Facts
- Ruxley Electronics and Construction Ltd contracted to build a swimming pool at Forsyth’s residence with a specified depth of seven feet six inches.
- On completion, the pool’s actual depth was six feet nine inches, falling short of the contractual requirement.
- Despite the discrepancy, the pool was safe and suitable for its intended use, including diving.
- Forsyth sued Ruxley for damages equivalent to the cost of rebuilding the pool to the contractually specified depth, estimated at £21,560.
- Ruxley argued that full reconstruction was disproportionate since the pool was functional and the depth defect did not devalue the property or result in significant loss.
- The dispute escalated to the House of Lords for determination on the proper measure of damages in these circumstances.
Issues
- Whether damages for breach of contract should be assessed based solely on the cost of curing the defect, regardless of proportionality.
- Whether a claimant is entitled to the full cost of reinstatement when the actual loss suffered is minimal and the intended use remains unaffected.
- Whether an award for loss of amenity is appropriate in lieu of full reinstatement costs.
Decision
- The House of Lords held that awarding Forsyth the full cost of reconstruction would be disproportionate given the minor nature of the depth deviation and absence of consequential loss.
- The court found that the primary aim of damages is to compensate for actual loss, not to ensure literal fulfillment of all contract terms irrespective of reasonableness or proportionality.
- Forsyth was awarded £2,500 for loss of amenity, reflecting the diminished enjoyment from the breach but falling short of the full cost of rebuilding the pool.
- The decision established that the claimant's genuine intention and the overall proportionality must be considered in assessing damages for defective works.
Legal Principles
- Damages for breach of contract are compensatory and measured by the actual loss suffered, rather than the cost of full contractual performance where such cost is excessive.
- The courts will not award cost of cure damages if that cost is out of proportion to the benefit gained; loss of amenity may be awarded instead in such cases.
- There must be a judicial assessment of the claimant’s true intention to cure and the reasonableness of awarding reconstruction costs.
- The principles of mitigation of loss and remoteness are relevant, ensuring remedies are reasonable and foreseeably connected to the contractual breach.
- The judgment crystallizes flexibility in awarding damages, considering both pecuniary and non-pecuniary (amenity) losses.
Conclusion
Ruxley Electronics and Construction Ltd v Forsyth clarifies that damages for breach of contract should not automatically equate to the cost of cure where that is disproportionate to the loss suffered. Courts may instead award a sum for loss of amenity, ensuring compensation remains fair and proportionate while avoiding unjust enrichment or punitive remedy.
