A shaft in Hadley’s (P) mill broke rendering the mill inoperable. Hadley hired Baxendale (D) to transport
the broken mill shaft to an engineer in Greenwih so that he o!ld make a d!pliate. Hadley told
Baxendale that the shaft m!st be sent immediately and Baxendale promised to deli"er it the next day.
Baxendale did not know that the mill wo!ld be inoperable !ntil the new shaft arri"ed.
Baxendale was negligent and did not transport the shaft as promised# a!sing the mill to remain sh!t
down for an additional fi"e days. Hadley had paid $ po!nds fo!r shillings to ship the shaft and s!ed for
%&& po!nds in damages d!e to lost profits and wages. 'he (!ry awarded Hadley $) po!nds beyond the
amo!nt already paid to the o!rt and Baxendale appealed.
• *hat is the amo!nt of damages to whih an in(!red party is entitled for breah of ontrat+
Holding and Rule
• An in(!red party may reo"er those damages reasonably onsidered to arise nat!rally from a
breah of ontrat# or those damages within the reasonable ontemplation of the parties at the time
of ontrating.
'he o!rt held that the !s!al r!le was that the laimant is entitled to the amo!nt he or she wo!ld ha"e
reei"ed if the breahing party had performed, i.e. the plaintiff is plaed in the same position she wo!ld
ha"e been in had the breahing party performed. -nder this r!le# Hadley wo!ld ha"e been entitled to
reo"er lost profits from the fi"e extra days the mill was inoperable.
'he o!rt held that in this ase howe"er the r!le sho!ld be that the damages were those fairly and
reasonably onsidered to ha"e arisen nat!rally from the breah itself# or s!h as may be reasonably
s!pposed to ha"e been in the ontemplation of both parties at the time the ontrat was made.
'he o!rt held that if there were speial ir!mstanes !nder whih the ontrat had been made# and
these ir!mstanes were known to both parties at the time they made the ontrat# then any breah of
the ontrat wo!ld res!lt in damages that wo!ld nat!rally flow from those speial ir!mstanes.
Damages for speial ir!mstanes are assessed against a party only when they were reasonably within
the ontemplation of both parties as a probable onse.!ene of a breah. 'he o!rt held that in this ase
Baxendale did not know that the mill was sh!t down and wo!ld remain losed !ntil the new shaft arri"ed.
/oss of profits o!ld not fairly or reasonably ha"e been ontemplated by both parties in ase of a breah
of this ontrat witho!t Hadley ha"ing omm!niated the speial ir!mstanes to Baxendale. 'he o!rt
r!led that the (!ry sho!ld not ha"e taken the loss of profits into onsideration.
0aated and remanded for new trial.
1onse.!ential damages are linked to knowledge and foreseeability at the time of ontrating and deal
with the reo"ery of damages for loss other than those arising nat!rally. 2odern o!rts do not look at the
implied tait agreement dis!ssed in this ase# and instead !se foreseeability as the ornerstone to
determine onse.!ential damages. 'he ob(et of damages as a remedy in a ontrat is to make the
parties finish in a position they wo!ld ha"e been in had the ontrat been properly performed. *hat is
reasonably foreseeable at the time of ontrating re.!ires e"idene of the ir!mstanes !nder whih the
parties entered into the ontrat and the knowledge that they possess. 3!h knowledge an be imp!ted
to the parties from !stomary trade pratie and other so!res.
Peevyhouse v. Garland Coal & Mining Co.# %4$ P.$d 5&6 (7kla. 568$).
Facts: Garland 1oal (D) ontrated for the right to strip mine oal on Pee"yho!se’s (P) property for fi"e
years. 'he ontrat pro"ided that Garland wo!ld perform restoration work on the property at the end of
the lease period. Pee"yho!se s!ed for 9$)#&&& when Garland ref!sed to perform the restoration. 'he
(!dge instr!ted the (!ry that it o!ld onsider the dimin!tion of "al!e of the land as well as the ost of
restoration in awarding damages.
