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Natashah K Mapingere
23900329

LS110 Law of contract

Term C 2023
Assignment 6
9 January 2024

Discuss the rule of remoteness with the aid of these cases, Hadley v
Baxendale, 1854, Victoria Laundry Windsor ltd v Newman Industries, 1949 and
Horn v Midland Railway,1873

Introduction

It is not every type of a damage caused by a defendant as a result of a breach that

is recoverable by the plaintif (Elliott, & Quinn, 2009). The court may discover that the
loss flowing from the said breach is too remote hence it cannot be recovered. It will
be unfair to expect the defendant to pay for the loss ( Elliot, & Quinn, 2009). In order
to determine if the defendant should be liable for the loss by a breach of a contract, 2
rules were established the key case of Hadley v Baxendale (1854).

As illustrated by Eliiot, & Quinn (2009) the case of Hadley v Baxendale (1854) the
court reasoned that, the defendant can only be liable for loss (a) " which would arise
naturally according to the usual course of their breach (b) loss "as may reasonably
be supposed to have been in the contemplation of the parties at the time when they
made the contract, as a probable result of the breach " . With the help of the
following case, Hadley v Baxendale ( 1854), Victoria Laundry (Windsor) Ltd v
Newman Industries (1949) and lastly Horn v Midland Railway ( 1873), this essay will
discuss and explain the rule of remoteness of damages.

Rule 1

As mentioned above, the first rule the makes a defendant liable to the loss caused
by their breach was laid down in tthe case of Hadley v Baxendale (1854), stated that
the loss had to have rose as a natural consequence flowing from the breach
meaning that it had to be loss that rose from the usual course of things and not
something remote. Looking at the above mentioned case, the plaintiff, was an owner
of a flour mill contracted with the defendant, carrier, for the transport of a broken
mill-shaft to an engineer who was to use it as a pattern for new mill-shaft. There was
a delay in the delivery to the engineer, which constituted a breach of contract by the
carrier Hadley v Baxendale (1854). The plaintiff received the new shaft five days late,
which resulted in considerable losses to his business, because no spare shaft was
available, and the mill was shut for longer than expected Hadley v Baxendale (1854).
The plaintiff sued for lost profits. In regard to the first rule it was held that the
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defendant was not liable for the plaintiff's loss because the fact that the mill could not
work without the iron shaft cannot be considered to be a loss that arose in the usual
course of things Hadley v Baxendale ( 1854). In fact, the court argued that they could
even have been in possession of a spare shaft. In this case one can argue that that
this rule prevents the issue of having consequential losses exceed too far and
placing unreasonable monetary burdens on the defendants (Stone, 2009).

A case in point where the defendant was found liable for the losses caused by their
breaach of a contract was in the Victoria Laundry (Windsor) ltd v Newman Industries
(1949). The facts of the case are that a boiler was to be fitted in a laundry. They
made it clear that it was needed for immediate use and after delay a claim was made
for loss of normal profit and for not being able to undertake a particularly lucrative
dyeing contract for the Ministry of Supply. In relation to the first rule, the court held
that the defendant was indeed liable for normal loss and therefore had to pay for the
£16 per week profit as it was termed normal loss that arose naturally especially
looking at their business and the loss was a usual course result of their breach
Victoria Laundry (Windsor) ltd v Newman Industries (1949) . Thus in this case, one
can argue that the rule of remoteness of damages aims to compensate the plaintiff
and put them in a place they would have been if the contract had been handled as
expected but making sure it does not burden the defendant with unreasonable
monetary burdens.

Rule 2

The second rule that makes a defendant liable for loss from their breach is loss that
the defendant should have contemplated ,could have been forseen and that it could
come if there is a breach and that it was a highly probable that suach a loss would
be met if a breach was to take place ( Elliott, & Quinn, 2009). As argued by Carman,
(2007), " the court will look at whether the reasonable person would have realised
that such loss was likely to result from the breach , to make it proper to hold that the
loss flowed naturally from the breach of contract or that the loss of that kind should
have been within his/ her contemplation". In support of this rule, the court has
reinforced on the point that, the plaintiff has to make sure the defendant is aware and
has sufficient knowledge on the specifics of the contract at the time the contract is
made so as to avoid losses being to remote to be claimed ( Stone, 2009).

Looking at the case of Hadley v Baxendale ( 1854) the court held that the plaintiff
could not claim for lost profits incurred during the time of late delivery because they
had not informed the defendants that the mill could not work without the shaft. If the
defendants had known they would have at least tried to make sure it's delivered on
time. This means that, the defendants did not contemplate such a loss as they were
not aware of the circumstances which might affect performance of the mill. Therefore
the loss incurred by the plaintiffs was unforeseen by the defendants thus remote for
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the plaintiff to be compensated. In this case, the rule prevents the defendants from
being burdened with unreasonable monetary debts (Stone, 2009).

The case of Victoria Laundry (Windsor) v Newman Industries the issue of being
aware of the circumstances of a contract was reinforced. In this case the plaintiff
besides claiming for loss of normal profit, they also claimed for damages of £262 per
week for the loss of a lucrative dyeing contract with the Government. The court held
that the defendant could only be liable for loss which they could have foreseen and
in this case they would have foreseen this loss if they were aware of the Government
contract (Stine, 2009).This case illustrates that the principle that a party who
breaches a contract is only liable for the losses that are within the contemplation of
the parties when they entered into a contract ( Stone, 2009).

The same issues rose in the case of Horn v Midland Railway (1873). The plaintiff Mr
Horn had sent a consignment of shoes to London by the defendant train the Midland
Railway. Unfortunately the train arrived a day late and the plaintiff missed an
opportunity to sell the shoes at a high price as the Franco Prussian war had ended .
The plaintiff claimed for loss of business. The court held that the defendant was not
liable because the loss was not reasonably foreseeable as he only knew that he had
to deliver them by a certain date but not why and that the shoes were to make
profit. In this case it is clear that the remoteness has to be on the basis that the party
had knowledge on the circumstances of the contract when it was made. Therefore,
knowledge which the defendants gets to acquire after the contract has been made is
found to be irrelevant in the rule of loss being reasonably foreseeable and probable
(Elliott, &Quinn, 2009).

Conclusion
The rule of remoteness of damges aims to assess if the expenses for which
compensation is being sought is a direct result of a breach if contract or if it is too
remote. In summary, it can be said that normal foreseeable losses will be
compensated by the court but not lucrative losses which are not within the
contemplation of the parties or circumstances that they are unaware. Furthermore, it
is a rule that protects both parties if a breach of contract incurs, as it helps a plaintiff
to be awarded damages and the plaintiff is protected from being burdened unfair and
ridiculous financial consequences.

Reference list

R. Stone. (2009). The Modern Law of Contract (8th ed). London: Routledge
Publishing.
C Elliot, &, F. Quinn.(2009). Contract Law (7th ed). Pearson Longman:London.
M. Charman. (2007) . Contract Law (4th ed). London: Wilan Publishing
Hadley v Baxendale (1854) 9 Exch 341
Horn v Midland Railway (1873) LR 6CP 131
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Victoria Laundry (Windsor) ltd v Newman Industries (1948) 2 KB 528