BetterLawNotes-5 (2)

CONTRACT LAW

More recent caselaw establishes that foreseeability of loss may not, of itself, be determinative of the remoteness requirement: one of the parties may have assumed the risk of a particular type of loss occurring. Thus, while the parties may have contemplated that a type of loss would be the probable result of a breach, they did not intend that the defendant should be liable for that loss.

Transfield Shipping Inc v Mercator Shipping Inc, The Achilleas [2008] UKHL 48

The owners (‘O’) of a vessel called the Achilleas entered into a contract with a chartering company (‘C’) under which O agreed to hire out the Achilleas to C. The contract set a date by which C had to redeliver the Achilleas to O. During the hire period, O agreed a ‘follow-on’ charter of the Achilleas with another charterer (‘T’), it being agreed that the hire period would begin on a date shortly after C’s redelivery date. C redelivered the Achilleas 9 days’ late. When it had become clear that redelivery would not be on time, and that the Achilleas would therefore not be available to T on the agreed start date, O agreed with T to reduce the hire rate payable by T. O subsequently sought compensation, ie damages, from C for the late redelivery. O claimed that it was entitled to damages based on the reduced amount of hire it received from T (ie the difference between the total amount of hire O actually received from T and the amount it would have received had T paid at the originally agreed rate), a sum in excess of $1m. C claimed that it was only liable to pay damages for the extra 9 days for which it had had the Achilleas (a sum of around $150,000). The House of Lords held that damages were to be assessed on the basis argued for by C.

The Achilleas is noteworthy principally for the reasoning of Lord Hope and Lord Hoffmann. They suggest that the court should not simply ask whether the parties had in their contemplation a particular type of loss, but also whether they had liability for this type of loss in their contemplation. Put another way, the court should ask whether or not D has assumed responsibility for this type of loss.

Siemens Building Technologies FE Ltd v Supershield Ltd [2010] EWCA Civ 7

A valve on a safety tank providing water for an office sprinkler system failed. The ensuing flood damaged office equipment. The Cs, the building owner, the lessee, and the occupier, brought claims against the construction company, Skanska, responsible for the building’s construction. Skanska joined its mechanical and electrical sub-contractor, Haden Young. HY joined Siemens, the sub-contractor for the supply and installation of the sprinkler system. Siemens joined Supershield, with whom it had contracted for the installation of the system. Having settled the claims against it, Siemens pursued its own claim against Supershield. The judge found that the failure of the valve was caused by Supershield’s breach of contract and that this breach was the effective cause of the flood. The judge further held that the settlement agreed by Siemens had been reasonable and represented the amount of Supershield’s liability in damages to Siemens. The Court of Appeal dismissed Supershield’s appeal.

Sylvia Shipping v Progress Bulk Carriers [2010] EWHC 542 (Comm)

As a result of delay caused by the owners’ failure to properly maintain the vessel, a sub-charter made by the charterers was cancelled when the vessel missed the applicable laycan dates. The tribunal awarded as damages the sum of some $275,000 being the loss of profit on the sub-charter suffered by the respondents. The owners appealed and argued that, following the Achilleas, the proper measure of damages was the difference between the charter and market rate for the period of the delay. Hamblen J dismissed the owners’ appeal.

John Grimes Partnership Ltd v Gubbins [2013] EWCA Civ 37

G, a farmer, had obtained planning permission for the development of a plot of land adjoining an ‘A’ road in Cornwall. G engaged JGP to design an access road. It was an express term of the contract that JGP complete its work by March 2007. Following a series of delays, G engaged another designer and the work was completed in June 2008. JGP sued G for its outstanding fees. G counter-claimed. The judge held that the project had been delayed by 15 months due to JGP’s breach of contract. The judge further held that the breach had caused a fall in the value of the development and that this loss was not too remote. The Court of Appeal dismissed JGP’s appeal.

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