Hadley v Baxendale (1854)

Contract I · Damages (s.73)

Facts.

A mill’s crankshaft broke; the owners gave it to a carrier to take to the makers as a pattern for a new one. The carrier delayed delivery; the mill stood idle longer and the owners claimed the lost profits for the extra days. The special circumstance — that the mill was wholly stopped for want of the shaft — was not made known to the carrier.

Issue.

For what loss is a party in breach liable — all loss in fact caused, or only some?

Held.

Recoverable loss is that which arises naturally from the breach, or which was in the contemplation of both parties (from known special circumstances). The lost profits, flowing from undisclosed special circumstances, were too remote.

Why it matters.

It lays down the two-limb rule of remoteness — general damages (natural) + special damages (known circumstances) — embodied in s.73 and applied in India. The single most examined case in Contract.

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