Matching Fragments
8. The Learned Single Judge, in our view, was justified in
coming to the conclusion that the Arbitrator was manifestly in
error in awarding the claim for overhead losses in spite of the
fact that no oral evidence was adduced on behalf of the
ppn 45 arbp-819.11 & 908.11(j).doc
Appellant. In Brij Paul Singh's case the Supreme Court noted
that it was not disputed that where in a works contract a party
entrusted with the work commits a breach of the contract, the
contractor would be entitled to claim damages for loss of
profit which he expected to earn by undertaking the contract.
The Supreme Court, however, noted that what must be the
measure of the profit and what evidence should be tendered to
sustain the claim are different matters. The judgment of the
Supreme Court adverts to the fact that in that case the High
Court had referred to Hudson's treatise on Building and
Engineering Contracts. Hudson states there that in major
contracts subject to competitive tender on a national basis, the
evidence given in litigation on many occasions suggests that
head office overheads and profits are between 3 to 7% of the
total price of cost which is added to the tender. The High
Court in that case had rejected the claim of the contractor.
The Supreme Court noted that in an identical contract with
regard to another portion of the same road and for the same
type of work the High Court had accepted loss of profit at
15% of the price of the balance of work as a reasonable
measure of damages if the State is guilty of a breach of
contract. It was on this basis that the Supreme Court came to
the conclusion that since for the same type of work, between
the same parties involving a nearby portion of the same road
a certain measure of damages had been adopted by the High
Court, the same measure ought to have been adopted in that
case as well.
"(a) Hudson Formula : In Hudson's Building and Engineering
Contracts, Hudson formula is stated in the following terms :
"Contract head office overhead & contract sum period of delay"
profit percentage ig x -------------- x
contract period
In the Hudson formula, the head office overhead
percentage is taken from the contract. Although the Hudson
formula has received judicial support in many cases, it has
been criticized principally because it adopts the head office
overhead percentage from the contract as the factor for
calculating the costs, and this may bear little or no relation to
the actual head office costs of the contractor." (emphasis
supplied)
