Hadley
v. Baxendale
Court of Exchequer, 1854.
9 Exch. 341.
Facts:
The plaintiff’s
crank shaft broke. It was the only one
they had, and without it they could not run their mill. They contracted with the defendant to send it
to the engineers. The delivery was
delayed, and the plaintiff sued for lost profits. The jury awarded damages of £25. The defendant appealed.
Issue:
Is the plaintiff
entitled to damages for lost profits?
Rule:
NEW
RULE! The defendant will only be held
liable for the plaintiff’s losses if they are generally foreseeable or if the plaintiff
tells the defendant about any special circumstances in advance.
Analysis: The court goes makes an
argument that from the evidence that a client wants to ship a broken item fast,
it does not necessarily follow that they are necessarily going to lose profits
if it is not delivered on time. The court
goes through a series of hypotheticals showing that there
are other circumstances under which the plaintiff could have sought out the
transaction they did, so that the defendant need not have assumed the situation
was as dire as it was.
The
court further argues that if special circumstances exist, special provisions
can be made in the contract voluntarily by both parties to impose extra damages
if there is a breach. The court doesn’t
wish to take that power away from the parties.
Conclusion:
The court
finds that lost profits should not have been awarded at trial; therefore, the court
orders a new trial with a statement of the jury instructions to be used.
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Damages