Hadley v Baxendale
Damages are recoverable for losses arising naturally from a breach, or within the reasonable contemplation of both parties when the contract was made.
Facts
The Hadleys owned a steam powered flour mill in Gloucester. The crankshaft of the mill's steam engine broke, and the Hadleys needed to send it to engineers in Greenwich as a pattern for a new one. They engaged Pickford & Co, carriers, whose employee was told that the mill was stopped and that the shaft must be sent immediately, although the court treated the case as one in which the carriers did not know that the lack of the shaft would keep the mill idle. Through the carriers' neglect, delivery of the shaft was delayed by several days, so the mill was out of action for longer than it should have been. The Hadleys claimed damages for the profits lost during the extra days.
Legal principle
The court held that the Hadleys could not recover their lost profits. Alderson B stated the rule on remoteness of damage in two limbs. Damages are recoverable for losses that may fairly and reasonably be considered as arising naturally, that is according to the usual course of things, from the breach, and for losses that 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. Mills usually had spare shafts, so a stoppage of the mill did not arise naturally from delay in delivering the shaft, and the carriers had not been told of the special circumstances that made the stoppage likely. The rule is the foundation of the modern law on remoteness in contract.
Related cases on remedies
- Addis v Gramophone Co Ltd [1909] AC 488
- Anglia Television Ltd v Reed [1972] 1 QB 60
- Attorney General v Blake [2001] 1 AC 268
- British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673
- Cavendish Square Holding BV v Makdessi; ParkingEye Ltd v Beavis [2015] UKSC 67, [2016] AC 1172
- Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1
- Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79
- Farley v Skinner [2001] UKHL 49, [2002] 2 AC 732
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