''Hadley & Anor v Baxendale'' ''& Ors'' EWHC J70
is a leading English contract law">854
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 them.

Facts

The claimants, Mr Hadley and another, were millers and mealmen and worked together in a

partnership A partnership is an agreement where parties agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. Organizations ...

. A

crankshaft A crankshaft is a mechanical component used in a reciprocating engine, piston engine to convert the reciprocating motion into rotational motion. The crankshaft is a rotating Shaft (mechanical engineering), shaft containing one or more crankpins, ...

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 an List of areas of London, area in south-east London, England, within the Ceremonial counties of England, ceremonial county of Greater London, east-south-east of Charing Cross. Greenwich is notable for its maritime hi ...

. 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 A jury is a sworn body of people (jurors) convened to hear evidence, make Question of fact, findings of fact, and render an impartiality, impartial verdict officially submitted to them by a court, or to set a sentence (law), penalty or Judgmen ...

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 law of the United States comprises many levels of codified and uncodified forms of law, of which the supreme law 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 and ...

. A 1994

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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 ...

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

England and Wales England and Wales () is one of the Law of the United Kingdom#Legal jurisdictions, three legal jurisdictions of the United Kingdom. It covers the constituent countries England and Wales and was formed by the Laws in Wales Acts 1535 and 1542. Th ...

, section 53(2) of the

Sale of Goods Act 1979 The Sale of Goods Act 1979 (c. 54) is an Act of the Parliament of the United Kingdom which regulated English contract law and UK commercial law in respect of goods that are sold and bought. The Act consolidated the original Sale of Goods Act ...

articulates the first limb of ''Hadley'', '' e 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)'' 9811 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 The High Court of Australia is the apex court of the Australian legal system. It exercises original and appellate jurisdiction on matters specified in the Constitution of Australia and supplementary legislation. The High Court was establi ...

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 ''

DPP v Camplin ''DPP v Camplin'' (1978) was an England and Wales, English criminal law appeal to the House of Lords Judicial Committee, House of Lords in 1978. Its unanimous judgment helped to define the main limits of defence of Provocation in English law, ...

'' 978UKHL 2, 978AC 705.

References

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