Legal Issues

The case involved Newman Industries Ltd who were supposed to deliver a broiler to Victoria Laundry (Windsor) Ltd. They delayed the delivery by twenty weeks resulting to Victoria Laundry losing a profitable contract. Since government contracts were accompanied by exceptional profits, the plaintiffs sought to know if they could sue for the normal and the extraordinary profits they had foregone. Lord Asquith held that the defendants were only liable for normal profits. This is because loss of normal profits was classified under the first head and was recoverable (Dotstoc.com, 2010). Moreover, loss of exceptional profits fell under the second head and was not recoverable as the defendant lacked prior knowledge that the broiler could harness exceptional profits.
         
A contract is a legal agreement between two or more parties and is enforceable in a court of law. Author Jean-Louis Baudouin argues that courts give financial compensation of damages which correspond to loss suffered and gains foregone due to a breach of contract. He further elaborates that the loss and gain has to be related directly to the breach of promise (article 1611 QCC). This implies that a court can only award damages equal to the gains that the concern parties could have reasonably expected to receive when they signed the contract (Law Essays UK, 2010).
           
In the case of Victoria Laundry, had Newman industries had a prior knowledge that the boilers were subject to extraordinary profits, then they would have been liable for such losses. Moreover, they would have associated the gains on this contract as different and of greater type of risk than the usual risk of losing profit by the cleaning company.