Anglia Television v Reed [1972] 1 Q.B. 60 is a significant case for law students studying contract law and damages. It covers the recovery of pre-contractual expenses when a party terminates a contract prematurely.

  • In the case of Anglia Television v Reed [1972] 1 Q.B. 60, it was held that in cases of wrongful repudiation of a contract, the aggrieved party may claim damages for expenditure incurred after the contract and pre-contract expenditure within the reasonable contemplation of the parties.

Facts of the Case Anglia Television v Reed

  • C involved themselves in much expense in preparation for producing a TV play before a lead actor was assigned.
  • On 30th August 1968, D (a well-known actor) and C agreed over a phone call to come to England from 9th September to 11th October to play the lead role.
  • As per the agreement, C would play D performance fees, living expenses, first class fares and so on.
  • Due to a prior conflicting booking, D’s agent told C that D would be unable to come to England and repudiated the contract.
  • Unable to find another lead, C accepted D’s termination and abandoned the film on 11th September. C sued D for damages resulting from the cancellation and expenses incurred before the contract with D was made.

Issues in Anglia Television v Reed

  • Could C recover for expenses incurred before the contract with D was made?

Held by the Court of Appeal (Civil Division)

  • Finding for C, that C could claim expenditure incurred before the contract provided it was reasonably contemplated by the parties that these expenses were likely to be wasted if the contract were broken.

Lord Denning M.R.

  • In wrongful repudiation cases, a plaintiff can either claim for loss of profits or for their wasted expenditure. But he must elect between them. Since C cannot prove what their profits would have been (and has not suffered loss of profits) they can alternatively claim the expenditure now wasted by reason of the breach.
  • “If the plaintiff claims the wasted expenditure, he is not limited to the expenditure incurred after the contract was concluded. He can claim also the expenditure incurred before the contract, provided that it was such as would reasonably be in contemplation of the parties as likely to be wasted if the contract was broken. Applying that principle here, it is plain that, when D entered into this contract, he must have known perfectly well that much expenditure had already been incurred on director’s fees and the like. He must have contemplated – or, at any rate, it is reasonably to be imputed to him – that if he broke his contract, all that expenditure would be wasted, whether or not it was incurred before or after the contract. He must pay damages for all the expenditure so wasted and thrown away” [64B].
  • This view is supported by Lloyd v. Stanbury [1971] 1 W.L.R. 535. There was a contract for the sale of land. In anticipation of the contract, the purchaser went to much expense in moving a caravan to the site and in getting his furniture there. The seller afterwards entered into a contract to sell to the purchaser, but afterwards broke his contract. The land had not increased in value, so there was no loss of profit. But Brightman J. held that he could recover the cost of moving the caravan and furniture, because it was ‘within the contemplation of the parties when the contract was signed.’
  • It is true that, if D had never entered into the contract, he would not be liable, and the expenditure would have been incurred by C without redress. However, with D having made his contract and broken it, he cannot said to be not liable when it was because of his breach that the expenditure has been wasted.

Significance of the Case in Legal Development

Anglia Television v Reed profoundly influenced the law on recoverable damages:

  1. Chandler v Webster [1904]: Introduced the principle of reliance damages in contract breaches.
  2. Hadley v Baxendale [1854]: Established the foreseeability criterion in claiming damages, which is crucial for understanding the limits on recoverable losses.
  3. McRae v Commonwealth Disposals Commission [1951]: Similar to Anglia, this case dealt with reliance losses where the contract failed, affirming the right to recover out-of-pocket expenses.

Exam Questions and Answers

Below, you will find answers to questions that are most commonly asked based on this case.

How do current UK laws protect parties from incurring significant pre-contractual expenses?

Current UK law, under the principle of reliance damages established in cases like Anglia Television v Reed, allows parties to recover pre-contractual expenses if a contract is breached. The law requires that these expenses must have been incurred in reliance on the contract being fulfilled and be a foreseeable consequence of the breach. For example, in Baird Textile Holdings Ltd v Marks & Spencer plc [2001], Baird was able to claim expenses related to preparations made in anticipation of a contract that was later breached by M&S.

What are the long-term impacts of this ruling on the entertainment and media industry?

The ruling in Anglia Television v Reed has had a lasting impact on the entertainment and media industry, particularly in terms of contract negotiations and risk management. Production companies often include detailed clauses in their contracts to specify compensation for pre-production expenses and penalties for breaches to mitigate potential losses, similar to what was sought in Anglia.

How has this case influenced modern contractual negotiations and the drafting of agreements in high-risk projects?

The principles from Anglia Television v Reed influence how high-risk projects, like construction or large-scale entertainment productions, handle contractual negotiations. There is now a greater emphasis on detailed contractual terms that clearly outline the consequences of breach, including specific provisions for the recovery of sunk costs and detailed termination clauses. This approach helps both parties understand the financial implications of failing to honour the contract, leading to more cautious and calculated contractual commitments.