Introduction
Contract law seeks to provide remedies for breaches of contractual obligations, primarily through monetary damages designed to compensate the injured party. A central principle, established in Robinson v Harman, mandates that damages should place the claimant in the same position as if the contract had been performed. This principle, known as the protection of expectation interest, aims to compensate for the loss of the bargain. The application of this principle is, however, subject to limitations. These include considerations of remoteness, the duty to mitigate losses, and restrictions on recovery for non-pecuniary losses. In Farley v Skinner [2001] UKHL 49, the House of Lords clarified the circumstances under which damages for distress and inconvenience could be awarded in contract breach cases. This landmark case provides a useful example of where expectation interest is upheld, but with recognition of the limitations of applying the principle in every single circumstance.
The Facts of Farley v Skinner
In Farley v Skinner, the claimant, Mr. Farley, engaged the defendant, Mr. Skinner, a surveyor, to inspect a property Mr. Farley was considering purchasing. The specific instruction given by Mr. Farley was to investigate whether the property was affected by aircraft noise, a key consideration because he wished to avoid living near a flight path. Mr. Skinner reported that the property was unlikely to be affected by such noise. Following Mr. Skinner’s report, Mr. Farley purchased the property only to find it was, in reality, significantly impacted by aircraft noise. Mr. Farley then brought an action for breach of contract, asserting that Mr. Skinner’s report was substandard and had breached the contractual obligation to exercise reasonable care when investigating the question of aircraft noise. He argued that he should be compensated not only for any financial loss but also for the diminished enjoyment of his property caused by the noise.
Legal Issues in Farley v Skinner
The legal issues before the House of Lords revolved around the extent to which damages for non-pecuniary losses, specifically distress and physical inconvenience, could be awarded in contract law. Traditionally, damages for mental distress were generally not recoverable in contract breach cases, except in very specific circumstances. These exceptions, established in previous case law such as Watts v Morrow, related to contracts where the very object was to provide pleasure or relaxation. The defendant, Mr. Skinner, argued that Mr. Farley’s claim for damages for the loss of amenity was not permissible because the purpose of a surveyor’s contract is not to provide pleasure or freedom from distress. Conversely, Mr. Farley claimed that he had suffered actual distress as a direct result of the defendant’s negligence and, therefore, was deserving of compensation. This dispute raised fundamental questions about the scope of damages for non-pecuniary loss in contract law.
The House of Lords Decision
The House of Lords, in a unanimous decision, found in favour of Mr. Farley. The court awarded him £10,000 in damages for his discomfort. Lord Steyn, delivering the leading judgment, clarified the exceptions established in Watts v Morrow with respect to damages for mental distress. The first exception allowed for recovery when the ‘very object’ of the contract was to provide pleasure. Lord Steyn, however, stated that the term ‘very object’ should not be interpreted narrowly. He argued that it was sufficient if the provision of pleasure was a “major or important object” of the contract, rather than the central purpose. Therefore, the provision of a quiet house was an important aspect, if not the central purpose of the contract. Further, Lord Scott, also in the majority, commented that the distinction between ‘physical’ and ‘non-physical’ is more about the cause of the inconvenience or discomfort, rather than the type. He clarified that discomfort caused by sensory experience could attract damages, whereas mere disappointment would not. The Court found that the aircraft noise was a physical inconvenience and, therefore, damages were available. This decision broadened the scope of damages for mental distress and discomfort in contract law, recognising that non-pecuniary losses could form a significant aspect of a contractual arrangement. The case established that while a contract for a survey was not purely about pleasure, the consideration of amenity, particularly as related to the purpose of the purchase, was enough for a claim.
Implications for Contract Law
The judgment in Farley v Skinner had several important implications for contract law. Firstly, it modified the strict boundaries established in earlier case law by adopting a more lenient approach towards awarding damages for non-pecuniary losses such as distress and inconvenience. It acknowledged that contracts can have both a practical and an emotional aspect, and that a breach of the contract can lead to tangible harm beyond financial loss. Secondly, it clarified that the concept of 'physical' inconvenience was not to be narrowly construed to exclude sensory experiences such as noise, sight and smell. It means that where contractual breaches lead to negative sensory experiences, damages are recoverable provided that the losses are not too remote. This broad interpretation of 'physical' inconvenience created a wider net of potential claims. Thirdly, it reinforced the principle that damages in contract law should be compensatory and should, to the extent that is possible, put the claimant in a position as if the contract was performed. It is particularly relevant where, as in Farley, the objective behind entering into the contract was partly, not exclusively, for a non-pecuniary benefit. Finally, Farley v Skinner shows that the English courts are prepared to move away from a rigid and formalistic approach to the law of contract by considering the actual expectations and experience of the contracting parties.
Connection to other Cases
The ruling in Farley v Skinner can be seen as a development of principles established in several earlier cases. In Addis v Gramophone Co Ltd, the court established the general rule that damages for mental distress and loss of reputation are not recoverable in contract law. Exceptions to this rule began to appear later in cases like Jarvis v Swan Tours Ltd where the very object of the contract was the provision of pleasure. A similar line was taken in Watts v Morrow, where damages for distress were allowed for physical inconvenience or where the purpose of the contract was the provision of relaxation or pleasure. However, Farley v Skinner expanded this exception by stating that the provision of pleasure did not need to be the "very object" but could be a "major or important object". Furthermore, the case can be contrasted with McLoughlin v Jones, a case where psychiatric harm resulted from the negligent actions of a solicitor which resulted in the imprisonment of his client. In McLoughlin, the Court of Appeal took a similarly lenient approach as was adopted in Farley v Skinner to allowing claims for non-pecuniary loss by treating loss of liberty as akin to physical injury, therefore qualifying for psychiatric damage. The approach in both cases is that non-pecuniary losses could be compensated provided there was a direct and foreseeable link to the contractual breach.
Conclusion
The case of Farley v Skinner is an important precedent in the English law of contract concerning the scope of recoverable damages. By recognizing the importance of non-pecuniary losses such as distress and inconvenience, the House of Lords expanded the boundaries of what could be compensated in contract cases. The court clarified that the 'very object' of a contract does not have to be solely about providing pleasure but also includes other “major or important” objectives. Furthermore, the case established that the concept of physical inconvenience includes negative sensory experiences. The case confirms that the law of contract aims, as stated in Robinson v Harman, to place the innocent party in the same position as if the contract was performed, so far as money can do it. It demonstrates that this principle is not limited to pecuniary damages and can include compensation for non-pecuniary losses directly linked to the breach. The influence of the case remains important in establishing the current legal approach to claims of distress and physical inconvenience.
