Ruxley Electronics and Construction Ltd v Forsyth [1996] AC ...

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

1. Whether damages for breach of contract should be assessed based solely on the cost of curing the defect, regardless of proportionality.
2. Whether a claimant is entitled to the full cost of reinstatement when the actual loss suffered is minimal and the intended use remains unaffected.
3. 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.