Status quo damages may be awarded in an action for breach of contract, both as an alternative to and as a complement to expectation damages. In the latter case, it is important that the same losses are not recovered twice over under the two bases of assessment. Conversely, the court should not make the mistake of insisting that the two measures are mutually exclusive of one another. Provided it is appreciated that expenditure has to be incurred (status quo loss) and taken into account in seeking to make a profit (expectation loss), there should be no objection to recovery under both heads. In Cullinane v British ‘Rema’ Manufacturing Co, the defendant sold the plaintiff a clay pulverising machine for £6,578 with a warranty that the machine could process six tons of clay per hour. In fact, it produced only two tons of clay powder per hour and was, therefore, commercially useless. The plaintiff claimed damages in respect of: (1) the difference between the total of the contract price and the cost of buildings to house the machine and their estimated break up value (capital loss); (2) interest on gross capital expenditure; and (3) loss of profit for a period of three years. The Court of Appeal (Morris LJ dissenting) held that the plaintiff could recover capital losses or he could recover loss of profit, but not both. Accordingly, he was allowed to recover (2) and (3) above, amounting to £10,521: Cullinane v British ‘Rema’ Manufacturing Co [1954] 1 QB 292, CA, p 299

doi:10.4324/9781843141518-274

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Status quo damages may be awarded in an action for breach of contract, both as an alternative to and as a complement to expectation damages. In the latter case, it is important that the same losses are not recovered twice over under the two bases of assessment. Conversely, the court should not make the mistake of insisting that the two measures are mutually exclusive of one another. Provided it is appreciated that expenditure has to be incurred (status quo loss) and taken into account in seeking to make a profit (expectation loss), there should be no objection to recovery under both heads. In Cullinane v British ‘Rema’ Manufacturing Co, the defendant sold the plaintiff a clay pulverising machine for £6,578 with a warranty that the machine could process six tons of clay per hour. In fact, it produced only two tons of clay powder per hour and was, therefore, commercially useless. The plaintiff claimed damages in respect of: (1) the difference between the total of the contract price and the cost of buildings to house the machine and their estimated break up value (capital loss); (2) interest on gross capital expenditure; and (3) loss of profit for a period of three years. The Court of Appeal (Morris LJ dissenting) held that the plaintiff could recover capital losses or he could recover loss of profit, but not both. Accordingly, he was allowed to recover (2) and (3) above, amounting to £10,521: Cullinane v British ‘Rema’ Manufacturing Co [1954] 1 QB 292, CA, p 299

ABSTRACT

The Court of Appeal (Morris LJ dissenting) held that the plaintiff could recover capital losses or he could recover loss of profit, but not both. Accordingly, he was allowed to recover (2) and (3) above, amounting to £10,521:

Cullinane v British ‘Rema’ Manufacturing Co [1954] 1 QB 292, CA, p 299 Lord Evershed MR: This appeal relates only to the proper measure of the damages which flow from what has been found to be a breach of warranty in regard to certain plant manufactured by the defendants and supplied to the plaintiff. It is, in my judgment, important to have clearly in mind the nature of the contract and, particularly, of the warranty. The plant, as I understand, was built according to a detailed specification and there is no doubt that as supplied it strictly conformed with the specification. Unfortunately, however, as the official referee found, it did not satisfy the warranty, because the machine, although capable of handling the plaintiff’s clay and of cutting, drying and grinding it so as to produce a dry clay powder, was not capable of producing it at the rate of six tons per hour, and the difference in rate, commercially speaking, was the difference between a profitable and an unprofitable commercial venture.