Potential heads of claim - Building Contract Claims - page 110

and some indication of the proof necessary has been given [in Peak v.
McKinney Foundations ]. 324

This seems to be the true position.

6.5.3. Profit

Loss of profit, which the contractor would otherwise have earned but for the
delay or disruption, is an allowable head of claim. It is recoverable under the
first part of the rule in Hadley v. Baxendale 325 . It is only the profit normally to
be expected which can be claimed and if, for example, the contractor was
prevented from earning an exceptionally high profit on another contract,
this special profit would not be recoverable unless, at the time the delayed
or disrupted contract has been entered into, the employer was aware of the
exceptional profit. This is the second part of the rule.
Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd 326 is a case in point
(although not in the construction industry) where the plaintiffs, who were
launderers, contracted to buy a boiler from the defendants, who knew that
the boiler was wanted for immediate use. Delivery of the boiler actually
took place 5 months after the date specified in the contract. The Court of
Appeal held that the plaintiffs were entitled to recover the profit which
might reasonably have been expected to result from the normal use of the
boiler during the 5 months in question, but that no account could be taken of
the exceptionally profitable character of some of the contracts that they lost.
A profit percentage is not invariably recoverable as a head of claim arising
from disruption and delay. The better view is that such a claim is allowable
only where the contractor is able to demonstrate that he has been prevented
from earning profit elsewhere in the normal course of his business as a
direct result of the disruption or prolongation, e.g. he has been prevented
from taking up other work available to him. The position is similar to that
discussed above in section 6.5.2 regarding overheads. Indeed, for conveni-
ence, claims for loss of profit are often grouped together with loss of
overheads. To some extent the success of such a claim may, therefore,
depend on the economic climate at the time since it may be difficult for a
contractor to show when there is a shortage of work that any actual loss of
this kind has been suffered. Indeed, it may be that a contractor is operating
at no profit or even a small loss. But it will also depend on the extent to
which the prolongation is the result of additional work, the value of which
contains an appropriate proportion of profit.
There is a possible argument to the effect that loss of the overhead and
profit-earning capacity of additional resources devoted to a contract because
of delay or disruption is to be assumed without necessity of proof. For the
reasons stated earlier, this kind of argument is no longer acceptable.

324 Max Abrahamson, Engineering Law , 1985, 4th edition, Elsevier Applied Science Publishers, p.369.
325

(1854) 9 Ex 341.

326

[1949] 1 All ER 997.