Charter v Sullivan

Under section 50(2) of the Sale of Goods Act 1893, a seller may recover profit lost through a buyer’s non-acceptance only to the extent that the loss is proved to have resulted from the breach. A resale at the contract price does not necessarily eliminate loss. The seller may show that, but for the default, both the original and resale transactions would have been completed.

Where the goods are resold, however, the seller bears the burden of proving a loss of profit beyond the profit apparently recouped. A dealer who can sell all goods obtainable from the supplier has not proved that the buyer’s default reduced the number of sales or profits achieved.

A motor-car dealer agreed to sell a new Hillman Minx to the defendant, who later refused to accept it. The dealer resold that car within seven to ten days to another customer at the same fixed retail price. The County Court held that a concluded contract existed and awarded the dealer £97 13s for lost profit.

The buyer appealed only on damages. The dealer contended that, had the buyer performed, he could have obtained and sold another car to the resale customer, thereby earning two profits. The central issue was whether the dealer had proved a loss of profit notwithstanding the resale.

1. The appeal was allowed unanimously. The County Court award was varied so that the seller recovered only 40s nominal damages.
2. Jenkins LJ held that section 50(2) of the Sale of Goods Act 1893 required proof of the loss directly and naturally resulting from the buyer’s refusal to accept. Profit on the unperformed sale could constitute such loss. Resale of the rejected car at the same price did not itself answer the claim, because the seller might have made both sales and earned both profits. This was consistent with the reasoning in Thompson (W.L.) Ltd v Robinson (Gunmakers) Ltd [1955] 1 Ch 177 and In re Vic Mill Ltd [1913] 1 Ch 468.
3. The seller nevertheless had to prove that the expected profit had actually been lost. His sales manager said that the dealer could sell all Hillman Minx cars it could obtain. On the ordinary meaning of that evidence, demand exceeded supply. The dealer would therefore have sold the same number of cars, and made the same number of fixed profits, whether or not this buyer performed.
4. Hodson LJ agreed that the seller had failed to prove loss beyond that apparently recouped by resale. Sellers LJ likewise held that, following resale, the seller bore the burden of proving an additional irretrievable loss. The evidence did not establish that the dealer could obtain more cars than it could sell.
5. The court also treated the fixed retail price and the absence of an immediate purchaser as insufficient, on the evidence, to establish an available market for section 50(3). In any event, the prima facie market-price measure did not dispense with proof of actual loss under section 50(2).

• Court of Appeal: The buyer’s appeal was allowed. The judgment was varied by substituting 40s nominal damages, with costs to the successful appellant.
• Aldershot County Court: Judge Rawlins found a concluded contract and awarded the seller £97 13s damages for the buyer’s refusal to accept the car.