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Breach of collateral contract: quantum: assessment: expected profits

An award of £150,000 damages to the claimant for a breach of a collateral contract limiting the construction of houses by the defendant was appropriate and made on a proper basis.

Lane -v- O’Brien Homes Ltd (2204)

The defendant (B) appealed against the quantum of damages awarded to the claimant (L) for B’s breach of an oral agreement to limit the number of houses on a building site. L sold a site to B for the construction of houses, subject to an oral collateral contract limiting construction to three houses only. B in fact built four houses. L claimed that the construction of the fourth house was in breach of the collateral contract. L was awarded £150,000 damages as the value of the loss of change of the bargaining position that the collateral contract gave L in any negotiations to release B from building only three houses. On this appeal, B submitted that the award of damages was not made on the appropriate basis and was therefore excessive.

Held: The award of damages had been made on the correct basis. L was entitled to a share of B’s expected profit from building, or being able to build, a fourth house. There was no principle that stated that an individual in a position analogous to L’s was only entitled to damages based upon a small percentage of any profits or expected profits. The sort of damages questions involved in cases such as the present were matters or judgment that were incapable of strict rational and logical exposition from beginning to end. Taking all matters into account, an award of £150,000 was appropriate. (Wrotham Park Estates Ltd v Parkside Homes Ltd (1974) 1 WLR 798, Amec Developments Ltd v Jury’s Hotel Management (UK) Ltd (2000) EGCS 138, HM Attorney-General (Claimant) v George Blake (Defendant) & Jonathan Cape Ltd (Third Party) (2000) 3 WLR 625 considered).

Appeal dismissed

“Lawtel”: 9.2.04