DR.

RAM”MANOHAR”LOHIYA”NATIONAL
”LAW UNIVERSITY

CONTRACTS

CASE COMMENT: Hadley v. Baxendale (1843-60) All

ER Rep. 461 172
Submitted”to:” Submitted”by:
Dr. Vishalakshi” Konark Singh

Associate”Professor,”Law” Roll”no”–”068

Dr.”RMLNLU” B.A.”LLB(HONS)

IInd”semester
 ACKNOWLEDGEMENT

I”would”like”to”express”my”special”thanks”of”gratitude”to”my”teacher”Dr.Vishalakshi”who”gav
e”me”the”golden”opportunity”to”do”this”wonderful”project”of”Contracts”on”case”study”“CENTRA
L”LONDON”PROPERTY”TRUST”LTD”V.”HIGH”TREES”HOUSE”LTD”,”who”also”helped”me”in”completi
ng”my”project”and”has”rendered”endless”support,”kind”and”understanding”spirit”during”my”proj
ect”completion.”I”came”to”know”about”so”many”new”things”I”am”really”thankful”to”her.”The”co
mpletion”of”this”project”could”not”have”been”possible”without”the”participation”and”assistance
”of”various”people.”Thus,”I”would”also”like”to”thank”my”parents”and”friends”who”helped”me”a”
lot”in”finalizing”this”project”within”the”limited”time”frame.”

I”would”also”like”to”thank”the”Great”Almighty,”source”of”supreme”knowledge”for”countless”lov
e”rendered”on”me.

KONARK SINGH

EN.NO.- 180101068

SECTION-A “
1. The law as it stood before the case

The law as it stood before the case was narrow as it only stated that the plaintiff is

entitled to the amount he or she would have received if the breaching party had

properly performed the contract. There was no law related to foreseeability or

remoteness of damage before the decision given in this case. The judge, while giving

the judgement, himself says that it is necessary to explicitly state a rule which the

judge, at the next trial, direct the jury to be governed by when they estimate the

damages. This case contains the foundation of the law on the amount of damages that

an injured party is entitled to in case of a breach of contract.

2. The facts of the case

In the given case, Hadley v. Baxendale (1843-60) All ER Rep. 461 172, the plaintiffs

carried on the business of millers and meal men as co-partners and were proprietors

and occupiers of city steam mills in the city of Gloucester. They carried on their

business with the help of a single steam engine which was used in cleaning and

grounding corn and dressing it into flour, sharps and bran. The crank shaft of the said

steam engine was broken and out of repair. This prevented the steam engine from

functioning. The plaintiffs were desirous of having a new crank shaft made for the

steam engine and had contracted with certain persons trading under the name of W.

Joyce and Co. at Greenwich to make a new crank shaft for them. However, before a
new shaft could be made, the old shaft had to be sent to Greenwich so that the new

shaft could be made in such a way so that it fits the other parts of the said steam

engine. The defendants were common carriers of goods and chattels for hire from

Gloucester to Greenwich, and carried their business under the name of Pickford and

Co. The plaintiffs delivered the broken shaft to the plaintiff’s and in consideration, the

defendants promised to deliver the shaft to Greenwich on the second day after it was

delivered to them. However, the defendant wholly neglected their own consideration

and refused to deliver the broken shaft for the space of seven days after the said shaft

was delivered to them due to which the completion of the new shaft was delayed for

five days and the plaintiffs were prevented from carrying on their business as millers

and meal men for five days. Thus, the plaintiffs were unable to supply many of their

customers with flour, sharps and bran during that period and were deprived of gains

and profits which otherwise would have accrued to them. At the trial before Crompton

J, the learned judge gave a verdict that a compensation of 25 pounds has to be made to

the plaintiffs beyond the amount paid into court. However, a rule nisi for a new trial

was obtained on the grounds of misdirection.

3. Issues before the court

There was only one main issue which came up before the court in the case of Hadley

v Baxendale:

What is the amount of damages to which an injured party is entitled for breach

of a contract?

Thus, the court mainly had to determine whether the plaintiff has to be compensated

for those losses which were not reasonably foreseeable as consequences of the breach

of contract.

4. Issues which were determined by the court

The main issue was to be determining the amount of damages that the plaintiff is

entitled to in this case. The court determined that the party which has breached the

contract, that is, the defendants have to only compensate for those damages suffered

by the plaintiff which are reasonably foreseeable at the time of the contract and not

for those damages which are remote consequences of the breach.

5. Issues which the court did not determine, if any

There was only one issue arising from the case of Hadley v Baxendale which was

well and truly determined by the court of law. Thus, there was no such issue which

was not determined by the court.

6. Decision of the court

After studying the facts of the case and drawing on the principle of foreseeability and

articles 1149-1151 of the French civil code which states that ‘The damages due to the

creditor consist in general of the loss that he has sustained, and the profit which he has

been prevented from acquiring, subject to the modifications hereinafter contained.

