Charter v Sullivan [1957] EWCA Civ 2 (25 February 1957)

A car dealer sued a buyer who repudiated a contract to buy a new car. Since demand for the car exceeded supply, the dealer easily resold it without loss. The court awarded only nominal damages, finding no actual loss of profit.

Facts

The plaintiff, Mr Charter, was a motor car dealer. He entered into a contract to sell a new Hillman Minx car to the defendant, Mr Sullivan, at the fixed retail price of £773 17s. Before the car was delivered, the defendant wrote to the plaintiff repudiating the contract and refusing to take delivery. Approximately ten days later, the plaintiff sold the car to another customer for the same retail price. The plaintiff then sued the defendant for breach of contract, claiming damages for the loss of his anticipated profit on the sale, which amounted to £97 15s. The key factual evidence, accepted by the County Court judge and the Court of Appeal, was that at the time of the breach, the plaintiff could sell every Hillman Minx car he could acquire from the manufacturers. In other words, the demand for the car exceeded the supply available to the dealer. The County Court judge awarded the plaintiff the full amount of his loss of profit. The defendant appealed to the Court of Appeal.

Issues

The primary legal issue was the correct measure of damages for non-acceptance of goods under section 50 of the Sale of Goods Act 1893. The court had to determine:

1. Whether there was an “available market” for the car within the meaning of section 50(3) of the Act, which provides that the measure of damages is prima facie the difference between the contract price and the market price.
2. If section 50(3) was not applicable, what was the correct measure of damages under section 50(2), which stipulates damages as “the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer’s breach of contract”?
3. Specifically, had the plaintiff suffered any actual loss of profit given that he had sold the car to another buyer for the same price and could sell every car he obtained?

Judgment

The Court of Appeal unanimously allowed the appeal, holding that the plaintiff was only entitled to nominal damages. The judgment of the County Court was set aside and an award of 40 shillings was substituted.

Jenkins LJ

Jenkins LJ delivered the leading judgment. He found it unnecessary to definitively decide whether an “available market” existed under section 50(3) when the retail price was fixed, as the result would be the same under the more general principle of section 50(2). The core of his reasoning was based on a pragmatic assessment of the plaintiff’s actual loss.

He distinguished the case from the recent decision in W. L. Thompson Ltd. v. R. Robinson (Gunmakers) Ltd. [1955] Ch 177, where the supply of cars exceeded demand. In Thompson, the dealer’s capacity to sell was greater than the number of cars available, so a defaulted sale represented a lost sale and thus a lost profit. In the present case, the opposite was true. The plaintiff’s ability to sell was limited not by the number of customers but by the number of cars he could get.

Jenkins LJ explained the plaintiff’s position as follows:

But on the facts of this particular case, the plaintiff has not, on the face of it, lost anything at all. He had one Hillman Minx car to sell. He sells it to a customer, a Mr X. Mr X repudiates his contract. Then he sells it to a Mr Y. He has thus received, from Mr Y, the very same price as he would have received from Mr X. Ex hypothesi, he would not have had a second car to sell to Mr Y.

Therefore, as the plaintiff had sold the same number of cars as he would have done had the defendant not breached, and at the same price, he had suffered no loss of profit. The breach only caused minor inconvenience and administrative costs, for which nominal damages were the appropriate remedy.

Sellers LJ

Sellers LJ agreed, emphasising the factual distinction based on supply and demand. He noted:

If he had had another car, he could have sold that too, but he was limited by the number which he could get from the makers, who for their own purposes, I suppose, allocate their products throughout the country. The plaintiff was in the fortunate position of being able to sell all the Hillman Minx cars he could get.

He concluded that the plaintiff had not lost a sale; he had simply made the sale intended for the defendant to another willing customer. Consequently, there was no loss to compensate beyond a nominal sum.

Implications

The decision in Charter v Sullivan is a leading authority on the measure of damages for non-acceptance of goods in contract law. Its primary importance lies in establishing that the assessment of a seller’s loss of profit depends critically on the market conditions of supply and demand.

• Demand Exceeds Supply: This case establishes the principle that where a seller can sell all the goods they can supply at the contract price, the buyer’s breach does not cause a loss of profit. The seller simply sells the item to another customer. Damages will be nominal.
• Supply Exceeds Demand: Conversely, when read alongside Thompson v Robinson, it clarifies that if supply exceeds demand, a defaulting buyer causes the seller to lose one sale from their total volume. In this scenario, the seller is entitled to claim the profit lost on that specific sale.
• Compensation Principle: The judgment reinforces the fundamental principle of contractual damages: to place the innocent party in the same financial position they would have been in had the contract been performed, not to punish the breaching party. Since the seller was no worse off financially, substantial damages were not warranted.

Verdict: Appeal allowed. The damages awarded to the plaintiff were reduced to a nominal sum of 40 shillings.

Source: Charter v Sullivan [1957] EWCA Civ 2 (25 February 1957)