Calculation of damages in case of avoidance and substitute transaction

Abstract This chapter tackles Article 75, which deals with the concrete calculation of non-performance loss when the contract has been avoided. The promisee can calculate its expectation interest by relying on a substitute transaction that it has entered into after the contract was avoided. A buyer entitled to damages can then claim the difference between the contract price and the higher price of the substitute purchase as non-performance loss; a seller entitled to damages can claim the difference between the contract price and the lower price of the substitute sale as non-performance loss. The discussion underscores that Article 75 is only applicable if the promisee has entered a substitute transaction; the mere possibility of doing so is not sufficient. A substitute transaction may only be made after the sales contract has been avoided. Furthermore, it emphasizes that a calculation of loss on the basis of Article 75 is permitted only if the substitute transaction was carried out in a reasonable manner.