SCHOOL OF LAW

UNIVERSITY OF PETROLEUM AND ENERGY

STUDIES

PROJECT WORK – LAW OF CONTRACTS

Case study Hadley v/s Baxendale

Submitted by : Submitted to:

1. Name – Ajay Narwal Ms. Charu srivastava

Roll – R450217012

SAP ID – 500059948

2. Name – Aditya pratap sisodiya

Roll – R450217010

SAP ID – 500061254
HADLEY V BAXENDALE

INTRODUCTION
The case is based on the damages on the breach of contract.
Hadley v Baxendale [1854] EWHC J70 is a leading English contract
law case. It sets the basic 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, but is not liable for any losses
that the breaching party could not have foreseen on the information
available to him.
The case refers to the section 72 of indian contract act 1872. Which
talks about the damages in case of breach of contract.
 FACTS OF THE CASE
The claimants, Mr Hadley and another, were millers and mealmen and
worked together in a partnership as proprietors of the City Steam-Mills
in Gloucester. They cleaned grain, ground it into meal and processed it
into flour, sharps, and bran. A crankshaft of a steam engine at the mill
had broken and Hadley arranged to have a new one made by W. Joyce &
Co. in Greenwich. 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 Ors, who were operating together as common carriers under the
name Pickford & Co., to deliver the crankshaft to engineers for repair by
a certain date at a cost of £2 sterling and 4 shillings (current value of
about.
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 awarded Hadley damages of £25 (present value
about £2500). 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.
 JUGEMENT
The Court of Exchequer, led by Baron Sir Edward Hall Alderson,
declined to allow Hadley to recover lost profits in this case, holding that
Baxendale could only be held liable 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.

"Although the principle stated in Hadley v Baxendale remains the fons

et origo of the modern law, the principle itself has been analysed and
developed, and its application broadened, in the 20th century... The
general result of the two cases is that the principle in Hadley v
Baxendale is now no longer stated in terms of two rules, but rather in
terms of a single principle—though it is recognised that the application
of the principle may depend on the degree of relevant knowledge held
by the defendant at the time of the contract in the particular case. This
approach accords very much to what actually happens in practice; the
courts have not been over-ready to pigeon-hole the cases under one or
other of the so-called rules in Hadley v Baxendale, but rather to decide
each case on the basis of the relevant knowledge of the defendant."
 TYPES OF DAMAGES

1) Compensatory damages
2) General damages
3) Pecuniary Damages
4) Liquidated Damages.

Compensatory damages

Damages awarded for actual loss, to place the plaintiff in a position

that she would have been in had she not suffered the wrong
complained of. The aim is to “make the injured party whole
again”.
In a breach of contract case, the court might well order the
breaching party to compensate the non-breaching party for losses
resulting from the breach. A defendant is liable to a plaintiff for all
the natural and direct consequences of the defendant’s wrongful
act. Remote consequences of a defendant’s act or omission cannot
form the basis for an award of compensatory damages. 

General damages
Damages for non-monetary losses suffered by a plaintiff. In contrast to
special damages (see below), these damages are called “general”
because they cannot be assessed exactly. General damages have long
been characterized as those that the law presumes to flow from every
breach of contract or other invasion of the plaintiff’s rights.
in a personal injury action, for instance, examples of such losses suffered
include pain, suffering, disfigurement, loss of enjoyment of life and loss
of amenities. Non-pecuniary damages are compensation for past, present
and future losses, subject to the upper limit for such an award
established by the Supreme Court of Canada. In determining fair
compensation in the particular circumstances of a case, courts look at
such factors as the plaintiff’s age, the nature of the injury, the severity
and duration of the pain, the level of the disability and the loss of
lifestyle or impairment of life.

Pecuniary Damages

Damages that can be exactly measured in money. Damages intended to

compensate a plaintiff for a quantifiable monetary loss. Special damages
means the particular damage (beyond the general damage) that results
from the particular circumstances of the case. Examples of such losses
include: medical bills, lost wages, and repair costs.

Liquidated damages
Damages agreed upon by the parties entering into a contract, to be paid
by a party who breaches the contract to a non-breaching party. These are
available when damages may be hard to foresee and must be a fair
estimate of what the damages might be if there is a breach. Liquidated
damages may be used when it would be hard to prove the actual harm or
loss caused by a breach. The amount of liquidated damages must be a
reasonable estimate of the actual damages that a breach would cause. A
contract term setting unreasonably large or disproportionate liquidated
damages may be void because it constitutes a penalty or punishment for
default.