Remoteness of Damage 351

Rs 25,000,
2. If the contract has not provided for
first claims the consequences of a breach, the
Prakash get
amounthe
had to pay to only thing we can go with is what had
additional
the
goods
transported transported impliedly been agreed between the
the
consignment was
being parties,
project. Prakash was on Several of these themes are inter-related.
commissioned the
The project from
getting
another
however, has led Let us begin our exploration with remoteness
ra of
Thedelay, of damages. Cases in which the parties have
Prakash as unreli-
verge
the COmpany.
sNecompany decrying awarded to not stipulated the damages are governed by
,the project is the principle settled in 1854in the case
Hadley
o Consequently,
the
Rs 15 lakh
claiming
Prakashis v. Baxendale.'
ahe. else.
someone of business. Several
the loss
damagesfor would have Come
as others
projectsfrom awarded this project. Court Case: Hadley v. Baxendale
Gloucester that
other
himifhe
had been lakh for this loss of Hadley operated aflourmill at ( crankshaft
o
Prakashis
claiming Rs 20 was driven by a steam engine. A
mill had to be
hasinessopportunity. several con- of the engine broke, and the
would lead to had made the
Any event surprising that shut down. The engineers whoGreenwich. It
sequences. It
is. thus, not
Sudip's steam engine were based at
ripples of them
Prakash can extend the other became necessary to send the shaft to
goods to several for making a new one.
iaiure to transport the expand his claim for to serve as a patternthe carriers, Pickford &
subsequent events and however, is, where It was sent with
Baxendale. The carriers
damages. The question, is a law made by Co., represented by
does one stop? A
contract
promised to deliver the shaft at Greenwich
Do we have to go and collected two
pounds for
the parties themselves. the next day
agreed to amnong delivery got delayed by
br what has actually been plan- the job. However, the
by canal
have been carriers sent it
the parties? What could theyshared horizons one week because the shaft
ning? What had been their a result, the new
been made? rather than by rail. As closed
within which the contract had The mill had to stay
was delivered late. claimed £300 as
I the parties had already contemplated in the meanwhile. Hadley
2breach and had specified the damages five days. awarding dam
tor such a breach, the specified loss of profit forcriterion for
Pa}aDle The court's exact intents,
aount would be payable. Determination of out what the
ages was to find were.
the boundaries to which the consequences awareness of the parties
purposes and
ola breach of contract can extend is an im
noted that the only communication
POrant concern. We can summarize this as The judge between the parties at
taken place article to
folows:. that had contractwas that 'the
1. If the parties have provided on the thetime of the broken shaft of a mill
and
the
onsequences of breach in the con be carried was [Hadley)were the millers of
tract itself, by mentioning the conse that the plaintiffs
actual situation had not
explic-
quences or the amount,the stipulation that mill.' The parties
planned by or known tothe
would apply. For example,a courier itly been
Ompany may provide that it is not All ER Rep
Baxendale, (1843-1860)
responsible for any losses caused due
to late delivery of a
2 Hadley v.

consignment. 461.
352 Contract Low

since Hadley had not told Baxendale about should look at the practices as these happen
under which the shaft
was 'naturally' in a'majority of the
the circumstances explicitly principle formulated in this case cases.
has
The
the carrier had not
being sent and
been
terms of being responsible for applied to all cases on compensation since.
agreed to the on account of any The summary
above
should help us grasp the
the closure of the mill following judgment of Alderson B
special arrange
delavs. There had been no
ment of this kind. We think the proper rule in suchma case as the
present
explicit comnu
In the absence of any the parties'
is this. Where two parties have made a contract

nication, we have to infer from which one of them has broken the damages whicb
reasoned that the carriers the other party ought to receive in respect of such
actions. The court
Hadley would breach of contract should be such as may fairly and
had noway of knowing that be considered as either arising naturall
lose profts if the shipment was delayed. For reasonably
spare shaft that ie, according to the usualcourse of things, from such
all they knew, the mill had a itself, or such as mav P
breach of contract
Also, the mill
they would put into service. be supposed to have been in the contemplation of
reasons other
could have been shut down for both parties at the time they made the contract as the
course,
than the broken shaft. One can, of Drobable result of the breach of it. If special circum
People
imagine any sequence of events.
stances under which the contract was actualy made

