Ruxley Electronics and Construction Ltd v Forsyth
[1996] AC 344
Ratio Decidendi
Where a contract for building works specifies a particular standard or dimension, but the works are carried out defectively, the appropriate measure of damages depends on what would be reasonable in all the circumstances. The cost of reinstatement — rebuilding to the contractual specification — is the prima facie measure but will not be awarded if it is out of all proportion to the benefit which the reinstatement would produce. Where reinstatement is disproportionate, the court may award instead damages for diminution in value (often zero where the defect does not affect market value) or damages for loss of amenity, which reflects the personal value the innocent party places on the contractual performance beyond its market value — the 'consumer surplus'. This last head of damage is a recognition that a consumer who bargains for a particular performance has a genuine non-market interest in receiving exactly what was promised.
حقائق
Mr Forsyth contracted with Ruxley Electronics and Construction Ltd to build a swimming pool in his garden in Kent at a contract price of £70,178. The contract specified that the pool should have a maximum depth of 7ft 6in. When the pool was built, the maximum depth was only 6ft 9in — nine inches shallower than specified. Expert evidence established that the pool was perfectly safe for diving despite the shallower depth, and that the difference in depth had no effect on the market value of the property. The cost of rebuilding the pool to the contractual depth would have been £21,560. The trial judge (Judge Diamond QC) awarded £2,500 for loss of amenity but declined to award the cost of reinstatement. The Court of Appeal reversed and awarded the full £21,560. Ruxley appealed to the House of Lords.
فیصلے کا خلاصہ
The House of Lords (Lords Jauncey, Bridge, Keith, Mustill, and Lloyd) unanimously allowed the appeal and restored the judge's award of £2,500. The leading speeches were given by Lord Jauncey and Lord Mustill. Lord Jauncey held that the cost of reinstatement was an available measure of damages for defective performance but that reasonableness was a limit on its award. On the facts, the pool was perfectly usable, the defect did not affect market value, and the cost of reconstruction was wholly disproportionate to any benefit it would confer. The award of £2,500 for loss of amenity — described as the consumer surplus or personal loss to Forsyth in not getting what he bargained for — was correct as a matter of law. Lord Mustill gave an important analysis of the consumer surplus, explaining that it represents the personal value placed on performance by the contracting party beyond what the market would pay: a person who contracts for a pool of a particular depth has a genuine interest in receiving that depth, even if the market does not value it. That interest merits compensation, but the compensation need not equal the cost of reinstatement if that would be grossly disproportionate.
اہم اقتباسات
"Damages are designed to compensate for an established loss and not to provide a gratuitous benefit to the aggrieved party, such as here would be the case if the full cost of rebuilding were awarded when the reconstucted pool would be of no greater utility than the existing one."
— Lord Jauncey at 357
"The law must take into account the fact that the consumer who has contracted for a particular amenity has suffered a real loss when he does not receive it, even though the financial consequences to him of the breach are slight."
— Lord Mustill at 360
"It is time to recognise that the law must cater for those occasions where the value of the promise to the promisee exceeds the financial value of the performance promised."
— Lord Mustill at 360–361
بعد کا علاج
The leading authority on the assessment of damages for defective building work and on the 'consumer surplus' concept. Consistently applied and cited in construction and contract disputes.
Applied and extended in Farley v Skinner [2001] UKHL 49, where the House of Lords awarded damages for non-pecuniary loss (disappointment and discomfort) to a property buyer where a surveyor had negligently failed to warn him of aircraft noise, relying on Ruxley's recognition of the consumer surplus.
Distinguished where reinstatement is reasonable and proportionate, for example where the defect affects a structural element that cannot be left as-is without risking the integrity of the building.
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