Damages for Breach of Contract — Compensation and ‘Personal Preferences’: Ruxley Electronics and Construction Ltd v Forsyth
| Date | 01 March 1996 |
| DOI | http://doi.org/10.1111/j.1468-2230.1996.tb02079.x |
| Published date | 01 March 1996 |
CASES
Damages for Breach of Contract
-
Compensation and
‘Personal Preferences’
:
Ruxley Electronics and
Construction Ltd
v
Forsyth
Jill
Poole*
There has been much debate surrounding the circumstances when it is possible to
recover cost of reinstatement damages for breach of contract rather than the
difference in the property’s value where the cost of reinstatement greatly exceeds
that difference in value.’ This
is
far more likely to be the case in the context of
building contracts where there has been defective performance than where the
breach stems from non-performance of a particular contract obligation since, in the
former case, the cost of reinstatement will inevitably involve the increased cost of
demolition of the defective structure and rebuilding from scratch.
In
the United
States of America, such additional expense is regarded as ‘economically wasteful’
so
that the employer is restricted to difference in value,2 although some American
courts have suggested that the measure adopted should depend on whether the
breach in question is inadvertent or deliberate.3
The problem can
be
particularly acute where there is
no
difference in value
between the building when the specification requirement has been properly
fulfilled and when it fails to meet that contractual specification. This may happen
all too often because building owners are frequently prepared to contract and pay
for work to their property which will not necessarily be reflected in an increase in
the property’s market value. In these circumstances, whilst failure to correctly
perform may not result in any objectively assessable difference in value, breach
may nevertheless affect the building owner’s ‘consumer ~urplus,’~ viz ‘the excess
utility or subjective value’ over and above the market value of the performance
which has been contracted for and which would have been secured by proper
*Banister and Lecturer in Law, Cardiff Law School, University of Wales.
I am indebted to Michael Furmston for his helpful comments on an earlier draft of this note.
1 Harris,
Ogus
and Phillips, ‘Contract Remedies and the Consumer Surplus’ (1979) 95 LQR
581;
Beale,
Remedies
for
Breach
of
Conrruct
(London: Sweet
&
Maxwell, 1980) pp 173-177; Birmingham,
‘Damage Measures and Economic Rationality’
[
I9691 Duke LJ 49; Farnsworth, ‘Legal Remedies for
Breach of Contract’ (1970)
70
Colum
L
Rev
1145,
1167-1 175; Tettenborn, ‘Damages for Breach of
Positive Covenants’ (1978) 42 Conv 366; Muris, ‘Cost of Completion
or
Diminution in Market Value:
the Relevance of Subjective Value’ (1983) 12 J. Legal Studies 379; MacDonald, ‘Breach of
a
Contractual Obligation
-
Cost of Work or Market Value’ [I9881 Conv 421.
See
Jacob
and
Youngs
v
Kent
(1921) 230
NY
239, 129 NE
889;
and
Groves
v
John Wunder
Co
(1939) 205 Minn 163, 286 NW 235, 238.
See
Groves
v
John Wunder
Co,
n2 above, where the Supreme Court of Minnesota stressed the
‘wilful’ nature of the breach; see further Famsworrh
on
Conrrucrs
(Boston: Little Brown and Co,
1990) volIII,
s
12.13.
In
French law
a
distinction is drawn between the effects of intentional and
unintentional breach (see Nicholas,
The French
Law
of
Contract
(Oxford: OUP, 1992) pp 228-229,
for
a
discussion of the effect of
‘dol’).
This is not, however,
a
factor
in
the English decisions which
do not distinguish breaches on an intent basis. Such an approach would
also
sit uneasily with the
principle that contract damages do not seek to punish the guilty party or make him hand over any
gains from that breach
(Surrey
CC
v
Bredero
Homes
Lid
[1993] 3
All
ER
705).
Harris
et
al,
op
cit
n
1,
582.
2
3
4
272
0
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1996
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592,
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