Court: |
Court of the Exchequer |
|
Facts: |
The crankshaft running Hadley's (plaintiff's) mill broke, and had to be sent back
to the manufacturers as a pattern so that a new one could be made. One of
Hadley's people went to Baxendale's (defendant's) shipping offices and inquired
about the cost and time involved in sending the shaft. The fact that the mill
was stopped was made known; Baxendale's clerk stated the cost of shipping, and
also said that the shaft must be brought in prior to noon for delivery the
next day. This was done, but the delivery was neglected, resulting in several
days' delay in the arrival of the replacement shaft. Hadley sought consequential
damages (i.e., compensation for profits lost during the period of the delay),
and was awarded these at trial. |
|
Posture: |
Initially tried (by J. Crompton) at the last Gloucester Assizes. Appealed
by defendant; B. Alderson granted, via decree of nisi, a new trial at
the last Michelmas Term. [Note: new trial will be governed by the
preposterous guidance that lost profits cannot be taken into account] |
|
Issue: |
Should a jury be instructed about whether a defendant had a clear understanding
that breach of contract would precipitate damages to the plaintiff, and
does absence of that knowledge excuse the defendant from damages not
contemplated? |
|
Holding: |
The prior court erred in allowing the jury to consider damages that were
so remote from the defendant's contemplation. |
|
Rule: |
Where two parties have made a contract which is later broken, consquential
damages should be limited to whose that could fairly and reasonably be
considered as naturally arising or reasonably contemplated by both
parties. |
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Reasoning: |
If we hold defendants accountable for consequences they might not have
known about, we impose on them the risk of failing to investigate all
aspects of the deals in which they're involved. It would be unjust
to penalize defendants for the effects of special circumstances
wholly unknown to them. [Note: should the absence of some indemnification
clause really be taken as proof that the defendant didn't contemplate
it?] |
|
Dicta: |
Leaving juries without rules to guide them produces great injustice. |