• In the case of Darlington BC v Wiltshier Northern Ltd 1995 1 WLR 68, it was held that the Albazero exception extended to cases where the third-party suffering loss owned the property all along even before the contract was made.

Facts of the Case

  • To avoid the financial constraints of the Local Government Act 1972, G acted as financier to P council in connection with the construction of a recreational centre.
  • G entered a building contracted with W, a construction company, for the benefit of P.
  • In accordance with a collateral agreement entered with P, G assigned to P, al rights and causes of action against W to which G was entitled under the contracts.
  • In an action brought by P against W for breaches of the contract, the judge held on a preliminary issue that P as assignee was not entitled to claim damages other than nominal damages.
  • P appealed this decision.

Issues in Darlington BC v Wiltshier Northern Ltd 1995 1 WLR 68

  • Was Darlington Borough Council an assignee to the contact and therefore entitled to substantial damages.

Held by Court of Appeal

  • Appeal allowed

Steyn L.J.

  • Held that since both parties were aware that the building contracts were entered into for the benefit of P and it was foreseeable that damage caused by breach of the contracts would cause loss to P, P as assignee could claim substantial damages for loss caused by W’s breaches of the contract and damages should then be assessed on the nominal basis as if P had been the employer under the contract.
  • “The court will of course wish to be satisfied that the repairs have been or are likely to be carried out but if they are carried out the cost of doing them must fall upon the defendant who broke his contract.” There was apparently no argument on this point in the House of Lords. For my part, I would hold that in the field of building contracts, like sale of goods, it is no concern of the law what the plaintiff proposes to do H with his damages. It is also no precondition to the recovery of substantial damages that the plaintiff does propose to undertake the necessary repairs. In this field English law adopts an objective approach to the ascertainment of damages for breach of contract. On this point I am in agreement with the observations of Kerr L.J. in Dean v. Ainley [1987] 1 W.L.R 1729, 1737H-1738A and Staughton L.J. in Ruxley Electronics and Construction
    Ltd. v. Forsyth     [1994] 1 W.L.R. 650, 656A-657D. Subject to this qualification, I am in respectful agreement with Lord Griffiths’s wider principle and I gratefully adopt it as part of my reasoning.  As I have already said, I would also allow this appeal. I find it unnecessary to consider the question of constructive trust. But I cannot D leave this case without expressing my gratitude to counsel on both sides for the excellence of their arguments. “pg. 80

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