Civil Engineering Reference
In-Depth Information
the SBC, clauses 2.35 and 2.36 of the SBC/DB and clauses 43-45 of the NEC3, and,
further, that the contractor will not do so voluntarily, the measure of the employer's
loss can, ordinarily, be assessed in one of two ways. he first is the cost of the necessary
repairs. The second is the difference in value between the building in the condition
contracted for and the building in its actual condition, i.e. with the defective work, see
GUS Property Management Ltd
v.
Littlewoods Mail Order Stores Ltd
(1982).
A pursuer can, ordinarily, proceed on the basis of either measure. These are not
the only available measures of loss and a court is not confined to making an award
basedononeofthesemeasures,see
Ruxley Electronics and Construction Ltd
v.
Forsyth
(1995). It may be prudent, where possible, to proceed on the basis of both measures
as alternatives. The proper measure of damages may be determined by checking one
measure against the other, see
Prudential Assurance Co. Ltd
v.
James Grant & Co.
(West) Ltd
(1982).
The law in relation to this matter was clarified in England in the case of
Ruxley
Electronics and Construction Ltd
(1996). The House of Lords held that in assessing
damages for breach of contract for defective building works, should the court decide
that the cost of reinstatement would be out of all proportion to the benefit to be
obtained by the innocent party by reinstatement, the innocent party's claim would be
restricted to the difference in value between the building in the condition contracted
for and the building in its actual condition. Whether or not the innocent party actu-
ally intends to reinstate will be relevant in determining if it is reasonable to insist upon
reinstatement.
The position in Scotland was clarified in
McLaren Murdoch & Hamilton Ltd
v.
Abercromby Motor Group Ltd
(2002). Lord Drummond Young generally accepted the
principle set out in
Ruxley
that ordinarily a party is entitled to claim the cost of mak-
ing works conform to contract. However, he also set out exceptions to that rule. he
first, as with
Ruxley
,iswherethecostinvolvedismanifestlydisproportionatetoany
benefit that will be obtained from it. The second exception is where the other party
leads evidence to show a significant disproportion between cost and benefit. In the
latter situation the court considered that the balance between cost and benefit should
not be weighed too finely.
It should be borne in mind that certain contracts have detailed mechanisms for
assessing the sum due by one party to the other on termination, see, for example,
clause 8 of both the SBC and the SBC/DB, as well as clause 9 of the NEC3. In part, at
least, this deals with damages arising out of the termination. Termination is consid-
ered in Section 9.4.
Finally, it must always be borne in mind that only such losses as are consequent
onthebreachmayberecovered.Anexampleofthiscanbeseeninthecaseof
British
Westinghouse Electrical & Manufacturing Co. Ltd
v.
Underground Electric Railways Co.
of London Ltd
(1912).
10.5 Finance charges
It has long been judicially recognized that, in the ordinary course of things, when
contractors require capital to finance a contract they either borrow the capital
