Breach of contract by one of the parties entitles the other party to recover damages. Sometimes assessing the damage is quite easy, in other cases it can be quite difficult. But once the damage has been assessed, the (legal) question remains as to which part of it is recoverable by law? Most legal systems agree in placing some limitations on the ability to recover damages for breach of contract. Treitel, for one, mentions seven principal techniques used by various legal systems to achieve the aim of limiting damages.
However, he fails to mention one – fairly obvious – method of limiting damages, which is the possibility of hard and fast rules; rules which apply in all cases, regardless of the facts and circumstances of the case. For example: “the amount of damages to be awarded may never exceed 1,000 euros”. Treitel is right of course in not mentioning this method, because he is concerned solely with modern law and most modern legal systems do not have such rules. However, a hard and fast rule was in place in most of Europe for at least 1250 years.
Interestingly enough, classical Roman law did not know such rules for limiting damages either. The amount of damages awarded depended entirely on the facts of the case. But this changed in the year 531, when emperor Justinian issued a law limiting the recoverable amount of damages. This law – C.7,47 – contains the so-called duplum (Latin for ‘double’)-rule. It limits the recoverable amount of damages to twice the value of the obligation. For example, when someone buys a machine (for 1,000 euros) and the seller does not deliver the machine on the agreed date, the amount of damages awarded will be a maximum of 2,000 euros.
The duplum-rule immediately became the subject of much debate. It was considered to be incongruent with other provisions of Roman law, particularly those found in the Digests. In the ‘Middle ages’ the glossators and commentators tried to narrow the scope of the rule by interpreting it in a very strict sense. Most lawyers agreed that the rule should not be applied in all cases of breach of contract.
Despite its controversial nature the rule was in force in Europe for a long time. In France and The Netherlands it remained in effect until the first civil law codifications at the beginning of the 19th century. In Germany it even existed until 1900, when the rule was left out of the Bürgerliches Gesetzbuch.
In the French Code civil (art. 1150) and the old Dutch Civil code (art. 1283) the duplum-rule was abolished in favor of the foreseeability test: a debtor is only liable for damage which he has foreseen or which he could have foreseen at the time of contracting. The spiritual father of this foreseeability rule was the 16th-century lawyer Molinaeus, who introduced it in his treatise on C. 7,47. Pothier took it from Molinaeus, and through him it eventually crossed the North Sea to end up in the landmark case of Hadley v Baxendale under the English common law.
Want to know more about the duplum-rule and its connection to the foreseeability rule? A full article is published in this month’s issue of Ars Aequi (May 2013).