Hadley v Baxendale (1854) 9 Ex. 341 is a famous case in the common law of contracts, which is still taught in law schools throughout the common law world. It's two limbs are authority for how to determine the remoteness of damages when a breach of contract has occurred. Remoteness means how foreseeable the damages would have been to the breaching party.
The Facts in Hadley v Baxendale
The plaintiffs were the owners of a flour mill in Gloucestershire. They sent a broken iron shaft to an office of the defendants, who were common carriers. The shaft was to be conveyed by them to engineers in London. The defendants' clerk, who attended at the office, was told that the mill was stopped, that the shaft must be delivered immediately, and that a special entry, if necessary, must be made to hasten its delivery. The delivery of the broken shaft to the London consignees, to whom it had been sent by the plaintiffs to serve as a pattern with which to make a new shaft, was delayed for an unreasonable time. In consequence of this, the plaintiffs did not receive the new shaft for some days after the time they ought to have received it, and they were consequently unable to work their mill because they did not have the new shaft. Because of this, they incurred a loss of profits. The court held, that, under the circumstances, such loss could not he recovered in an action against the defendants as common carriers.
The Court’s Judgment in Hadley v Baxendale
The Court’s brief statement of judgment was summarised as follows. Where two parties have made a contract, which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be (a) such as may fairly and reasonably be considered either arising naturally, that is, according to the usual course of things, from such breach of contract itself, or (b) such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it.
The Two Limbs in Hadley v Baxendale
The judgment was clearly separated into two parts, designated “a” and “b” as above. They are now known as the two limbs in Hadley v Baxendale. The word "limb" is the same as the word which means arms and legs, or, bodily limbs.
The Court’s detailed explanation of its thinking, its ratio decidendi, was spoken by Alderson B, in the following terms, at (1854) 9 Ex. 341, 354, 355, digested as follows.
If the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances, so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury, that would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. Had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case, and of this advantage it would be very unjust for the court to deprive them.
Issue-spotting for Hadley v Baxendale in Examinations & Assignments
Remoteness of damages exam question may be identified by a clear breach of contract, followed by a fact pattern of special circumstances, which are either (a) explained to the defendant before entering into the contract, or (b) not explained at all. The case was applied in Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528.
Sources:
Hadley v Baxendale (1854) 9 Ex. 341.
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528.
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