Here are the facts of a problem question, created by my law teacher.
B1 (Builder 1) had agreed to build four backyard micro-cabins for P (Plaintiff), a developer, at a cost of £5 each. It was agreed that each house would be paid for when it was completed and that Al, an architect, must certify all completions. B1 completed two houses but P refused to pay because, P claimed, the windows were not up to specification. Al died just before the second house was completed and had not issued the certificates of completion. The two houses were each worth £7 on the open market.
Because of P’s refusal to pay, B1 was unable to pay his suppliers what he owed them. In turn, they refused to allow B1 to have more building materials on account. B1 stopped building.
Consequently, P entered the site and used B1’s materials, valued at £1 and completed the third house. P then engaged B2 (Builder 2) to build the fourth house, with B2's own materials, at an agreed contract price of £6. P paid B2 after B2 completed this fourth house.
Advise P. All prices should be multiplied by 1000, but I didn’t write out the 0’s to simplify the facts.
My teacher claims that
About the final house completed by B2, you must consider whether the increased cost of completion would affect P’s claim for damages against B1 by reference to case law relating to the expectation interest.
Can someone explain this? What does my teacher mean?
I know that Expectation Interest equates to the net value of what the innocent party would have received, had the contract been performed. The expectation measure aims to put the claimant in the position that he would have been in had the contract been performed in accordance with its terms (Robinson v Harman (1848)). This measure falls short of achieving this aim in a number of ways: for example, contract law does not compensate for all types of loss, it requires the type of loss to be reasonably foreseeable, it lays down certain causation requirements, and the claimant may be unable to recover if they have not taken sufficient steps to minimise the loss they suffer.