'he (!ry awarded Pee"yho!se 9)#&&&# whih was m!h less than the ost of restoring the property# b!t
greater than the red!tion in "al!e of the land if not restored. Pee"yho!se appealed# arg!ing that it sho!ld
be entitled to the ost of obtaining performane of the restoration. Garland 1oal arg!ed that damages
sho!ld be limited to the differene in market "al!e between the land as it was at the time# and the land as
it wo!ld be if the restoration were performed.
Issue: :f breah pertains to a matter only inidental to the main p!rpose of the ontrat# and performane
wo!ld be disproportionately ostly# what is the proper meas!re of damages+
Holding and Rule (Jackson): :f breah pertains to a matter only inidental to the main p!rpose of the
ontrat# and performane wo!ld be disproportionately ostly# the proper meas!re of damages is the
dimin!tion in "al!e meas!re.
Garland 1oal arg!ed that the work wo!ld add only a few h!ndred dollars to the "al!e of Pee"yho!se’s
land and that damages sho!ld be limited to that amo!nt bea!se that was all Pee"yho!se had lost. 'he
o!rt noted that the ma(ority followed the dimin!tion in "al!e r!le when the ost of performane greatly
exeeded the dimin!tion in "al!e.
'he o!rt looked to the p!rpose of the ontrat and onl!ded that it was for the mining of oal and the
restoration was inidental. ;"en in b!ilding and onstr!tion ontrats there is onsideration of
!nreasonable eonomi waste when determining damages. 'he <estatement and other a!thorities
onsider waste and relati"e eonomi benefit when assessing damages. 'he meas!re of damages in a
ontrat in"ol"ing land is= the ost of performane limited to the total differene in the market "al!e of the
land before and after the work was performed# if that ontrat pro"ision is merely inidental to the main
p!rpose of the ontrat# and the ost of f!ll performane is grossly disproportionate to the inrease in
*here s!h a res!lt is in fat ontemplated by the parties and is a main or prinipal p!rpose of the
ontrat# howe"er# the meas!re of the breah wo!ld be the ost of performane.
Disposition: Award red!ed to 9%&&.
Dissent (Irwin): Garland 1oal has reei"ed all of the benefits of the ontrat. 'he element of remedial
work was an essential part of this agreement and it was a ondition to the right for Garland to !se
Pee"yho!se’s land. :f the "al!e of the performane sho!ld be onsidered in determining damages# the
"al!e of the benefits reei"ed sho!ld also be onsidered. 'he law annot make a better ontrat for the
parties than they ha"e made for themsel"es and sho!ld not alter it for the benefit of one party and to the
detriment of the others. 'he (!diial f!ntion of a o!rt of law is to enfore a ontrat as it is written.
American Standard, Inc. v. Schectman# 4& A.D.$d %54# >%6 ?.@.3.$d )$6# >$A ?.;. $d )5$ (?.@. 5645).
Facts: Amerian 3tandard# :n. (P) operated a pig iron man!fat!ring plant on $8 ares of land ab!tting
the ?iagara <i"er in 'onawanda. 7n the property were se"eral b!ildings# a 8&Bton blast f!rnae# railroad
traks and loomoti"es# and other hea"y mahinery. Amerian 3tandard deided to lose the plant and
ontrated with 3hetman (D) to on"ey the b!ildings and e.!ipment# in exhange for 9$A)#&&& and his
promise to remo"e e"erything. 3hetman promised to remo"e all fo!ndations et.# inl!ding those
beneath the s!rfae and not "isible# and grade the property as speified. D failed to perform and P
bro!ght s!it and was awarded 96&#&&&. D appealed.
Issue: *hat is the meas!re of damages for breah of a onstr!tion ontrat+
Holding and Rule: 'he general r!le of damages for breah of a onstr!tion ontrat is that the in(!red
party may reo"er those damages whih are the diret# nat!ral# and immediate onse.!ene of the
breah and whih an reasonably be said to ha"e been in the ontemplation of the parties when the
ontrat was made. 'he dimin!tion in "al!e meas!re of damages is only applied when the defets are
irremediable or may not be repaired witho!t s!bstantial tearing down, howe"er o!rts ha"e applied the
dimin!tion of "al!e meas!re e"en where no s!bstantial tearing down is neessary if the breah is only
inidental to the main p!rpose of the ontrat# and ompletion wo!ld be disproportionately ostly.
