Ruxley Electronics and Construction Ltd v Forsyth [1995]
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Ruxley Electronics and Construction Ltd v Forsyth [1995] UKHL 8 addresses the choice between awarding damages for the cost of curing a defect in a building contract and, when curing is deemed unreasonable, awarding damages for loss of amenity.
Ruxley Electronics agreed to construct a swimming pool for Forsyth. The contract specified a diving area depth of seven feet, six inches. However, when completed, the diving area was only six feet deep. Although the shallower depth was still safe for diving and did not affect the pool's value, Forsyth was dissatisfied. He brought an action for breach of contract, seeking the cost of demolishing and rebuilding the pool (cost of cure), totalling £21,540.
The trial judge rejected the claim for cost of cure damages, deeming it unreasonable in the circumstances. Instead, the judge awarded Forsyth loss of amenity damages amounting to £2500. The Court of Appeal overturned this decision, stating that damages should be awarded to place Forsyth in the position he would have been in if the contract had been performed, which, in this case, was the cost of rebuilding the pool. Ruxley appealed to the House of Lords.
The House of Lords allowed the appeal and upheld the judge's award of £2500 for loss of amenity. Lord Mustill emphasised that the law should accommodate situations where the value of a promise to the promisee exceeds the financial enhancement resulting from full performance. This concept acknowledged the idea of consumer surplus in a breach of contract award.
To award nothing would render the promise illusory, an unsatisfactory outcome. However, the cost of correction was deemed too high for the loss suffered by Mr Forsyth, and it would be contrary to common sense and unreasonable. Lord Mustill stressed the importance of considering the loss truly suffered by the promisee.
Lord Lloyd added that although courts do not concern themselves with how damages will be used, the innocent party's intention for using them may be relevant to the reasonableness of awarding damages. Additionally, he noted that in small building works on residential property, the cost may not be fully reflected in the house's market value, and minor deviations may have no direct financial impact.
In summary, this case illustrates the courts' flexibility in awarding damages, taking into account the actual loss suffered by the promisee when strict performance or costly corrective measures are deemed unreasonable.
Ruxley Electronics agreed to construct a swimming pool for Forsyth. The contract specified a diving area depth of seven feet, six inches. However, when completed, the diving area was only six feet deep. Although the shallower depth was still safe for diving and did not affect the pool's value, Forsyth was dissatisfied. He brought an action for breach of contract, seeking the cost of demolishing and rebuilding the pool (cost of cure), totalling £21,540.
The trial judge rejected the claim for cost of cure damages, deeming it unreasonable in the circumstances. Instead, the judge awarded Forsyth loss of amenity damages amounting to £2500. The Court of Appeal overturned this decision, stating that damages should be awarded to place Forsyth in the position he would have been in if the contract had been performed, which, in this case, was the cost of rebuilding the pool. Ruxley appealed to the House of Lords.
The House of Lords allowed the appeal and upheld the judge's award of £2500 for loss of amenity. Lord Mustill emphasised that the law should accommodate situations where the value of a promise to the promisee exceeds the financial enhancement resulting from full performance. This concept acknowledged the idea of consumer surplus in a breach of contract award.
To award nothing would render the promise illusory, an unsatisfactory outcome. However, the cost of correction was deemed too high for the loss suffered by Mr Forsyth, and it would be contrary to common sense and unreasonable. Lord Mustill stressed the importance of considering the loss truly suffered by the promisee.
Lord Lloyd added that although courts do not concern themselves with how damages will be used, the innocent party's intention for using them may be relevant to the reasonableness of awarding damages. Additionally, he noted that in small building works on residential property, the cost may not be fully reflected in the house's market value, and minor deviations may have no direct financial impact.
In summary, this case illustrates the courts' flexibility in awarding damages, taking into account the actual loss suffered by the promisee when strict performance or costly corrective measures are deemed unreasonable.
