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Victoria Laundry V. Newman Industries Ltd.
(1949) 2 KB 528
Publications, Uncategorized
Introduction:
This is case where providing clear knowledge of circumstances leading to loss of profit imposes
a liability on the party that breaches the contract. Victoria Laundry v. Newman Industries Ltd.
(1949) is a case where the rule laid down in Hadley v. Baxendale was re- examined on the
ground of foreseeability or knowledge of the defendant to claim damages by the plaintiff. The
rule that Hadley v. Baxendale laid down was that the plaintiff cannot claim damages in special
circumstances where the defendant is not aware off while entering into the contract. This case
modified this rule and added the term foreseeability to the rule. The rule in this cases states that
only those damages can be claimed or recovered by the plaintiff that can be reasonably foreseen
by the defendants. If the damages cannot be reasonably foreseen by the defendants the it cannot
be recovered or claimed.
The brief facts of this case is that Victoria Laundry Ltd ordered a large boiler from Newman
Industries Ltd in contemplation of some lucrative dyeing contracts. Newman Industries were
aware of the nature of Victoria Laundry Ltd.’s business, and that it was intended for the boiler to
be put to use as soon as possible. The delivery of the boiler was delayed by five months and
Victoria Laundry Ltd. claimed for breach of contract. The issue arose as to whether Newman
Industries being aware of the Victoria Laundry’s nature of business can be held liable and
whether Victoria Laundry can recover damages from the Newman Industries.

Background:
Victoria Laundry v. Newman Industries (1949) is an English Contract Law case that bought
about the principle of remoteness of damages. Victoria Laundry (plaintiff) bought a large boiler
for use in their dying and laundry business. The Newman Industries (defendant) was aware that
they wanted to put it to immediate use and knew the nature of their business. The delivery of the
boiler was delayed in breach of contract and the plaintiffs brought an action for the loss of profit
which the boiler would have made during the period in which the delivery was delayed. The
claim contained a sum for a particularly lucrative contract which they lost due to the absence of
the boiler. The plaintiffs sued for damages and for loss of profits on the grounds that the large
number of customers they could have taken had the boiler been installed and the amount they
could have earned under a special dying contract. The defendant knew that the plaintiffs were
launderers who wanted the boiler for immediate use. The Court of Appeals held that reasonable
foreseeability existed on the part of the defendants and hence the plaintiffs could recover the
damages(lost profits). Damages could be awarded for losses which could have reasonably
foreseen or expected to occur.

Analysis:
Victoria Laundry Ltd. v. Newman Industries (1949) is case where the question of Law arose with
respect to reasonable foreseeability of the defendants. The basic principle of this case with regard
to consequential damages was laid down in the case of Hadley v. Bexandale where the court held
that defendants cannot be sued for damages or losses they are not aware off at the time of
entering into the contract. Victoria Laundry’s case added an extra element to the rule
emphasising on reasonable foreseeability and knowledge of expecting a damage to take place.
The court viewed that reasonable foreseeability is depended upon knowledge and this knowledge
is of two kinds. One is imputed knowledge which the defendant is assumed to know about the
losses which was laid down in Hadley v. Bexandale’s case. This knowledge refers to knowledge
in ordinary circumstances. Actual knowledge is an addition to the previous knowledge about the
special circumstances of losses and the possibility that more loss shall occur as a result of this
breach. The court also distinguished loss of profits from a lucrative dying contract as different
type of loss which would only be recoverable if the defendant had sufficient knowledge of them
to make it reasonable to attribute to him acceptance of liability for such losses. Justice Asquitch
was of the opinion that the question is addressed to the time where the contract was made and it
is assumed that the defendant undertook to bear any special loss which is referable to specific
circumstances.
In the case of Kourfos v. C. Czarnikow Ltd. (1969) the House of Lords laid down three main
principles with respect to reasonable foreseeability under:

 “In case of breach of contract, the aggrieved party is only entitled to recover such part of
the loss actually resulting as was at the time of the contract reasonably foreseeable as
liable to result from the breach.
 What was at that time reasonably so foreseeable depends on the knowledge then
possessed by the parties or at all events, by the party who later commits the breach.
 Knowledge ‘possessed’ is of two kinds: one imputed, the other actual. Everyone, as a
reasonable person, is taken to know the ‘ordinary course of things and consequently what
loss is liable to result from a breach of contract in that ordinary course.’ But to this
knowledge which a contract breaker is assumed to possess whether he actually possesses
it or not, there may have to be added in a particular case -knowledge which he actually
possesses, of special circumstances outside the ‘ordinary course of things’ of such a kind
that a breach in those special circumstances would be liable to cause more loss.”
The Judgement given by the Court of Appeal was an appropriate one and this rule conforms with
law in present times. In India Section 73 of Indian Contract Act,1872 also lays emphasis on the
element of reasonable foreseeability and rewards compensation only in the cases where
circumstances cannot be reasonably foreseeable. This law is also in line with Section 73 of the
Indian Contract Act ,1872.Section 73 of the Indian Contracts Act ,1872 states that “ when a
contract has been broken, the party who suffers by such breach is entitled to receive, from the
party who has broken the contract, compensation for any loss or damage caused to him thereby,
which naturally arose in the usual course of things from such breach, or which the parties knew,
when they made the contract, to be likely to result from the breach of it. Such compensation is
not to be given for any remote and indirect loss of damage sustained by reason of the breach”It
further states that “When an obligation resembling those created by contract has been incurred
and has not been discharged, any person injured by the failure to discharge it is entitled to
receive the same compensation from the party in default, as if such person had contracted to
discharge it and had broken his contract.” The explanation to Section 73 states that “In
estimating the loss or damage arising from a breach of contract, the means which existed of
remedying the inconvenience caused by non-performance of the contract must be taken into
account.” Transfield Shipping Inc v Mercator Shipping Inc (2008) it was clear that the
remoteness test is about identifying the scope of an implied assumption of responsibility by the
defendant in the contract. Therefore, requires an assessment of the common expectation as to the
scope of the defendant’s liability.
Hence, by these cases we can conclude that the judgement was an appropriate one makes the
rules laid for the test of remoteness more specific and clear. This also provides legal protection
for plaintiffs in case of grave losses which can be missed out only. Because of the defendant
being unaware.

Conclusion:
The concept of reasonable foreseeability plays a very important role in examining the extent of
damages. The impact this case was vast and it led to Indian Law also to include sections of
consequential damages and also led the House of Lords to pronounce a judgement in a similar
case to declare that knowledge or reasonable foreseeability plays an important role. Thus, this
case adds another element to the underlying principle of consequential damages that was laid
down in the case of Hadley v. Baxendale which is the element of reasonable foreseeability or
knowledge. Reasonable foreseeability encompasses the plaintiffs claim which might not
otherwise be relevant if the defendant was unaware or could not contemplate such damages.
Therefore, both the cases have laid a foundation in Contract Law with regard to remoteness of
damages.