:t is also a general r!le in b!ilding and onstr!tion ases# that a ontrator who wo!ld ask the o!rt to
apply the dimin!tion of "al!e meas!re m!st not ha"e breahed the ontrat intentionally# and m!st show
s!bstantial performane made in good faith. :n this ase the o!rt held that D’s ompleted performane
wo!ld not ha"e in"ol"ed !ndoing what in good faith was done improperly# b!t only doing what was
promised and left !ndone. D# instead of attempting in good faith to omplete the remo"al of the
!ndergro!nd str!t!res# ontended that he was not obliged by the ontrat to do so and# th!s# annot
laim to be a transgressor whose defa!lt is !nintentional and tri"ial.
'hat the f!lfillment of defendant’s promise wo!ld add little or nothing to the sale "al!e of the property
does not ex!se the defa!lt. 'he r!le that the meas!re of P’s damage is the ost of ompletion is not
altered by the mere fat that the b!rden of performane was hea"ier than antiipated# and the ost of
ompletion disproportionate to the end to be obtained.
Disposition: Affirmed.
Notes: 7ne of the key feat!res of this ase that disting!ishes it from other onstr!tion ontrats ases is
that the o!rt deemed that D’s breah was intentional.
3!mmary of Fletcher v. Peck# 5& -.3. 4A# 8 1ranh 4A# % /. ;d. 58$ (545&).
:n 5A6)# nearly e"ery member of the Georgia state legislat!re was bribed to permit the sale of %& million
ares of land at less than two ents per are for a total of 9)&&#&&&. 7nly one member of the legislat!re
"oted against the legislation. 'he land was known as the @aCoo lands and e"ent!ally beame the states
of Alabama and 2ississippi.
As a res!lt of p!bli o!trage# most of the legislators lost the following eletion and the new legislat!re
passed a stat!te in 5A68 essentially n!llifying the transations. 'hose who had p!rhased the land
ref!sed to aept the ret!rn of their p!rhase prie and m!h of the land was resold to bona fide
p!rhasers at great profit.
<obert Dlether (P) p!rhased 5)#&&& ares from Eohn Pek (D) in 54&% for 9%#&&&. Pek# in spite of the
5A68 stat!te# had plaed a o"enant in the deed that stated that the title to the land had not been
onstit!tionally impaired by any s!bse.!ent at of the state of Georgia. Dlether s!ed Pek to establish
the onstit!tionality of the 5A68 at, either the at was onstit!tional and the ontrat was "oid# or the at
was !nonstit!tional and Dlether had lear title to the land.
• :s a law that negates all property rights established !nder an earlier law !nonstit!tional+
Holding and Rule (Marshall)
• @es. A law that negates all property rights established !nder an earlier law is !nonstit!tional for
"iolating the 1ontrat 1la!se (Artile :# 3etion 5&) of the -nited 3tates 1onstit!tion.
'he o!rt# while deploring the extensi"e orr!ption in the earlier state legislat!re# held that ontrats
signed !nder the original law m!st be aepted as "alid. 'he moti"es of the legislators o!ld not be
onsidered by the 1o!rt and were not the responsibility of bona fide p!rhasers who were following the
law. 'he o!rt aknowledged that a legislat!re an repeal any at of a former legislat!re# b!t that this
priniple did not apply where the legislat!re so!ght to !ndo ations taken !nder the pre"io!s at while it
was still "alid.
'he o!rt held that the land grant was a type of ontrat# and therefore the 1ontrat 1la!se (Art. :# se.
5& of the -.3. 1onstit!tion) applied. 'he 1ontrat 1la!se states= F?o 3tate shall G pass any Bill of
Attainder# ex post fato /aw# or /aw impairing the 7bligation of 1ontrats# or grant any 'itle of ?obility.H
'he o!rt held that the 5A68 law was an !nonstit!tional ex post fato law that so!ght to penaliCe bona
fide p!rhasers for wrongs ommitted by those from whom they were p!rhasing.
