The facts that have given rise to a major upheaval in the law of contract can be simplified as follows:
Under a contract (the main contract) A engages B to carry out extensive building work on land belonging to C, who has no rights under the main contract. However, C has entered into a separate contract with B (the parallel contract) entitling him to call upon B to remedy any defects attributable to B’s failure to exercise the care and skill called for by the main contract. Serious defects are discovered, and it is assumed, for the purpose of a preliminary point taken by B, that these have rendered B liable under the main contract. It is accepted, and it is important to note, that A is under no legal duty to account to C for any damages recovered from B.
The headline result of the House of Lords decision in Alfred McAlpine Construction Ltd v Panatown Ltd [2000] EGCS 102 (Lords Goff and Millett dissenting) was that A could recover no more than nominal damages because the loss had been sustained exclusively by C.
But that is a long way from the whole story. It seems that, with one or possibly two dissenting voices, the decision would have gone the other way if C had not entered into the parallel contract. Such a conclusion requires the acceptance of the proposition that someone in A’s position can claim a “performance loss”, and that such a loss is capable of being expressed in money terms: see John Murdoch’s analysis in
Opening the door to such claims will undoubtedly affect a wide variety of contracts: consider, for example, a case where C is poisoned by a meal, bought and paid for by A, in circumstances where A has a claim for breach of contract against the restaurant, but C cannot establish negligence – say because there was no reason for doubting the freshness of the offending prawns.
For the sake of completeness, it should be borne in mind that McAlpine issues are less likely to arise in cases where C is in a position to enforce the main contract, whether by reason of the Contracts (Rights of Third Parties) Act 1999 or otherwise.
The facts that have given rise to a major upheaval in the law of contract can be simplified as follows:
Under a contract (the main contract) A engages B to carry out extensive building work on land belonging to C, who has no rights under the main contract. However, C has entered into a separate contract with B (the parallel contract) entitling him to call upon B to remedy any defects attributable to B’s failure to exercise the care and skill called for by the main contract. Serious defects are discovered, and it is assumed, for the purpose of a preliminary point taken by B, that these have rendered B liable under the main contract. It is accepted, and it is important to note, that A is under no legal duty to account to C for any damages recovered from B.
The headline result of the House of Lords decision in Alfred McAlpine Construction Ltd v Panatown Ltd [2000] EGCS 102 (Lords Goff and Millett dissenting) was that A could recover no more than nominal damages because the loss had been sustained exclusively by C.
But that is a long way from the whole story. It seems that, with one or possibly two dissenting voices, the decision would have gone the other way if C had not entered into the parallel contract. Such a conclusion requires the acceptance of the proposition that someone in A’s position can claim a “performance loss”, and that such a loss is capable of being expressed in money terms: see John Murdoch’s analysis in Basic requirements Estates Gazette 28 October 2000, at p182, which usefully fits Panatown into the pattern created by Murphy v Brentwood District Council [1991] 1 AC 398 and Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1993] EGCS 139. See further PP 2001/56.
Opening the door to such claims will undoubtedly affect a wide variety of contracts: consider, for example, a case where C is poisoned by a meal, bought and paid for by A, in circumstances where A has a claim for breach of contract against the restaurant, but C cannot establish negligence – say because there was no reason for doubting the freshness of the offending prawns.
For the sake of completeness, it should be borne in mind that McAlpine issues are less likely to arise in cases where C is in a position to enforce the main contract, whether by reason of the Contracts (Rights of Third Parties) Act 1999 or otherwise.
