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It is established in law that a Claimant in a breach of contract claim can recover only those losses which arise naturally from the breach and which could reasonably be supposed to have been in the contemplation of the parties at the time the contract was entered into. Any further losses would be too remote and irrecoverable. A recent Court of Appeal case has considered the extent to which property-related losses are recoverable and has held that losses arising from a fall in the market value of property are not too remote and are therefore recoverable.

In the case of John Grimes Partnership Ltd –v- Gubbins [2013] the Defendant obtained planning permission to develop a field for residential purposes and engaged the Claimant, an engineer, to make arrangements for a road and drainage on the site. It was expressly agreed that such work would be completed by the Claimant by March 2007. The deadline was not met and in April 2008 the Defendant engaged another engineer to complete the work.

The Claimant brought a claim against the Defendant for just under £3,000 of unpaid invoices. The Defendant disputed the claim and brought a counterclaim for almost £20,000 of fees that he had previously paid to the Claimant, claiming that the work had not been completed properly. The Defendant also claimed damages for the losses he suffered due to the work not having been completed by March 2007 as agreed. The Defendant’s losses caused by the delay were a reduction in the market value of the residential properties and an increase in building costs. The Defendant was successful and the Claimant appealed but his appeal was dismissed.

The Claimant argued that the losses claimed due to a decrease in market value were too remote. It was held by the Court of Appeal that the losses were not too remote as, when entering into the contract, the Claimant knew that a delay would bring with it the risk that the property market may rise or fall and therefore the loss was reasonably foreseeable. The Court of Appeal also did not uphold the Claimant’s case that such loss would be disproportionate compared to the contract price. It was held that this was not sufficient to escape responsibility.

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The Court of Appeal did note that there may be circumstances where the general rule may not be followed, and this would be in such a case where the particular circumstances show that the parties when entering into the contract did not intend for the Defendant to be liable for a particular type of loss (even though that loss was reasonably foreseeable).

It follows therefore that contracting service providers should take particular care to carefully consider and ensure that any contract expressly excludes liability for particular types of loss. Otherwise they may become liable for ‘foreseeable losses’ which they did not foresee or contemplate at all.

We at Blacks can assist in the preparation of all forms of contracts and any disputes arising therefrom.

 

Please contact Luke Patel
on 0113 227 9316
or by email at LPatel@LawBlacks.com

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