dolution

Hadley v. Baxendale

FACTS The plaintiffs operated a flour mill at Gloucester. They had to stop operating the mill because of a broken crankshaft attached to the steam engine that furnished power to the mill. It was necessary to send the broken shaft to a foundry in Greenwich so that a new shaft could be made. The plaintiffs delivered the broken shaft to the defendants, who were common carriers, for immediate transportation from Gloucester to Greenwich but did not inform the defendants that the mill had ceased operating because of the broken crankshaft. The defendants received the shaft, collected the freight charges in advance, and promised the plaintiffs to deliver the shaft for repairs the following day. The defendants did not make prompt delivery as promised. As a result, the plaintiffs could not operate the mill for several days, thus losing profits that they otherwise would have received. The defendants contended that the loss of profits was too remote, and therefore unforeseeable, to be recoverable. In awarding damages to the plaintiffs, the jury was permitted to consider the loss of these profits.

DECISION Judgment for defendants.

OPINION The appellate court reversed the decision and ordered a new trial on the ground that the special circumstances that caused the loss of profits, namely, the continued stoppage of the mill while awaiting the return of the new crankshaft, had never been communicated by the plaintiffs to the defendants. A common carrier would not reasonably foresee that the plaintiff’s mill would be shut down as a result of delay in transporting the broken crankshaft. Damages for
breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach … or 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.

INTERPRETATION Damages are recoverable only for those damages that were foreseeable at the time of entering into the contract.

ETHICAL QUESTION Is the court’s decision fair? Explain.

CRITICAL THINKING QUESTION Should damages be limited to those that are foreseeable? Explain.