Darlington Borough Council v Wiltshier Northern Ltd [1995]

Darlington Borough Council v Wiltshier Northern Ltd [1995] 1 WLR 68, 79 is an important English contract law case concerning a building contract for the benefit of a third party to whom contractual rights were assigned.

Wiltshier Northern Ltd (WNL) was contracted to construct a recreational centre for Darlington Borough Council (DBC). Two contracts were entered into between WNL and a finance company, and the agreement specified that all rights and causes of action against WNL were assigned to DBC. DBC initiated legal action against WNL for breaches of contract, and initially, no entitlement to damages was established. DBC appealed. The central question was whether DBC, as the assignee of the contract, was entitled to substantial damages for the breach of contract by WNL.

The appeal by DBC was allowed. The Court of Appeal reasoned that when the building contracts were executed, both parties were aware that any foreseeable damage would cause a loss to DBC. Consequently, the primary benefit of entering into the contract was intended for DBC. Therefore, DBC was deemed entitled to substantial damages for the loss caused by WNL. The assessment of damages would follow the normal basis, as if DBC had been an original party to the contracts.

The court applied the principle established in Johnson v Agnew [1980], emphasising the general principle for assessing damages for a breach of contract, which is to compensate the plaintiff for any loss or damage arising from the contract. The court distinguished Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915], clarifying that, despite the general rule that a third party cannot sue for damages on a contract they are not a party to, DBC was entitled to recover losses. This entitlement was based on the assignment of rights and the fact that the recreational centre was specifically built for DBC, considering the factual context of the case.
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