According to the concept of deterrence the damages should equal the amount of harm which was the base concept for compensation in the previous methods of damages. In this type the remedy is used to punish the wrongdoer in order to deter others from doing the same acts in future. “The traditional rule is that punitive damages are not recoverable in contracts cases unless a specific legal conditions (such as some consumer protection statutes) allows them or the defendant has committed fraud or some other independent tort”(Jane P. Mallor).
This is because it is believed that penalties in contracts may push the promise to induce the promisor to breach. “A few states will permit the use of punitive damages in contracts in certain cases” (Jane P. Mallor) This kind of remedies is contrary to the previous one, over compensatory, and it is based on placing the injured party in non favorable position on breach. By reducing the compensation the promise will be encouraged to provide help to the promisor in order to do the job. For example provide him with all the required information that could help him in doing the job.
This concept of the under compensatory is based upon one of the factors stated for the losses to be recoverable which is that “Damages must be reasonably foreseeable at the time the contract was made”. This means that any unreasonable damages are not recoverable. For example, if X has a mill and a shaft was broken, X delivered the shaft to Y who was supposed to deliver it to the manufacturer to make a copy of it. Y delayed the delivery of the shaft beyond a reasonable time. X had not informed y that the delay will result in some loses to him.
Thus, Y was not entitled to damages for X (Jane P. Mallor). By applying this rule a better communication between parties should develop which will increase the efficiency of applying the contract. Summary and conclusion: The importance of contract remedies for the welfare of the market is increasing with world being as a global village. The most common remedy in Egypt is restitution because it is the easies to compute. If the restitution is not applicable the injured party should resolve to one of the kinds of the compensatory damages discussed.
In other certain cases the best compensation can be proven to be the over/under compensatory damages although they a contradicting with the theory of deterrence. These kinds of compensation should be enforceable by law in order to be recoverable.
Hosny, Abdel Monoem. “A Brief Guide in the General Theory of Obligation. ” The Lawyers’ Syndicate. Cairo: 1991 Morkos, Soliman. ” The Theory of Contracts part 2. ” 5th edition. Cairo: 1988 El Shawazaly, Abd EL Hamid. “The theory of obligation in light of judgment” 5th edition. Cairo: 1996 Jane P. Mallor, et al. , “Business Law and the Regulatory Environment” 11th ed. 2001.