ordinarily anticipate things that usually hap were communicated by the plaintiffs to the defend.
obvious ants, and thus known to both parties, the damages
pen. As the court put it: But it is
resulting from the breach of such a contract which
that, in the great multitude of cases of millers
they would reasonably contemplate would be the
sending off broken shafts to third persons by amount of injury which would ordinarily follow from
a carrier under ordinary circumstances, such abreach of contract under the special circumstances
consequences would not, in all probability, so known and communicated. But, on the other hand,
have occurred...' The court, thus, inferred: if these special circumstances were wholly unknown
It follows, therefore, that the loss of profits to the party breaking the contract, he, at the most,
here cannot reasonably be considered such could only be supposed to have had in his contem
contract as plation the amount of injury which would arise gen
aconsequence of the breach of
and in the real multitude of cases not affected
could have been fairly and reasonably con erally, such a breach of
by any special circumstances, from
templated by both the parties when they contract. For, had the special circumstances been
made this contract.
known, the parties might have specially provided for
Another way of expressing the same the breach of contract by special terms as to the dam
principle is: Where two parties have made ages in that case; and of this advantage it would be
a contract which one of them has broken, very unjust to deprive them.
by which we think
the damages which the other party ought to The above principles are those
estimating the damages
receive in respect of such breach of contract the jury ought to he guided in said that
out of any breach of contract. It is
should be such as may fairly and reasonably arisingcases, such as breaches of contract in
the non
other
be considered either arising naturally, i.e., payment of money, or in the not making agood tite
according tothe usual course of things, from to land, are to he treated as exceptions from this, and
such breach of contract itself. The court was, conventional rule. But as, in such
as governed by a supposed to be cognisant
thus, stating that towards exploring the in cases, both parties must be wethink, be
rule, these cases may,
tents and plans of the parties, we should first of that well--known enunct
under the rule above
look for any explicit or special arrangements more properly classed circumstance,
known special
made. If there is no special arrangement, we ated as to cases under
 Remoteness of Damage 353
becausethere both parties may reasonably be pre-
sumedto contemplate the estimation of the amount them, they ought not to take the loss of profits
into
damagessaccordingto
the conventional rule. In the consideration at allin estimating the damages. There
of
presentcase, if we are to apply the
must, therefore, be a new trial in this case.
principles above
laid down, we find that the only circumstances here
communicated by the plaintiffs to the defendants at REMOTENESS IN INDIAN CONTRACT ACT
thetime
the contract was made were that the article The Indian Contract Act
carried was the broken shaft of a mill and that ciple adopted the prin
to be formulated in
plaintiffs were the millers of that mill. But how do case. Section 73 of the
the Hadley v. Baxendale
the cirrcumstances show reasonably that the
profits provides: Indian Contract Act
these
must be stopped by an unreasonablee delay
ofthe mill of the broken shaft by the carrier to 73. Compensation for loss or
delivery
in the damage caused by
he third person? Suppose the plaintiffs had anothber breach of contract-When a contract has been bro
haf in their possession put up or putting up at the ken, the party who suffers by such breach is entitled to
that they only wished
to send back the receive, from the party who has broken the contract,
time, and
broken shaft to the engineer who made it; it is clear compensation for any loss or damage caused to him
that this would be quite consistent with the above thereby, which naturally arose in the usual course of
circumstances, and yet the unreasonable delay in the things from such breach, or which the parties knew,
delivery would have no effect upon the intermediate when they made the contract, to be likely to result
from the breach of it.
nrofts of themill. Or, again, suppose that, at the timne
of the delivery to the carrier, the machinery of the Such compensation is not to be given for any
ll had been in other respects defective, then, also, remote and indirect loss or damage sustained by
reason of the breach.
the samne results would follow. Here it is true that
+he shaft was actually sent back to serve as a model Compensation for failure to discharge obliga
for a new one, that the want of a neW one was the tion resembling those created by contract-When
an obligation resembling those created by contract
only cause of the stoppage of the mill, and that the
has been incurred and has not been discharged, any
loss of profit really arose from not sending down
the new shaft in proper time, and that this arose from person injured by the failure to discharge it is entitled
the delay in delivering the broken one to serve as a to receive the same compensation from the party in
model. But it is obvious that, in the great multitude default, as if such person had contracted to discharge
it and had broken his contract.
of cases of millers sending off broken shafts to third
persons by a carrier under ordinary circumstances,
Explanation-In estimating the loss or damage
arising from a breach of contract, the means which
such consequences would not, in all probability, existed of remedying the inconvenience caused by
have occurred, and these special circumstances
the non-performance of the contract must be taken
were here never communicated by the plaintiffs to into account.
the defendants.
It follows, therefore, that the loss of profits here The principles of Hadley v. Baxendale are in
cannot reasonably be considered such a consequence
of the breach of contract as could have been fairly the first two paragraphs. The principle has
and reasonably contemplated by both the parties two parts in limiting consequences of breach.
First, if the parties have in express terms or
when they made this contract. For such loss would
for the consequences,
neither have flowed naturally from the breach of impliedly provided
followed. We imply from the
this contract in the great multitude of such cases these should be
Occurring under ordinary circumstances, nor were conduct of the specific parties and their nego
cannot throw
the special circumstances, which, perhaps, would tiations and dealings. The law
have made it a reasonable and natural consequence its hands in despair if the parties do not
of such breach of contract, communicated to or
up boundary for the
provide for themselves. A somewhere.
Anown by the defendants. The judge ought, therefore, consequences has to be drawn
lo have told the jurvthat, upon the acts then before