Allen-Britten & Anor v Abels

A seller designing and constructing goods to a buyer’s specified general purpose must provide goods reasonably fit for that purpose, including necessary features not expressly specified. Contractual delivery dates may be established by the agreement’s payment and completion provisions read in context. Where business losses are the foreseeable consequence of breaches and the buyer’s particular purpose was communicated, lost profits may be recovered under the second limb of the Hadley v Baxendale rules. For a vessel built to order, reasonable repair costs may measure diminution in value. Reasonable cessation of trading and letting the repaired asset may constitute mitigation.

The claimants alleged that the defendant boat builder breached a contract to design, build and deliver a permanently moored floating café and restaurant. The issues included the contracting party, the contractual delivery date and design obligations, defects in construction, stability, causation, recoverable losses and the defendant’s counterclaim for unpaid extras.

The court held that Arbi’n’Tap Ltd was the contracting buyer. The vessel was delivered late, incomplete and unstable, without the contractually required statement of stability. The central questions were whether those breaches caused the claimed business and repair losses and what, if anything, remained payable to the seller.

1. Contract and delivery. The contract was made between the defendant and Arbi’n’Tap Ltd. Read in its factual context, the staged payment provisions established delivery by 31 July 2004. The vessel was delivered on 24 November 2004 and the delay was a breach.
2. Design, fitness and stability. The defendant undertook to provide a turnkey vessel suitable for the communicated purpose of operating a floating café or restaurant. The express and implied obligations covered stability, safe operation, quality, fitness for purpose and compliance with the contractual description. The vessel’s tanks, bilges, opening portholes and operating arrangements were defective. The defendant also failed to carry out appropriate inclining experiments and failed to provide the required stability statement in a complete, accurate and properly supported form.
3. Repudiation and causation. The defendant’s failure to complete the outstanding works entitled the buyer to accept repudiation and terminate the contract in March 2005. The late delivery, defects, unsafe instability and continuing disruption caused the losses claimed. The later cessation of trading and letting of the vessel were reasonable steps in mitigation.
4. Damages. The lost trading income was recoverable under the second limb of the Hadley v Baxendale rules because the intended business and its potential losses were within the defendant’s contemplation. The appropriate assessment required a predictive evaluation of the turnover that could have been achieved, rather than treating actual depressed turnover as determinative. Repair and adaptation costs were recoverable as the reasonable measure of loss caused by the defective vessel.
5. Outcome. The claim succeeded. Arbi’n’Tap Ltd recovered £37,268 and £36,836 for loss of profits, together with repair and estimated repair costs of £41,132 and £15,636, plus recoverable VAT and interest. The defendant could set off £7,741.90 and £2,903 plus VAT, but was not entitled to further payment for incomplete work.