Hadley v. Baxendale
| Hadley v Baxendale | |
|---|---|
| Court | Exchequer Court |
| Decided | 23 February 1854 |
| Citation(s) | [1854] EWHC J70, (1854) 156 ER 145, 9 ExCh 341, (1854) 23 LJ Ex 179, 18 Jur 358, [1843-60] All ER Rep 461 |
| Transcript(s) | Abridged judgment on bailii.org |
| Court membership | |
| Judge(s) sitting | Parke B, Alderson B, Platt B and Martin B |
| Keywords | |
| Breach of contract, remoteness | |
Hadley v Baxendale [1854] EWHC J70 is a leading English contract law case. It sets the basic rule to determine consequential damages from a breach of contract: a breaching party is liable for all losses that the contracting parties should have foreseen, but is not liable for any losses that the breaching party could not have foreseen on the information available to him.
The claimants, Mr Hadley and another, were millers and mealmen and worked together in a partnership as proprietors of the City Steam-Mills in Gloucester. They cleaned grain, ground it into meal and processed it into flour, sharps, and bran. A crankshaft of a steam engine at the mill had broken and Hadley arranged to have a new one made by W. Joyce & Co. in Greenwich. Before the new crankshaft could be made, W. Joyce & Co. required that the broken crankshaft be sent to them in order to ensure that the new crankshaft would fit together properly with the other parts of the steam engine. Hadley contracted with defendants Baxendale and Ors, who were operating together as common carriers under the name Pickford & Co., to deliver the crankshaft to engineers for repair by a certain date at a cost of £2 sterling and 4 shillings (current value of about £240.00)[1].
Baxendale failed to deliver on the date in question, causing Hadley to lose business. Hadley sued for the profits he lost due to Baxendale's late delivery, and the jury awarded Hadley damages of £25 (present value about £2500). Baxendale appealed, contending that he did not know that Hadley would suffer any particular damage by reason of the late delivery.
The question raised by the appeal in this case was whether a defendant in a breach of contract case could be held liable for damages that the defendant was not aware would be incurred from a breach of the contract.
The Court of Exchequer, led by Baron Sir Edward Hall Alderson, declined to allow Hadley to recover lost profits in this case, holding that Baxendale could only be held liable for losses that were generally foreseeable, or if Hadley had mentioned his special circumstances in advance. The mere fact that a party is sending something to be repaired does not indicate that the party would lose profits if it is not delivered on time. The court suggested various other circumstances under which Hadley could have entered into this contract that would not have presented such dire circumstances, and noted that where special circumstances exist, provisions can be made in the contract voluntarily entered into by the parties to impose extra damages for a breach. Alderson B said the following.
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