E!dgment for Pek. 'he 5A68 stat!te was !nonstit!tional and the sale to Dlether on"eyed lear title.
Concurrence (Johnson)
*hile states may not abrogate ontrats# they may pass legislation that affets ontrats.
3!mmary of Martin v. Hunters !essee# 5> -.3. %&># > /. ;d. 6A# 5 *heat. %&># 5458 -.3. /;I:3 %%%
'he state of 0irginia enated legislation d!ring the <e"ol!tionary *ar that ga"e the 3tate the power to
onfisate the property of British /oyalists. H!nter was gi"en a grant of land by the 3tate. Denny 2artin
held the land !nder de"ise from /ord 'homas Dairfax.
:n an ation in e(etment# the trial o!rt fo!nd in fa"or of 2artin and the o!rt of appeals (the highest
0irginia state o!rt) re"ersed. 'he 3!preme 1o!rt of the -nited 3tates re"ersed in fa"or of 2artin#
holding that the treaty with ;ngland s!perseded the state stat!te# and remanded the ase to the 0irginia
o!rt of appeals to enter (!dgment for 2artin. 'he 0irginia o!rt ref!sed# asserting that the appellate
power of the -.3. 3!preme 1o!rt did not extend to (!dgments from the 0irginia o!rt of appeals.
• Does the -.3. 3!preme 1o!rt ha"e appellate (!risdition o"er state o!rt deisions in"ol"ing
federal law+
Holding and Rule
• @es. 'he -.3. 3!preme 1o!rt has appellate (!risdition o"er state o!rt deisions in"ol"ing
federal law.
'he federal power was gi"en diretly by the people and not by the 3tates. Artile :::# 3etion $# 1la!se $
of the -.3. 1onstit!tion states that Fin all other ases before mentioned the 3!preme 1o!rt shall ha"e
appellate (!risditionH. 'his demonstrates a text!al ommitment to allow 3!preme 1o!rt re"iew of state
:f the 3!preme 1o!rt o!ld not re"iew deisions from the highest 3tate o!rts# the state o!rts
neessarily wo!ld be exl!ded from hearing ases in"ol"ing .!estions of federal law. :t had already been
established that state o!rts ha"e the power to r!le on iss!es of federal law# and therefore the 3!preme
1o!rt m!st be able to re"iew those deisions. 'he 1o!rt also held that the 3!premay 1la!se states that
the federal interpretation tr!mps the states’ interpretation.
'he 1o!rt re(eted onerns regarding state (!diial so"ereignty. 'he 3!preme 1o!rt o!ld already
re"iew state exe!ti"e and legislati"e deisions and this ase was no different. 3tory then onfronted the
arg!ments that state (!dges were bo!nd to !phold the 1onstit!tion (!st as federal (!dges were# and so
denying state interpretations pres!med that the state (!dges wo!ld less than faithf!lly interpret the
1onstit!tion. 'he 1o!rt stated that the iss!e did not onern bias, rather# it onerned the need for
!niformity in federal law. 'he 3!preme 1o!rt onl!ded that the deision by the 0irginia o!rt of appeals
was in error.
E!dgment re"ersed.
Difty years after the 3!preme 1o!rt handed down this opinion# it held in Ex parte McCardle that while the
1o!rt’s appellate (!risdition is s!b(et to exeptions and reg!lations imposed by 1ongress# it is deri"ed
from the 1onstit!tion itself and not from ats of 1ongress.
Question: Problem question: Mary, a frail but mentally sound 87-year old woman, is in the
front garden of her old weatherboard home. Duncan, a big man who was heavily tattooed
and wearing leathers, ar!s his motorbi!e outside her garden and stri!es u a conversation
with Mary. "e told Mary that: #$ am a licensed ainter and $ could aint the e%terior of your
house for a good rice & '8(((). Mary obviously felt intimidated by Duncan and hastily
agreed. *he ne%t day Duncan arrived and over the ne%t two days ainted her house. During
this time Mary discovered from her daughter+s inquiries that had Mary received cometitive
quotes for the ainting wor!, the going rate for ainting her house was about ',(((. "er
daughter also discovered that Duncan+s registration as a licensed ainter had lased two
wee!s agobecause he had forgotten to ay the renewal fee. *he -ob is now comlete and
Duncan has as!ed Mary for '8(((.
