Chapter 11 Guidance for end of chapter questions

Damage

Question

Jan agrees to build a balcony onto the side of Alex's house for £10,000. Alex specifies that she wants the balcony to be south-facing so that it will catch the most sun. An estate agent tells Alex that her house is currently worth £300,000 but it would be worth £320,000 with the balcony.

Midway through the construction of the balcony Jan has to erect some scaffolding and she negligently leaves a bolt loose. Alex is curious to see how the work has progressed and she climbs up to the balcony but accidently dislodges the loose piece of scaffold which falls through her greenhouse below, destroying all of the glass and her prize marrow. Alex is devastated because she was going to enter the marrow in a national competition with a prize of £50,000 and the chance to meet Alan Titchmarsh.

Unfortunately, Jan has built the balcony on the wrong side of the house and Alex is disappointed when the estate agent returns and values her house at only £310,000.

Advise Alex. Assume that there is an implied term in the contract that Jan will take all steps necessary to complete the balcony and take reasonable care at all times.

Answer

This problem raises quite a number of issues relating to damages for breach of contract but the question will be more manageable if the discussion is divided into the two different breaches which Jan appears to have committed. These are a) building the balcony on the wrong side of the house and b) negligently erecting the scaffolding.

In relation to a), the question presents you with an open opportunity to explain the basic aims of contractual damages, to put the innocent party in the position as though the contract had been performed. Alex's house would have been worth £20,000 more in this situation whereas as a result of the breach it is only worth £10,000 more and she has spent that amount having the balcony constructed. Her expectation loss appears, therefore, it to be the net £10,000 extra increase in the value of her house which she would have obtained had the contract been performed. You could also point out that sometimes it is difficult to prove what the expectation interest would be and in such cases (as in McRae the Commonwealth Disposals Commission) the claimant can seek reliance damages instead but given that we have the evidence of the estate agent, this problem does not really arise and in any event there do not seem to be any reliance losses as the £10,000 paid out has been recouped by a £10,000 increase in value.

You might also ask whether Alex might be able to claim the cost of cure as opposed to diminution in expected value, as was awarded in Radford v De Froberville, if Alex claimed that she was going to have the balcony pulled down and rebuilt on the correct side of the house. This seems unlikely for a number of reasons. There is less incentive to award the cost of the cure where the diminution in value measure does not leave the breach uncompensated (whereas in Radford the diminution in value was zero). Indeed, the £10,000 diminution in value award in this case is probably enough to enable the claimant to have the balcony rebuilt in the correct place given that the original contract price was only £10,000.

The fact that the diminution in value figure provides substantial compensation also distinguishes this case from Ruxley where in any event cost of cure was not awarded in contrast to Radford. This in turn leads on to the question of the £2500 awarded in Ruxley for loss of amenity. Could Alex claim a sum for loss of amenity in the sense that she would not get the expected benefit of the sun on her balcony? Could she bring this under the Farley v Skinner exception for non-pecuniary losses on the basis that the enjoyment of the sun's rays was a distinct and important part of the contract? Could she argue that this was part of her "consumer surplus"; in addition to the expected increase in financial value of her house. Although these points might be arguable, you may conclude that the £10,000 diminution in value award could be spent by her in building a new balcony on the sunny side thus enabling her to mitigate i.e. to avoid any such non-pecuniary loss of amenity or consumer surplus and that to award her £10,000 plus a sum for loss of amenity would be to overcompensate her. Thus £10,000 is a sufficient award and accurately reflects her loss whichever way you look at it.

Turning to the negligently erected scaffolding, the first issue is whether Alex's actions in climbing the scaffolding are so unwise as to be an overriding cause breaking the chain of causation completely between the breach and the damage as in Quinn v Burch Brothers. Even if it is not found to be an overriding cause, does it amount to contributory negligence on the basis of which the court should reduce the damages which are the "result partly of his own fault and partly of the fault of any other person". In this case Jan is the other person. Jan's fault is not simply the breach of a strict contractual duty as in Barclays v Fairclough but is the breach of an implied term to take reasonable care so contributory negligence might be applicable even though the action is technically brought in contract, as decided in Forsikrings Vestal v Butcher. However, this depends also on there being concurrent liability of Jan in tort which is not necessarily always an easy question to answer. However, such concurrent liability in tort probably would apply in this case (in so far as a builder owes a duty of care to anyone whose property might foreseeably be damaged by negligently erected scaffolding falling onto their property, whether or not they have a contract with the builder) and so any damages caused by the loose scaffolding could be reduced if the court considers Alex to have been partly at fault in climbing up it.

The final part of the question asks what those damages which might be subject to reduction are. Clearly the damage to the glass is recoverable, it is a type of loss which is not too remote whether one takes the normal contractual (Hadley v Baxendale) test of loss arising in the natural course of things/foreseeable as a serious possibility (the Heron) or the more generous tortious test of reasonable foreseeability favoured by Lord Denning in Parsons v Uttley Ingham for physical damage caused by negligent breach. Physical damage to the contents of the greenhouse (i.e. to the marrow) would also not be too remote on the contract test but Alex's disappointment at losing the chance to win the £50,000 or to meet Alan Titchmarsh (assuming you count that as a loss!) would be too remote on any test. It is certainly not a loss arising in the natural course of things nor is it one which may reasonably have been supposed to be in the contemplation of the parties since, as in Victoria Laundry, Jan had not been told about the competition. Nor is it reasonably foreseeable even on the more generous tort test and even it were, this test would not apply to the breach of contract claim as the damage is of a different "type" to the foreseeable physical damage. You may be tempted to say Alex can recover on the basis of loss of a chance as in Chaplin v Hicks but this should be dismissed as there the whole point of the contract was to give the claimant the opportunity or chance to be selected so the loss of a chance was the obvious loss arising in the natural course of things which is certainly not the case here so that case is of no application.

Overall Alex is likely to get £10,000 diminution in expected value of her house plus the cost of replacing the greenhouse glass and the ordinary market value of her marrow (and any other plants destroyed) but other than the £10,000, the latter items would be subject to potential reduction for contributory negligence on her part.