Habton Farms v Nimmo

A contract expressed to be subject to veterinary inspection and approval of x-rays may be binding from the outset, subject to a condition precedent that the buyer is satisfied and communicates approval to the seller. An unauthorised agent who purports to contract on behalf of a principal may be liable for breach of warranty of authority. The ordinary measure of damages for such a warranty concerning a chattel is the contract price less market value at the relevant time. That measure is not applied mechanically where the claimant reasonably continues to treat the contract as subsisting because of the breach. A subsequent collapse in value or destruction of the chattel may then be loss arising from the breach, subject to mitigation.

Habton Farms claimed £70,000 after a purported sale of the racehorse High Spirits to Mr Williamson through Christopher Nimmo. The horse passed veterinary inspection, but Mr Williamson declined to proceed because of its age. The horse remained with Habton Farms and later died. His Honour Judge Behrens held that Nimmo had purported to contract as Williamson’s agent without actual or ostensible authority, and was liable for breach of warranty of authority. He awarded £70,000 in damages. Nimmo appealed on the construction of the condition, authority and damages. The central issues were whether a binding conditional contract had been formed, whether Nimmo warranted authority, and whether the horse’s death affected the proper measure of damages.

Lord Justice Clarke delivered the leading judgment. Lord Justice Auld agreed with him on liability and damages. Lord Justice Jonathan Parker agreed on liability but dissented on the measure of damages.

1. Contract. The natural meaning of the fax was that a binding contract existed, subject to a condition precedent that the buyer approve the veterinary report and x-rays and that approval be communicated to the seller. The buyer could act through an agent in determining satisfaction. The construction did not make the agreement too uncertain. The first defendant’s communication of approval therefore made the contract unconditional.
2. Authority. The first defendant had no actual, usual or ostensible authority to make the contract or communicate approval. Ostensible authority required a representation by the principal to the third party, acted upon by that third party. The agent’s own representations and any prior course of dealing did not amount to a representation by the principal. The first defendant accordingly warranted his principal’s authority and was liable in principle for breach of that warranty.
3. Ordinary damages. The contractual measure was normally the loss recoverable against the solvent principal. In a sale of a chattel, this was ordinarily the contract price less the chattel’s market value at the relevant time. The approach was analogous to the market-value provisions of the Sale of Goods Act 1979. The separate statutory remedy for the price and the timing of passing of property and risk did not determine the damages payable by the unauthorised agent where the seller retained the horse.
4. Application. The majority held that the normal market-value deduction should not be made. Habton Farms reasonably treated the contract as subsisting and continued seeking the price. Its failure to resell the horse arose from the breach and was not an independent market decision. The horse’s death was therefore comparable to a collapse in market value and the loss of the valuable bargain was recoverable. The majority awarded £70,000. It observed that mitigation could become relevant if the claimant later had to accept repudiation and seek another buyer.
5. Dissent and order. Jonathan Parker LJ would have assessed damages at the date of breach. Since Habton Farms retained a horse worth £70,000, he would have found no loss. The appeal was dismissed with costs to be assessed if not agreed. Permission to appeal to the House of Lords was refused.

1. Court of Appeal (Civil Division). In [2003] EWCA Civ 68, the appeal was dismissed, unanimously on liability and by a majority on damages.
2. Leeds Mercantile Court. On 25 January 2002, His Honour Judge Behrens gave judgment against Christopher Nimmo for £70,000.