3 Provided the loss is not too remote, the next matter
to consider is how much is payable by way of damages.
As we have already seen, the object is to put the injured
party in the same position as if the contract had been
performed. This is sometimes described as providing
compensation for loss of expectation. Expectation losses
may include loss of profit which would have been made
but for the breach or the cost of achieving agreed per-
formance. In some situations the claimant may prefer
to recover the losses he has incurred in reliance on the
contract. Reliance loss includes wasted expenditure. It
seems that the claimant may claim for reliance losses
rather than expectation losses if he so chooses.
If the claimant has not suffered a loss as a result of the
breach, the court will only award nominal damages.Part 3Business transactions
256
(b) damages of £262 a week for loss of profits it would
have made on extremely lucrative dyeing contracts.
The Court of Appeal held that the claimant was entitled
to recover for the normal loss of profits on both clean-
ing and dyeing contracts, but it could not recover for
the especially profitable dyeing contracts of which the
defendants were unaware.Simpsonv London and North Western
Rail Co (1876)
Simpson entrusted samples of his products to the de-
fendants for delivery to Newcastle, for exhibition at an
agricultural show. The goods were marked ‘must be at
Newcastle on Monday certain’. They failed to arrive in
time. The defendants were held liable for Simpson’s pro-
spective loss of profit arising from his inability to exhibit
at Newcastle. They had agreed to carry the goods know-
ing of the special instructions of the customer.is plain that, when Mr Reed entered into this contract, he
must have known perfectly well that much expenditure
had already been incurred on director’s fees and the like.
He must have contemplated – or at any rate, it is
reasonably to be imputed to him – that if he broke his
contract, all that expenditure would be wasted, whether
or not it was incurred before or after the contract.’
Comment. This unanimous decision of the Court of
Appeal has been criticised for allowing recovery of pre-
contractual expenditure which has not been incurred in
reliance on the defendant’s promise.Anglia Television Ltdv Reed(1971)The claimants engaged the defendant, a well-known
American actor, to play the lead in a film they were
making for television. At the last moment the defendant
repudiated the contract and, as the claimants were unable
to find a suitable replacement, the film was abandoned.
The claimants did not attempt to claim for loss of profits
as it was not possible to say whether the film would
have been a success. However, they were successful
in recovering their wasted expenditure (on employing a
director, scriptwriter and other actors, researching loca-
tions and so on), even though some of the expenses had
been incurred before the defendant entered into the con-
tract. Lord Denning explained the decision as follows: ‘itC & P Haulagev Middleton(1983)C & P had granted Mr Middleton a six-month renewable
licence to occupy a garage which he used to carry on his
business. Mr Middleton spent some money equipping the
premises, but the terms of his agreement prevented him
from removing such equipment at the end of the licence.
The parties quarrelled and, as a result, Mr Middleton was
unlawfully evicted from the garage ten weeks before the
end of a six-month period. Fortunately, Mr Middleton’s
local council allowed him to use his own garage for more
than ten weeks, which meant that he did not have to pay
rent. He sued C & P for the cost of equipping the pre-
mises. The Court of Appeal held that he was entitled to
nominal damages only. The cost of equipping the garage
would have been lost even if the contract had been car-
ried out as agreed. It is not the function of the courts to
put the injured party in a better financial position than if
the contract had been properly performed.Where the breach of contract consists of defective per-
formance of a building contract, the courts have some-
times based the award of damages on the difference
between the value of the building contracted for and the
defective building, and sometimes on the cost of curing
the defect.Ruxley Electronics and Construction
Ltdv Forsyth(1995)
The claimant company agreed to build a swimming pool
for Mr Forsyth. It was a term of the contract that the pool
should be 7ft 6in at the deep end, to allow for safe diving.
When the pool was built, however, it had a maximum
depth of 6ft 9in and was only 6ft under the diving board.