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FACTS Hadley v Baxendale [1854] EWHC J70

• Hadley was the plaintiff and Baxendale was the defendant. • A crank shaft broke in the plaintiff's mill, which meant that the mill had to stop working. • The plaintiffs wanted to send the shaft to the manufacturer as quickly as possible, so that it could be used as a pattern for a new one. • The carriers commissioned by the plaintiff were guilty of serious delay in making delivery. • The defendant failed to deliver on the date in question, causing the plaintiff to lose business. • On the above facts, the plaintiffs brought an action for breach of contract by reason of the delay. • The test for remoteness of contractual damages was laid down in this case.

. from such breach of contract itself.Test of Remoteness in Hadley v Baxendale • Dictum of Alderson B: – The damages which the other party ought to receive in respect of such breach of contract should be: • 1st limb: – Such as may fairly and reasonably be considered either arising naturally. according to the usual course of things. OR • 2nd limb: – Such as may reasonably be supposed to have been in the contemplation of both parties.e. i. at the time they made the contract.. as the probable result of the breach of it.

businesses like the one carried out by the plaintiff in this case. • Therefore. • Furthermore. the losses suffered by the plaintiff were not natural consequences of the defendant’s breach. would be assumed to have spare/extra shafts. • It is not natural because usually. under the 2nd limb. • The defendant was not informed that the mill will be inoperable in the absence of the shaft.The test of remoteness was not satisfied in the case of Hadley v Baxendale. the loss not being communicated to the defendant so the defendant was not in the contemplation of the loss of profit. • Why is this so? • This is because under the 1st limb. . the loss of profit was not within the contemplation of both parties. it was not within the knowledge of the defendant. • The defendant did not know that the plaintiff only had one crank shaft. in this case.

. or if Hadley had mentioned his special circumstances in advance. declined to allow Hadley to recover lost profits in this case. led by Baron Sir Edward Hall Alderson. • The Court held that Baxendale could only be held liable for losses that were generally foreseeable.HELD Hadley v Baxendale [1854] EWHC J70 • The Court of Exchequer Chamber. • The mere fact that a party is sending something to be repaired does not indicate that they would lose profits if it were not delivered on time.