Developments in Foreseeability and Remoteness: The Limits of Contract Damages

Abstract

The leading case on remoteness of damages in contract law continues to be the 1854 decision of the Exchequer Court in Hadley v. Baxendale. The plaintiff, who operated a grist mill, agreed with the defendant, a nation-wide carrier, to carry a broken mill shaft to serve as a pattern for the manufacture of a new shaft. The carrier’s undue delay caused the mill to be stopped for longer than it would otherwise have been, and the mill-owner claimed compensation for the consequent loss of profits. The carrier was held not to be liable in the absence of knowledge of the probable consequences of the delay. In a well-known passage Baron Alderson said:

Now we think the proper rule in such a case as the present is this: 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 such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, 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.

Keywords: Justice, legal remedies, law, Canadian, Canada, CIAJ, ICAJ, Canadian Institute for the Administration of Justice, Institut canadien d’administration de la justice