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A Fall In Property Value Can Be Recovered In A ‘Breach Of Contract’ Claim

9th July, 2013

In order to claim for losses in a ‘breach of contract’ claim, the loss must not be too ‘remote’, i.e. the loss that has occurred must have been reasonably foreseeable at the time that the contract was made.

In the recent Court of Appeal case of John Grimes Partnership Ltd v Gubbins [2013], Mr Gubbins had instructed the John Grimes Partnership (‘JGP’) to design a road across a field that he had purchased for development. It was an express term of their agreement that the work would be finished by March 2007.

When the work was not completed by March 2007, Mr Gubbins instructed another firm who re-designed the road.

JGP issued proceedings against Mr Gubbins for unpaid invoices and Mr Gubbins counterclaimed for damages on the ground that JGP’s work had been defective. He also claimed that the failure to complete the work as promised had meant that there had been a reduction in the market value of the private residences to be built, as house prices had fallen between March 2007 and when the work was actually completed.

JGP were found to have breached the contract.

The Court implied a contractual term whereby JGP assumed responsibility for reasonably foreseeable losses. The Court found that JGP had known what Mr Gubbins had planned for the land and that delay brought the risk that the property market may move up or down. The loss in value, therefore, was deemed to be recoverable.

The advice coming from cases like this is that parties wishing to ensure they are not liable for a particular type of loss (eg a reduction in market value due to delay) should make sure that they expressly exclude them when making the contract.

For more information on this or any other contentious property matter please contact Beth Wheatley on 01244 405546 or email [email protected]

 

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