Cullinane v British Rema Manufacturing

Cullinane v British ‘Rema’ Manufacturing Co Ltd [1954] 1 QB 292

Breach of warranty as to performance of machine; measure of damages

Facts

Cullinane purchased a clay pulverising machine from British ‘Rema’ Manufacturing Co Ltd (BRMCO). BRMCO warranted the machine processed six tonnes of clay per hour. After Cullinane took delivery, he discovered the machine only processed two tonnes of clay per hour and was commercially useless. Cullinane sought damages for breach of warranty.

Issues

Cullinane contended the breach entitled him to recover damages to put him in the position he would have been in had the contract been fulfilled. He, therefore, sought to claim for the cost of purchasing the machine with interest, and for the loss of profits he would have made over the next three-year period, had the machine processed the warranted quantity of clay. Cullinane argued the lost profits should be calculated on the average annual earnings because these sums reflected what he would have earned had the machine been fit for purpose. BRMCO contended that Cullinane could recover the cost of the machine. They argued that even if lost profits were recoverable on the basis that they were reasonably in the contemplation of both parties at the time the contract was made under Hadley v Baxendale [1854] EWHC J70, then the capital loss for the cost of the machine could not be recovered in addition.

Decision/Outcome

Damages awarded should put Cullinane so far as was possible in the position he would have been had the contract been fulfilled. He could claim either the capital loss stemming from the breach of warranty, or the lost profits which both parties could be said to have had within their contemplation at the time of the agreement. These two claims were alternative, and he could not recover both the capital and the lost profit.