Chapter 13 Guidance on questions in the book

Question

Doolittle plans a summer holiday cruise for himself and his paying guests. On 1st April he contracts to hire from Sinbad the pleasure ship The Venus for the months of June and July, paying a deposit of £5,000. On May 1st, having spent £10,000 on preparation for the voyage, he learns that the ship is not going to be available. An alternative vessel cannot be found in time, and the project has to be abandoned. Doolittle loses the £12,000 profit that he expected to make. Advise him, on the following assumptions:

(a) Unknown to the parties when they make their contract on April 1st, The Venus had been wrecked on a reef the week previously;

(b) The Venus never existed.

Answer guidance

Remember you are asked to advise Doolittle. Doolittle has paid a deposit, has wasted expenditure preparing for the voyage and has lost anticipated profit. Be careful when juggling with figures like these that you don’t double-count: in practice, you would need to check whether the lost profit was net or gross. After all, expectation damages for breach of contract put the claimant into the position he would have been in had the contract been performed: in this scenario, Doolittle would have had to incur the expenditure to make the anticipated profit (for more details on the measure of expectation damages, see chapter 16). So Doolittle is going to want to claim expectation damages for breach of contract and prima facie this should be utterly straightforward, in that Sinbad has breached his promise to deliver the ship at the due date. However you will need to advise him how the law is likely to deal with the two ‘mistake’ scenarios. You always begin by construing the contract to see whether the risk of the non-availability of the ship is allocated, expressly or impliedly: maybe Sinbad promised that the ship was in good condition or at least in existence at the date of the contract, maybe the contract provided that the existence of the ship was a condition precedent to the parties’ obligations. The better view is that this process exhausts the possible outcomes. However, regrettably English law suggests that there is a further possibility to consider, namely whether the apparent contract was actually void for mistake, in which case no damages for breach of contract can by definition be claimed (what an outrageous outcome that would be!), although there might be another route to a lesser level damages, such as a claim for misrepresentation that the ship existed.