Citation. 3 All E.R. 690 (House of Lords 1971)
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Brief Fact Summary.
An actor and a media company entered into a contract for the actor to star in a film of a play for television. The actor had to repudiate the contract, and a question as to the damages owed by the actor to the media company arose.
Synopsis of Rule of Law.
If a party cannot demonstrate an amount of lost profits they are entitled to, both expenditures incurred before and after the contract was concluded will be part of the damages award, if those expenditures "would reasonably be in the contemplation of the parties as likely to be wasted if the contract was broken."
The Defendant, Robert Reed (the "Defendant"), was an actor employed by the Plaintiff, Anglia Television Ltd. (the "Plaintiff"), to star in a film of a play for television entitled "The Man of the Wood." The Plaintiff arranged most of the details for the film including its location, director, designer and stage manager, etc. The Defendant's agent agreed via telephone conversation on August 30, 1968 that the Defendant would be available between September 9, 1968 and October 11, 1968 to come to England to rehearse and play in the film. However, the Defendant was double booked because the Defendant's agent had booked him in America for another play. On September 3, 1968, the Plaintiff learned the Defendant was not available. At that time, the Defendant repudiated the contract. The Plaintiff tried to find a replacement, but had no luck doing so. As such, the Plaintiff on September 11, 1968 accepted the Defendant's repudiation and gave notice to all the people they had engaged. The Plaintiff then sued the Defendant for damages because although liability was not in dispute, the amount of damages were. The Plaintiff could not say how much profit they would have made if the defendant had performed the contract, so they instead claimed for their wasted expenditure. The Plaintiff's wasted expenditure totaled 2750 pounds and included "director's fees, the designer's fees, the state manager's and assistant manger's fees, and so on."
If a party cannot demonstrate they lost profits, but can show they incurred expenditures prior to and after the contract was consummated, are they entitled as damages to their costs both prior to and after the contract was concluded?
They are entitled to their costs, both prior to and after the contract was consummated if those costs were such "as would reasonably be in the contemplation of the parties as likely to be wasted if the contract was broken." The judge rejected the Defendant's argument that the Plaintiff was entitled to only expenses incurred after the contract was concluded. In doing so, the judge refused to follow the case of [Perestrello & Compania Limitada v. United Paint Co. Ltd.], which held "[t]he expenses preliminary to the contract ought not to be allowed. The party enters into them for his own benefit at a time when it is uncertain whether there will be any contract or not."
This decision offers an interesting analysis of how contractual damages are computed if profits cannot be proven.