Contract Law

Ruxley Electronics and Construction Ltd. v. Forsyth

[1996] AC 344

Facts

Ruxley agreed to construct a swimming pool for Forsyth.
The contract required the pool’s diving area to be 7 feet 6 inches deep.
The completed pool was shallower than specified.
The pool was nevertheless:
safe for diving;
usable;
not reduced in market value.
Forsyth claimed the entire cost of demolishing and rebuilding the pool.
Rebuilding would cost substantially more than the benefit obtained from correcting the depth.
Evidence suggested that Forsyth did not genuinely intend to reconstruct the pool.

Whether damages should equal the full cost of curing the defect.
Whether loss of amenity could be awarded where neither market value nor reasonable cost of cure reflected the true loss.

The normal objective is to protect the expectation interest.
Possible measures include:
diminution in value;
reasonable cost of cure;
damages for loss of amenity.
Cost of cure is inappropriate where it is wholly disproportionate to the benefit obtained.
The claimant’s intention to undertake remedial work may be relevant to reasonableness.
A contractual promise may possess personal value even where breach causes no market-value reduction.

Ruxley had clearly breached the contract by failing to provide the specified depth.
However, awarding the full reconstruction cost would produce economic waste.
The pool was safe and functional.
Correcting the defect required destruction of a usable structure for a relatively limited personal benefit.
A nominal award would also be inadequate because Forsyth had genuinely contracted for a deeper pool.
The House of Lords therefore recognised a middle measure: loss of amenity.
This compensated Forsyth for not receiving the exact performance promised without granting a disproportionate windfall.
The measure of damages must be reasonable and proportionate to the actual contractual interest injured.

Forsyth was denied the full cost of reconstruction.
He received £2,500 for loss of amenity.
Use this case for: cost of cure will be refused where disproportionate, but loss of amenity may compensate the unfulfilled contractual expectation.