Common law — practice questions

This scenario mirrors the facts of Ruxley Electronics v Forsyth.

Step 1: Identify the possible measures of loss. The two main measures are 'Cost of Cure' and 'Diminution in Value'.

Step 2: Calculate each measure.

• Cost of Cure: The cost to fix the defect is given as £21,560.
• Diminution in Value: The difference in the property's market value is £0.

Step 3: Apply the test of reasonableness from Ruxley v Forsyth. The court must decide if awarding the cost of cure is reasonable and proportionate to the benefit gained. Here, spending £21,560 (over 30% of the contract price) to gain an extra 1.5 feet of depth, when the property value is unaffected and the pool is still usable, is likely to be deemed wholly disproportionate and unreasonable.

Step 4: Consider 'Loss of Amenity'. Since awarding £21,560 is unreasonable and awarding £0 would not compensate the homeowner for their genuine disappointment and loss of a specific contractual promise (the 'consumer surplus'), the court will award a sum for 'loss of amenity'.

Final Answer: The court is unlikely to award the full £21,560. Instead, a smaller sum will be awarded for loss of amenity. In the actual Ruxley case, this was £2,500. This figure represents a fair compensation for the non-financial loss without being punitive to the builder.

Step 1: Identify the total loss claimed. The miller's total loss of profit due to the 7-day delay is £1,400.

Step 2: Apply the remoteness test from Hadley v Baxendale.

• Limb 1 (Natural Loss): Loss of some profit is a natural result of a delay.
• Limb 2 (Contemplated Loss): The miller explicitly told the courier the mill was stopped. Therefore, the significant loss of profit from the delay was in the reasonable contemplation of both parties. The loss of £1,400 is not too remote.

Step 3: Apply the duty to mitigate. The claimant must take reasonable steps to minimise their loss. The miller had the option to hire a replacement crankshaft for £400, which would have allowed the mill to operate during the delay. Failing to do so is a failure to mitigate.

Step 4: Calculate the recoverable loss. The claimant cannot recover for losses they could have reasonably avoided. The miller could have avoided the £1,400 profit loss by spending £400 on a hire.

• Loss if mitigated: £400 (the cost of hiring the replacement).
• Loss if not mitigated: £1,400 (the lost profit).

The court will only award damages for the loss that would have been incurred had the miller taken the reasonable step of mitigating.

Final Answer: The miller can recover £400. This is the cost they would have incurred to mitigate their loss. They cannot claim the full £1,400 in lost profit because that loss was avoidable.