Ruxley Electronics and Construction Ltd v Forsyth
| Ruxley Electronics Ltd v Forsyth | |
|---|---|
 | |
| Court | House of Lords |
| Decided | 29 June 1995 |
| Citation(s) | [1995] UKHL 8, [1996] AC 344 |
| Court membership | |
| Judge(s) sitting | Lord Keith of Kinkel, Lord Bridge of Harwich, Lord Jauncey of Tullichettle, Lord Mustil, Lord Lloyd of Berwick. |
| Keywords | |
| Loss of amenity, cost of cure | |
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".
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 upheld an 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’.
| “ | a common feature of small building works performed on residential property that the cost of the work is not fully reflected by an increase in the market value of the house, and that comparatively minor deviations from specification or sound workmanship may have no direct financial effect at all. | ” |
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.
See also
- English contract law
- Addis v Gramophone Co Ltd [1909] AC 488
- Jarvis v Swans Tours Ltd [1973] QB 233, [1973] 1 All ER 71, where purpose of contract to obtain some mental satisfaction
- Jackson v Horizon Holidays Ltd, [1975] 3 All ER 92
- Johnson v Gore Wood & Co [2002] 2 AC 1, 49, (a case actually concerning "reflective loss" in UK company law) it was said contract breaking is an ‘incident of commercial life which players in the game are expected to meet with mental fortitude’
- Peevyhouse v. Garland Coal & Mining Co., 382 P.2d 109 (Okl. 1962)
- Tito v Waddell (No 2) [1977] Ch 106
Notes
References
- Harris, Ogus and Phillips, ‘Contract Remedies and the Consumer Surplus’ (1979) 95 LQR 581