''Hadley & Anor v Baxendale'' ''& Ors'' EWHC_J70
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EWHC J70
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EWHC J70
is a leading English contract law case. It sets the leading rule to determine consequential damages from a breach of contract: a breaching party is liable for all losses that the contracting parties should have foreseen. However, if the other party has special knowledge that the party-in-breach does not, the breaching party is only liable for the losses that he could have foreseen on the information available to him.

Facts

The

claimant A plaintiff ( Π in legal shorthand) is the party who initiates a lawsuit (also known as an ''action'') before a court. By doing so, the plaintiff seeks a legal remedy. If this search is successful, the court will issue judgment in favor of the ...

s, Mr Hadley and another, were

miller A miller is a person who operates a mill, a machine to grind a grain (for example corn or wheat) to make flour. Milling is among the oldest of human occupations. "Miller", "Milne" and other variants are common surnames, as are their equivalent ...

s and mealmen and worked together in a

partnership A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments o ...

. A

crankshaft A crankshaft is a mechanical component used in a piston engine to convert the reciprocating motion into rotational motion. The crankshaft is a rotating shaft containing one or more crankpins, that are driven by the pistons via the connecting ...

of a steam engine at the mill had broken and Hadley arranged to have a new one made by W. Joyce & Co. in

Greenwich Greenwich ( , ,) is a town in south-east London, England, within the ceremonial county of Greater London. It is situated east-southeast of Charing Cross. Greenwich is notable for its maritime history and for giving its name to the Greenwich ...

. Before the new crankshaft could be made, W. Joyce & Co. required that the broken crankshaft be sent to them in order to ensure that the new crankshaft would fit together properly with the other parts of the steam engine. Hadley contracted with defendants Baxendale and Ors to deliver the crankshaft to engineers for repair by a certain date at a cost of £2 sterling and 4 shillings. Baxendale failed to deliver on the date in question, causing Hadley to lose business. Hadley sued for the profits he lost due to Baxendale's late delivery, and the jury awarded Hadley damages of £50. Baxendale appealed, contending that he did not know that Hadley would suffer any particular damage by reason of the late delivery. The question raised by the appeal in this case was whether a defendant in a breach of contract case could be held liable for damages that the defendant was not aware would be incurred from a breach of the contract.

Judgment

The Court of Exchequer, led by Baron Sir Edward Hall Alderson, declined to allow Hadley to recover lost profits, holding that Baxendale could be held liable only for losses that were generally foreseeable, or if Hadley had mentioned his special circumstances in advance. The mere fact that a party is sending something to be repaired does not indicate that the party would lose profits if it is not delivered on time. The court suggested various other circumstances under which Hadley could have entered into this contract that would not have presented such dire circumstances, and noted that where special circumstances exist, provisions can be made in the contract voluntarily entered into by the parties to impose extra damages for a breach. Alderson B said the following:

Significance

Lon L. Fuller Lon Luvois Fuller (June 15, 1902 – April 8, 1978) was an American legal philosopher, who criticized legal positivism and defended a secular and procedural form of natural law theory. Fuller was a professor of Law at Harvard University for many ...

and WR Perdue evaluated the idea of reducing contractual remoteness to foreseeability in this way: As early as 1894, the U.S. Supreme Court recognized the influence of ''Hadley'' upon

American law The law of the United States comprises many levels of codified and uncodified forms of law, of which the most important is the nation's Constitution, which prescribes the foundation of the federal government of the United States, as well as v ...

: The ''Hadley'' holding was later incorporated into Section 351 of the

Restatement (Second) of Contracts The Restatement (Second) of the Law of Contracts is a legal treatise from the second series of the Restatements of the Law, and seeks to inform judges and lawyers about general principles of contract common law. It is one of the best-recognized an ...

. A 1994

law review A law review or law journal is a scholarly journal or publication that focuses on legal issues. A law review is a type of legal periodical. Law reviews are a source of research, imbedded with analyzed and referenced legal topics; they also pr ...

article noted that as of that year, ''Hadley'' had been cited with approval by the

state supreme court In the United States, a state supreme court (known by other names in some states) is the highest court in the state judiciary of a U.S. state. On matters of state law, the judgment of a state supreme court is considered final and binding in b ...

s of 43 U.S. states; three state supreme courts had adopted the ''Hadley'' holding without citing ''Hadley'' itself; and intermediate appellate courts in the four other states had also favorably cited ''Hadley''. In '' Satef-Huttenes Albertus SpA v Paloma Tercera Shipping Co SA (The Pegase)''

981 Year 981 ( CMLXXXI) was a common year starting on Saturday (link will display the full calendar) of the Julian calendar. Events Births * Abu'l-Qasim al-Husayn ibn Ali al-Maghribi, Arab statesman (d. 1027) * Giovanni Orseolo, Venetian ...

1 Lloyd’s Rep 175, Robert Goff J stated, However, it has been suggested that the rule in ''Hadley v Baxendale'' is not as novel as its celebrated importance suggests.

James Edelman James Joshua Edelman (born 9 January 1974) has been a justice of the High Court of Australia since 30 January 2017, and is a former justice of the Federal Court of Australia and the Supreme Court of Western Australia. He is noted for his various ...

, a Justice of the

High Court of Australia The High Court of Australia is Australia's apex court. It exercises Original jurisdiction, original and appellate jurisdiction on matters specified within Constitution of Australia, Australia's Constitution. The High Court was established fol ...

gave a speech on the topic, asserting that "the rule set out in ''Hadley v Baxendale'' was not novel". For example, Edelman noted that, in 1564, the French jurist

Charles Dumoulin Charles Dumoulin (Du Moulin, Molinaeus) (1500–1566) was a French jurist. He was surnamed by some of his contemporaries the "French Papinian". Life He was born in Paris. He began practice as an advocate before the ''parlement'' of Paris from 152 ...

had argued that liability for breach of contract should be limited to foreseeable damage, thereby pre-dating this same sentiment in ''Hadley v Baxendale''. The core of the judgment below is often cited as an example of a combination of the objective test and a subjective test:See also ''

DPP v Camplin ''DPP v Camplin'' (1978) was an English criminal law appeal to the House of Lords in 1978. Its unanimous judgment helped to define the main limits of defence of provocation chiefly until Parliament replaced the defence with one of "loss of con ...

978 Year 978 ( CMLXXVIII) was a common year starting on Tuesday (link will display the full calendar) of the Julian calendar. Events By place Byzantine Empire * Battle of Pankaleia: Rebel forces under General Bardas Skleros are defeated ...

UKHL 2,

AC 705

Notes

External links

Judgment of Alderson B
pdf file hosted by mtsu.edu
Judgment available via Bailii
(abridged)
English Reports version available via Google Books
{{UK law 1854 in case law English remedy case law 1854 in British law Court of Exchequer Chamber cases