$s Mary contractually obligated to ay Duncan the '8(((.
$n your answer, refer to the general law of contract only. Do not refer to any statute law.
/dministrators comment: *his coursewor! was comleted as art of an 001 0aw degree
rogramme outside of the 23. 4/ustralia - Masters year 56 $t has been added to the
lawcoursewor!.com database due to it+s high quality. 7enerally sea!ing only wor!
comleted within 23 0aw courses is acceted.
Answer: $8829 *he issue to be resolved in this case is whether or not Mary is contractually
obliged to ay '8,((( to Duncan for ainting her house. 8ecifically, are there
circumstances which may cause the contract between them to be vitiated. :209,
P:$;<$P098 and :909=/;* <>;D2<*8 *he laintiff is allowed to vitiate contracts based on
law and equity on several grounds. *he grounds that ave the way to e%ercise the right to
recover damages, rescind or annul a contract are mista!e, misreresentation, duress, undue
influence, unconscionable conduct and illegality. /s held in 1arton v /rmstrong, a re-
contractual reresentation that has the robability to influence the mind of an ordinary
erson, and actually affects that erson+s mind leading him to enter into the agreement,
entitles the ......4short e%tract6
Question: Problem question 4Part ?6: /dam says to his wor! colleague <olin: @if you drive
my et Doberman, 1rutus, to 8ydney $ will ay you 'A(((+. <olin says nothing. *hree days
later he drove 1rutus to 8ydney. 1rutus became very car sic! during the tri because of
<olin+s erratic driving. 41rutus had never been car sic! before on long drives.6 >n arrival in
8ydney 1rutus was so dehydrated from car sic!ness that he had to be ta!en to an animal
hosital. *his required /dam to ay '5((( in veterinary e%enses. /dam refuses to ay
<olin 'A(((.
4ii6 /ssuming that a contract has been formed, has it been breached. $f so, what remedies
arise. 4B mar!s6
/dministrators comment: *his coursewor! was comleted as art of an 001 0aw degree
rogramme outside of the 23. 4/ustralia6 $t has been added to the lawcoursewor!.com
database due to it+s high quality. 7enerally sea!ing only wor! comleted within 23 0aw
courses is acceted.
Answer: 1:9/<" >C <>;*:/<* $8829 7iven that the contract is valid between /dam and
<olin, has the contract been breached. 8ecifically, are there imlied terms in their contract
and has it been breached. :2098, P:$;<$P098 /;D :909=/;* <>;D2<* /s a general rule,
the obligations arising from a contract are determined by its terms 4:adan D 7ooley, ?((E6.
$n this case, the terms and conditions in the contract desite not being e%ressly rovided
in writing, has been resolved to be valid and enforceable. /ccording to 7illies 4?(5?6, terms
in a contract may be e%ressed or imlied and the violation of the imlied terms and
conditions gives rise to liabilities as much as e%ressed terms do. / decided case 4Donoghue
v 8tevenson 6 similarly stated that an imlied term in contracts to render service......4short
Question: >utline the develoment of the 0aw of 9vidence with reference to the evidence
of souses.
Answer: *o be comellable, a witness must first be cometent. / witness is cometent
where he can be lawfully called to give evidence, and is comellable if he has a legal
obligation to do so . /s a general rule, all witnesses are comellable for all arties. $n civil
roceedings, the only e%cetion to this is the non-comellability of the former souse of a
deceased erson . *herefore, the discussion will focus on the more contentious area of
souse comellability within the criminal law. / souse refers to a erson who is lawfully
married . 2ntil 5E8,, the common law ruled that a souse was not cometent, and thus
non-comellable, to testify against her husband. *he rationale behind this was the
fundamental ob-ection to the otential disrution of marital harmony and the ris! of
er-ur......4short e%tract6