporting evidence. A writ is issued specifying the amount claimed and
advising the devendant that judgement will be signed by default if the defendant fails to
defend the matter. By contrast, if a plaintiff wishes to recover more than a nominal sum by
way of damages, the plaintiff must often produce detailed evidence of loss, which may
include evidence of market values and so on.4 There is also a difference in the onus of proof.
Where a plaintiff alleges that a debt is due, but the defendant danies this and pleads a devence
of payment, the onus is on a defendant. 5 On the other hand, a plaintiff who seeks damages for
breach bears the onus of proving the breach and the loss in respect of which compensation is
sought.6 It was also explained earlier that a plea of tender may answer, that is, provide a
defence to, to claim there was a breach on the part of the defendant, 7 but the plea of tender
does not answer the plaintiff’s claim in debt.8
Second, as the High Court explained in Young v Queensland Trustees Ltd,9 the
common law ‘doesnot and never did conceive of indebtedness in a sum certain for an
executed consideration as a mere breach of contract: it is rather the detention of a sum of
money and that was so whether the creditor enforced his demand by an action of debt or by
indebitatus assumpsit’. This means, for example, that the rules dealing with the mitigation of
loss are not relevant where the plaintiff is seeking to recover a debt due under the contract,
whereas there are frequently relevant to an action for damages.
( 2202 ) Characteristics of liquidated sums. In the present context a liqudated sum has two
essential characteristics: it is fixed by the contract; and due for payment by the defendant. 10
Where the sum is not due for payment is cannot usually be recovered as a debt due: unless
there is a clause accelerating the time for payment 11 applicable to the events which have
occurred, or the contract has been terminated for breach or repudiation by the defendant, 12 the
plaintiff must wait until the payment actually falls due.13
The idea that a debt has fallen due for payment usually assumes that it has been
earned by the plaintiff, by performance of the contract. If the parties have agreed that the
payment must be earned, the fact that a breach on the part of the defendant has prevented
performance by the plaintiff does not permit the plaintiff to ignore the requirement of
performance.14 On the other hand, once the payment has been earned, the fact that
theperformance of the contractis terminated by the plaintiff on account of the defendant’s
breach does not divest the plaintiff of the cause of action. 15 The defendant may, however, be
entitled to set-off that claim against the plaintiff’s claim.16
In some cases a plaintiff who looks to have earned the right to recover a sum fixed by
the contract will be restricted to a claim for damages because the defendant has prevented the
occurrence of the event on which the obligation to pay depends. For example, in Alpha
Trading Ltd v Dunnshaw-Patten Ltd17 an agency agreement provided for the payment of
commission out of the proceeds by the agents. The principals breached the contract of sale
and did not receive payment. It was held by the English Court of Appeal that the principals
with buyers introduced by the agents. The principals had breached an implied term of the
agency. contract. Therfore, although there was no entitlement to claim the sum fixed by the
contract as a debt, they were entitled to damages which, on the facts, were equal to the
commission which the principals had agreed to pay.18
( 2203 ) Nature of the action. Historically, the action to recover a liquidated sum under the
contract was framed at common law in debt. The disappearance of the ‘forms of action’, 19 and
the fusion of law and equity, makes it a little anachronistic to speak today of an action ‘in
debt’.
Nevertheless, it remains true that an action to recover a contract debt due is not a
claim for breach of contract. Nor does it involve specific performance of the contract.
Therefore, the claim is not subject to the exercise of a judicial discretion in favour of the
plaintiff based on equitable concideration. 20 For example, where a seller of good recovers the
price due under the contract, the order of the court is not one for specific performance, and
equitable defences, such as laches, are not relevant. In some cases on order for specific
performance may lead to the recovery of a liquidated sum, as where the court orders specific
performance of a contract for thesale of land. However, recovery of the liquidated sum is here
merely an incident of the decree.
( 2205 ) Entire contracts. Full performance of an entire contract will lead to the recovery of
a liquidated sum, that is, the contract price. Moreover, in mose cases subtantial performance
of the contract will have this effect, subject to the right of the other party to claim damages.25
( 2206 ) Instalment payments. Contracts frequently provide for the payment of money by
instalment. For example, A might lend $1000 to B and B might promise to pay a specified
amount, say $110 per month, for 10 months. Another form of instalment payment is found in
severable contract.26 For example, a buyer may agree to pay a specified amount for each
delivery made by the seller under an instalment goods contract. Other example can be found
in leases, time charterparties, and so on, where the contract fixes an amount to be paid at
specified intervals. In respect of there contracts the plaintiff is able to recover each instalment
payment, as a debt, when it falls due for payment.27
Two features of contracts which provide for instalment payment deserve emphasis.
First, the plaintiff may sue for and recover each payment as it falls due without waiting for all
payment to become due. Even if the defendant has repudiated all liability under the contract,
the plaintiff is not conceived as ‘splitting’ a cause of action by claiming each payment as it
falls due. Accordingly, an action for one instalment does not bar a subsequent claim in
respect of a latter instalment.
Second, in the absence of a clause accelerating payment, the plaintiff is not entitled to
recover future payments as debts due. If the defendant commits a serious breach, or
repudiates the contract, instalments which had not fallen due for payment can only be
recovered as damages. The defendant’s conduct does not bring forward the time for payment
and the court will discount an award of future payments to take account of premature
recovery.28