A recent decision1 of the English Court has underlined that where there is an available market, the prima facie measure of damages for non-delivery is the difference between the contract price and the market price of the goods, and not the loss of profit claimed by the aggrieved party.
A Moroccan steel company entered into two contracts for the purchase of steel billets from a Dubai based company. Following the seller’s failure to deliver the goods under both contracts, the buyer commenced proceedings and sought damages for non-delivery.
Section 51 of the English Sale of Goods Act 1979 provides:
“51. Damages for non-delivery
(3) Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered or (if no time was fixed) at the time of the refusal to deliver.”
The buyer contended that as the seller’s non-delivery caused production to stop at its factory, it should be entitled to damages for its loss of profits. The seller was not represented at the hearing but, in its pleadings, had argued that as there was an available market for the goods in question, any damages should be assessed by reference to the prima facie rule set out in section 51(3) above.
Notwithstanding the interruption to the buyer’s production, the Court ruled that there was an available market for
the goods and that section 51(3) applied. The Court added that the buyer’s loss of profit claim was, in any event, too remote and would not, therefore, have been recoverable.
In assessing the market, the Court took the average price of similar contracts entered into by the buyer which evidenced the relevant market price.
Whilst there is nothing ground breaking in this decision, it is a timely reminder that displacing the measure of damages for non-delivery as set out in s. 51(3) is no mean feat.