BP Exploration Co (Libya) Ltd -v- Hunt (No 2); 1979

The contract between the parties relating to an oil concession in Libya had been frustrated by the nationalisation of the field.
Held: The court considered the setting of damages where the plaintiff had delayed in notifying the defendant of the claim. Interest is awarded not as a punishment but to compensate a claimant for having been deprived of the money which was due to him, though: ‘The basic principle, is, however, that interest will be awarded from the date of loss.’
are (a) receipt by the defendant of a benefit (b) at the plaintiff’s expense, (c) in such circumstances that would be unjust to allow the defendant to retain the benefit.’
In a claim for unjust enrichment, the formulation of the requirements of the cause of action are: (a) receipt by the defendant of a benefit (b) at the plaintiff’s expense, (c) in such circumstances that would be unjust to allow the defendant to retain the benefit.
Rober Goff K discussed the calculation of damages under the 1943 Act: ‘A crucial question, on which the Act is surprisingly silent, is this: what bearing do the terms of the contract, under which the plaintiff has acted, have on the assessment of the just sum? First, the terms on which the work was done may serve to indicate the full scope of the work done, and so be relevant to the sum awarded in respect of such work. For example, if I do work under a contract under which I am to receive a substantial prize if successful, and nothing if I fail, and the contract is frustrated before the work is complete but not before a substantial benefit has been obtained by the defendant, the element of risk taken by the plaintiff may be held to have the effect of enhancing the amount of any sum to be awarded. Secondly, the contract consideration is always relevant as providing some evidence of what will be a reasonable sum to be awarded in respect of the plaintiff’s work. Thus if a prospector, employed for a fee, discovers a gold-mine before the contract under which he is employed is frustrated (for example, by illegality or by his illness or disablement) at a time when his work was incomplete, the court may think it just to make an award in the nature of a reasonable fee for what he has done (though of course the benefit obtained by the defendant will be far greater), and a rateable part of the contract fee may provide useful evidence of the level of sum to be awarded. If, however, the contract had provided that he was to receive a stake in the concession, then the just sum might be enhanced on the basis that, in all the circumstances, a reasonable sum should take account of such a factor: cf Way v Latilla [1937] 3 All ER 759. Thirdly, however, the contract consideration, or a rateable part of it, may provide a limit to the sum to be awarded. To take a fairly extreme example, a poor householder or a small businessman may obtain a contract for building work to be done to his premises at considerably less than the market price, on the basis that he cannot afford to pay more. In such a case, the court may consider it just to limit the award to a rateable part of the contract price, on the ground that it was the understanding of the parties that in no circumstances (including the circumstances of the contract being frustrated) should the plaintiff recover more than the contract price or a rateable part of it. Such a limit may properly be said to arise by virtue of the operation of s 2(3) of the Act. But it must not be forgotten that, unlike money, services can never be restored, nor usually can goods, since they are likely to have been either consumed or disposed of, or to have depreciated in value; and since, ex hypothesi, the defendant will only have been prepared to contract for the goods or services on the basis that he paid no more than the contract consideration, it may be unjust to compel him, by an award under the Act, to pay more than that consideration, or a rateable part of it, in respect of the services or goods he has received. It is unnecessary for me to decide whether this will always be so; but it is likely that in most cases this will impose an important limit on the sum to be awarded: indeed it may well be the most relevant limit to an award under s 1(3) of the Act. ‘
. . And, as to the award of statutory interest under the 1838 Act: ‘Another matter which is generally ignored is the financial situation of the plaintiff; it should generally make no difference even if, for example, it could be shown that a plaintiff in a personal injury action was a person who would simply have paid the damages, if received earlier, into his current account at the bank which was permanently in credit.’

Date: 01-Jan-1979
Judges: Robert Goff J
Statutes: Law Reform (Frustrated Contracts) Act 1943, Judgments Act 1838
References: [1979] 1 WLR 783,
Cases Cited:
Cited By:

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