Hadley v Baxendale

The claimants, Mr Hadley and another, were millers and mealmen and worked together in a partnership. A crankshaft of a steam engine at the mill had broken and Hadley arranged to have a new one made by W. Joyce & Co. in 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 others 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==

L. L. Fuller and William R. 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 Hadley holding was later incorporated into Section 351 of the Restatement (Second) of Contracts. A 1994 law review article noted that as of that year, Hadley had been cited with approval by the state supreme courts 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 England and Wales, section 53(2) of the Sale of Goods Act 1979 articulates the first limb of Hadley, [t]he measure of damages for breach of warranty is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty, while section 53(4), The fact that the buyer has set up the breach of warranty in diminution or extinction of the price does not prevent him from maintaining an action for the same breach of warranty if he has suffered further damage, allows for "special damages", articulating the second limb. In Satef-Huttenes Albertus SpA v Paloma Tercera Shipping Co SA (The Pegase) [1981] 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, a Justice of the High Court of Australia 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 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==