The debtor is only liable for the damages foreseen, or which might have been

foreseen, at the time of the execution of the contract, when it is not owing to his fraud

that the agreement has been violated. Even in the case of non-performance of the

contract, resulting from the fraud of the debtor, the damages only comprise so much

of the loss sustained by the creditor, and so much of the profit which he has been

prevented from acquiring, as directly and immediately results from the non-

performance of the contract’, Alderson B., the honourable judge in the case, stated

that were the parties have made a contract which one of them has broken damages are

recoverable when they are ‘such as may fairly and reasonably be considered arising

naturally, that is, according to the usual course of things’ from the breach or when

they are ‘such as may reasonably be supposed to have been in the contemplation of
 both parties at the time they made the contract’, provided that in both cases, they are

the probable result of the breach. Now, if the special circumstances under which the

contract was actually made were communicated by the plaintiffs to the defendants,

and thus known to both parties, the damages resulting from the breach of such a

contract, which they would reasonably contemplate, would be the amount of injury

which would ordinarily follow from a breach of contract under these special

circumstances so known and communicated. But, on the other hand, if these special

circumstances were wholly unknown to the party breaking the contract, he, at the

most, could only be supposed to have had in his contemplation the amount of injury

which would arise generally, and in the great multitude of cases not affected by any

special circumstances, from such a breach of contract. For, had the special

circumstances been known, the parties might have specially provided for the breach

of contract by special terms as to the damages in that case; and of this advantage it

would be very unjust to deprive them.1

Therefore, the court held that plaintiff will only be compensated for those damages

which were reasonably foreseeable at the time at which the contract was entered into.

Thus, after giving the above rule, the judge ordered a fresh trial to determine the

amount of money that would have to be paid by the defendant to the plaintiff.

1
(1854) 9 Exch. 341, at p. 354
7. Reasons as identified by the court for its decision

The decision of the court of ordering a new trial was based on the principle that the plaintiff

can only be compensated for those damages which were reasonably foreseeable at the time of

the contract or if there were any special circumstances which were contemplated by the two

parties at the time of entering into the contract and the damage suffered was reasonably

foreseeable according to the special circumstances. The court also said that if the special

circumstances are not known to both the parties, the defendant would only be liable for

damages which are the natural consequence of the breach. The reasoning behind this principle

is that if the special circumstances had been known to the parties, they might have specially

provided for the breach of contract by special terms as to the damages in that case. Also if the

principle had not been laid down in this case, then the defendants would have been in a

disadvantageous position since the plaintiffs would have claimed for even the remotest of the

damages suffered by them in case of a breach. Moreover, in this case, the special

circumstance was never communicated to the defendants, that the plaintiffs only had one

steam engine and thus, had the engine stopped working, the mill would have come to a

standstill. Thus, the main reason of the decision was to put the plaintiff and the defendant in

cases like Hadley v Baxendale on an equal footing and thus, prevent the defendants from

injustice.
8. Analysis of issues framed by the court

In the case of Hadley v. Baxendale (1843-60) All ER Rep. 461 172, there was only

one main issue which was determined by the court as already mentioned above, that

what is the amount of damages that the plaintiff is entitled to in accordance with the

facts of the case. In the trial before Crompton J., the jury held that the defendant is

liable to pay 25 pounds to the plaintiff for the breach committed by the defendant.

However, this judgement was challenged on the grounds of misdirection. The Court

of Exchequer identified the main issue of the case and decided that the defendant is

only liable for those damages suffered by the plaintiff which could be reasonably

foreseeable at the time of contract.

Analysing the issue framed by the court, we realize that it was the only possible issue

that could have arisen in accordance with the facts of the given case. Thus, the court

has very correctly identified the main issue and has given a reasonably just judgement

and a principle which puts both the parties entering into a contract on an equal

footing. Thus, the judgement of Alderson B. has removed the possible biasness that

could have occurred in the judgement of the given case. This has only been possible

due to the correct identification of the main issue of the case and thus, a lot of credit

should go to the court for deciding the case as fairly as possible.

9. Analysis of the reasoning of the court

The decision of the court in the case that there should be a fresh trial is based on the

reason that the damages suffered by the plaintiff were not reasonably foreseeable at

the time of the contract and also, that the special circumstances were never

communicated to the defendants. The special circumstance that should have been

communicated was that the plaintiffs had only one steam engine and if there was any

delay in repairing the shaft, their business would come to a halt and thus, they would

suffer losses. However, this special circumstance was never communicated to the

defendants and it was only said that the shaft should be delivered to Greenwich as

soon as possible. Thus, the reasoning of the court’s decision was perfectly reasonable

because if the defendants do not have any idea about the special circumstance, then

they can be held liable for those damages occurring due to the breach which they do

not even know can occur if they breach the contract. Also, had this judgement not

been given, the concept of remoteness of damage would not have come into place and

thus, parties would have brought an action for even the remotest of consequences

occurring due to the breach. Thus, the decision of the court has been reasonably

deduced and is unbiased and just.

10. Impact of the decision on the law
The case of Hadley v Baxendale contained the foundation of the law on the amount of

damages that an injured party is entitled to in case of a breach of contract. The law

that stood before the case was- The plaintiff is entitled to the amount that they would

have received if the party that breached the contract had performed the contract

properly. There was no law related to the remoteness of damage or foreseeability prior

to this case. The following new principle came into existence after the judgement in

the case:

Were the parties have made a contract which one of them has broken damages are

recoverable when they are ‘such as may fairly and reasonably be considered arising

naturally, that is, according to the usual course of things’ from the breach or when

they are ‘such as may reasonably be supposed to have been in the contemplation of

both parties at the time they made the contract’, provided that in both cases, they are

the probable result of the breach.

In my opinion, this law put an additional responsibility on the plaintiff’s shoulder to

specify the special circumstances to the defendant.

The law also gave some protection to the party that has breached since the party

would not be held liable for those damages suffered by the plaintiff which were not

reasonably foreseeable or were not contemplated by both the parties.

The law put both the parties who entered into a contract on an equal footing since if

this law would not have been operational then the plaintiff would have brought an

action to the court for even the remotest damage suffered by him due to the breach of

the contract.

Thus, the decision in the case of Hadley v Baxendale gave a fair and just law which

has been applied in a number of subsequent cases.

Konark Singh .pdf
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