if there was a breach of contract

In this case involving 2 friends, we could clearly identify that Charles did not fulfill his responsibility for Barry to design and construct the unique steel framed factory to satisfactory level and thereby causing the building unsafe for workers to enter. Clearly, there is a contract that exists here.

However, Barry has to ascertain if there was a breach of contract. The first step is to find out if there was breach on the express terms. As the contract was on construction, it would only contain terms relating to drawing & specifications, quality of work, materials used, warranties and the exclusion clause. Assuming if the express terms have not been breached, the next course of action would be to see if there has been a breach of the implied terms.

Breaching of Implied Terms

The implied terms should not contradict the express terms; but where they are implied they carry the same weight as express terms and may found a claim for breach of contract. They may be implied by statute, or in order to give the contract business efficacy. Furthermore, they may be implied where the express terms do not cover the matter that eventually becomes the subject of dispute, and it is necessary to define “usual practice" so as to determine the supposed objective intention of the parties [1] .

By observing the facts, the first implied term that has been breached is the term of Sale of Goods Act 1979 (2B), where there is an implied condition that the goods are of satisfactory quality and fitness if they meet the standard that a reasonable person would regard as satisfactory. And in this case, the quality of goods includes their state where safety is the main concern for the factory which Barry could holds Charles for. The term of ‘satisfactory quality’ has clearly been breached.

Besides the responsibility to ensure the building was accordance to specification and delivered with satisfactory quality, Charles also owes a duty of care to build the building with knowledge of modern techniques in building. In Carosella v Ginos [2] ; the point was made that not only did a professional engineer have a duty to have the type of skills described in Voli v Inglewood Shire [3] but there was a duty to keep the skills up to date. Charles could be sued for professional negligence under Tort of Negligence. However, Barry may have to prove Charles’ lack of professional conduct.

There are three approaches in proving negligence; the first approach is whether the representor owed a duty of care. Formally, a duty of care was only owed for the degree of probability of the products harming somebody mentally or physically. However since Hedley v. Heller [4] that liability for the tort of negligence has been expanded to include a purely economic loss.

Under Barry's circumstances, Charles owed a duty of care as an experience engineer and civil engineering contractor for the past 20 years; and despite being notified by the Institute of Engineers with the circular warning, he was negligence in identifying a new problem on the type of building requested by Barry which required further measures to strengthen such building.

The second approach is to find out the standard of care owed by Charles. The standard of care is what a reasonable person in the public or society in general, with the knowledge of the qualifications and means of the person would expect to owe. Under such circumstances Charles being an engineer. Therefore, he should know under his professional capacity, how the factory is to be build to render safe for the workers, also exactly how the factory should be build with the latest technology to fulfill the same purpose.

The final approach to check is on the remoteness of the damage. In this situation, Barry could get damages for the demolishing and rebuilding cost of $1m or alternatively, he could request compensation to get a similar site in a nearby suburb for $200,000 and rebuild an identical building for $400,000.

However, there could be exclusion clauses at the end of the contract that remove Charles duty of care in this case.

Breaching of Contract for Damages

On another aspect, the most common remedy granted is to sue for damages. The losses must result from the breach of the contract and the plaintiff has a duty to mitigate losses. Also the losses must not be too remote, which means that the losses must either flow from the breach according to the usual course of things or be losses that both parties are aware of prior to the contract [5] .

In this case, Barry could sue for damage of $1m for the demolishing and rebuilding of the factory in the existing site. However, Barry has to prove that Charles failed to comply with the specification for the building requirement for the type of building he needs. And to rectify the breach of contract, the remedial work is both “reasonable" and “necessary". In the case of Bellgrove v Eldridge [6] , the trial judge proceeded to consider whether there was available other practical solution for the remedying of the defect of the building other than the demolition of the building and its re-erection in accordance with the plans and specification.

In Bellgrove, it is true that a difference in the values indicated may, in one sense; represent the respondent's financial loss. But it is not in any real sense so represented. In assessing damages in cases which are related to the sale of goods the measure, prima facie, to be applied where defective goods have been tendered and accepted, is the difference between the worth of the products at the time of delivery and the worth they would have had if they had been performed accordance to the contract. But in such cases, Barry sues for damages for a breach of warranty with respect to marketable commodities and this is in no real sense the position in cases such as the present.

In the present case, Barry was entitled to have a building erected upon his land in accordance with the contract and the plans and specifications which formed part of it, and his damage is the loss which he has sustained by the failure of Charles to perform his obligation to him. This loss cannot be measured by comparing the value of the building which has been erected with the value it would have borne if erected in accordance with the contract; her loss can, prima facie, be measured only by confirming the amount required to allow the complained defects to be rectified and so give to him the equivalent of a building of his land which is substantially in accordance with the contract.

Breaching of Contract for Disappointment and Distress

On another hand, Barry may be able to sue for damages for disappointment and distress [7] . However, Courts have in most cases been averse to grant damages for distress and disappointment in commercial cases.

Barry may attempt to prove that he was extremely distressed and emotional when he has to fork out the lavish amount of $1m to demolish and reconstruct the building before he could get his factory in operation. The stress could be build-up from his commitment to his clients to meet the timeline for his customers’ orders. The delay of the factory in operation could cost Barry further economic loss and as a result, lose the trust of his customers when he fails to deliver his promise. On a similar situation, Barry could be bound by another contract to his customers and if affected due to delay in delivery, Barry may be sued for liquidated damages. The most uphill task in granting damages for distress is to ascertain the sum of damages to be awarded.

In Ruxley Electronics v Forsyth [8] , the House of Lord introduces into construction law a novel category of damages, namely “damages for disappointed expectations".

It was cited in Ruxley whereby; the completed swimming pool could still serve the practical purpose for the landowner. But in some minor expects, it fall short of the contract specification. Though the amenity, convenience or the aesthetic satisfaction have been lost, the House of Lords was in the opinion that “The cost of demolishing and rebuilding the work would be too great in proportion to any benefit it would confer on the owner that no reasonable owner would think of incurring it" [9] .

Prior to the Ruxley, the court took the view that where a builder in a building contract performed defective work, the owner was entitled to either:

The difference in value between the works with the defects and what they would have been worth if they had been constructed strictly base on specification and in accordance with the contract (diminution in value costs): or

The cost of having the work corrected or completed so as to bring it into line with the original specification. The reinstatement costs - as discussed in Bellgrove v Eldridge. (cost of rectification).

Until Ruxley, these had been the only available choices, and so the courts had felt that they were obliged to opt for one or the other. It was argued that as there had been no diminution in value, then because the courts had to award some damages, they were left with only the reinstatement option [10] . In Ruxley, at the first instance, the court took the view that there may be another alternative, and they explored the possibility of something in between diminution value on the one hand and replacement or reinstatement value on the other.

The Recommended Course Of Action

The case points toward a professional negligence of Charles with his reliance on his 20 years of experience in civil engineering and applying older method of construction for Barry’s factory. The requirement to keep his knowledge up-to-date could therefore allow him to construct the building which renders safety for use.

Looking into the various approaches cited, if I was advising Barry on his legal rights and the course of action to take, I would advice Barry to sue Charles for his professional negligence under breach of torts. By doing so, we could also bypass the exclusion clause.

Since there is no diminution in value, the cost of reinstatement is the only available measure of compensation for Barry. The remedies that he would most probably receive under this situation would be the cost of a similar site at the suburb for $200,000 and the cost of reconstructing a similar building accordance to specification and the latest technology at $400,000. This would most likely be granted by the court as it is both “reasonable" and does not incur “economic waste" [11] .