Decided 29 June 1995 Court House of Lords | End date June 29, 1995 | |
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Citation(s) [1995] UKHL 8, [1996] AC 344 Judge(s) sitting Lord Keith of Kinkel, Lord Bridge of Harwich, Lord Jauncey of Tullichettle, Lord Mustill, Lord Lloyd of Berwick. Similar Farley v Skinner, Jarvis v Swans Tours Ltd, Robinson v Harman, Anglia Television Ltd v Reed, Attorney General v Blake | ||
Ruxley Electronics and Construction Ltd v Forsyth [1995] UKHL 8 is an English contract law case, concerning the choice between an award of damages for the cost of curing a defect in a building contract or (when that is unreasonable) for awarding damages for loss of "amenity".
Contents
Facts
Ruxley Electronics Ltd was meant to build a seven-foot six inch deep pool, but it was built to only six feet. It was found that the pool was safe for diving, and anyway Forsyth never intended to put in a diving board. Also, Forsyth had no intention to use the damages to correct the pool. Moreover, £21,560 was unreasonable for a new pool. But Forsyth refused to pay any money given the defect. Ruxley Electronics Ltd sued for breach of contract. Forsyth counterclaimed requesting damages to fix the pool as it should have been.
The trial judge gave the diminution of value was zero and the cost of cure was £21,560. He awarded £750 for inconvenience and £2500 for loss of amenity. The Court of Appeal said the cost of rebuilding the pool should be awarded.
Judgment
The House of Lords allowed the appeal and upheld the judge's award of £2500 for loss of amenity. Lord Mustill said ‘the law must cater for those occasions where the value of the promise to the promisee exceeds the financial enhancement of his position which full performance will secure.’ So ‘consumer surplus’ was recognised in an award for breach of contract. To award them nothing would be to say the promise was illusory, and that was unsatisfactory. But correcting was too expensive, and too much for the loss of Mr Forsyth. It would be contrary to ‘common sense’ and unreasonable. So we must look to ‘the loss truly suffered by the promisee’.
Lord Lloyd said that though courts do not care what damages will be used for, the intention of the innocent party for what he does with them may be relevant to the issue of reasonableness in awarding damages.