Blacksmith worked so unskillfully the horse was lame and the man was late
Heiress married another
Blacksmith was found liable for the loss of the marriage
Comment by F.E. Smith: even if the blacksmith knew about the wedding he couldn't be expected to apprehend that the bride would marry another due to lateness
Hadley v Baxendale (1854)
Ratio:
Rule for damages in cases where breach of contract causes a remote damage:
Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as:
First Prong - May fairly and reasonably be considered either arising naturally from such breach of contract itself; or,
Second Prong - Such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable breach of it
If the special circumstances were communicated then the potential damages would have been considered.
Facts:
Plaintiff owns steam powered mill. The gear shaft broke.
Plaintiff had to send broken gear shaft to serve has model for replacement
Plaintiff brought action against defendants for lost profit
Trial judge awarded damages, Defendant's appeal
Issue:
Can the plaintiff receive damages for lost profits caused by the defendant's delayed delivery
Party A contracts with B. B performs slowly, this causes a damage to A that was unknown to B.
Decision:
For Defendants, new trial ordered.
Reasons:
Proper rule for damages in cases like this:
Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as:
May fairly and reasonably be considered either arising naturally from such breach of contract itself; or,
Such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable breach of it
We're the special circumstances of the contract communicated from the outset?
In this case there are other reasons a mill may ship a broken gear shaft that in no way effects profits
The plaintiffs did not make it clear that their profits were dependant on receiving the gear shaft and so the defendants could not reasonably have been expected to know that the delay was causing lost profits
Horne v The Midland Railway Company(1873)
Ratio:
In calculating exceptional damages for a remote loss:
In order that the notice of special circumstances may have any effect, it must be given under such circumstances, as that an actual contract arises that obliges the defendant to bear the exceptional loss
Facts:
Plaintiffs had contract to supply shoes to a firm in London at 4s/pair
The shoes had to arrive on Feb. 3
When dropping shoes off at defendant's rail station they gave a note stating they were under contract to have them delivered by the 3rd
The shoes arrived on the 4th and were not accepted
Plaintiffs resold shoes at 2s 9d/pair
Defendants originally paid enough to cover the cost of resale
Plaintiffs further 267pounds for difference between contracted price and market price
Issue:
Does the note make the defendant's liable for the plaintiff's loss?
Decision:
For the defendant, the note did not form a contract that created liability
Reasons:
There has never been a case that affirmed that if notice is given the defendants will become liable for exceptional damages
"In order that the notice may have any effect, it must be given under such circumstances, as that an actual contract arises on the part of the defendant to bear the exceptional loss."
Note Cases
Hydraulic Engineering Co. Ltd. v McHaffie (1878)
A person contemplates the performance and not the breach
But, is liable for injuries that he is aware his default might cause
Court will not imply the note as an implied condition
Rivers v George White & Sons Co. (1919)
Shippers have no discretion to decline the second contract as they have already accepted the first
(modification without consideration)
Kinghorne v The Montreal Telegraph (1859)
It makes no sense that a shipper should be liable for all potential loss that might arise from a late delivery
Victoria Laundry Ltd. v Newman Industries Ltd. (1949)
Ratio:
The following is not precedent. The SCC qualifies Hadley v Baxendale as the standard in Fidler
When dealing with loss of profit due to unreasonable delay follow these principles:
In cases of breach of contract the aggrieved party is only entitled to recover such part of the loss actually resulting as was at the time of the contract reasonably foreseeable as liable to result from the breach
What was at that time reasonably foreseeable depends on the knowledge then possessed by the parties, or at all events, by the party who later commits the breach
For this purpose: Knowledge possessed is either i) imputed; or, ii) actual
If an individual has knowledge outside the ordinary that allows them to infer the damage that would be received by the plaintiffs then the damage is recovering
The contract -breaker is liable is he, having considered the question of liability, would have reasonably concluded that the loss in question was liable to result.
Liability does not require the contract-breaker to know the loss would necessarily result, it is enough that there was a "serious possibility" or "real danger" that a loss would result.
Facts:
Defendants advertised selling two boilers they owned
Plaintiffs, looking to expand their business, contracted for the purchase of the boilers
Contract was complete on Apr. 26th
Plaintiffs made it very clear they wanted the boiler ASAP
Plaintiffs had delays getting licensing for boiler: Defendants knew they wanted it as soon as possible
Plaintiffs went to pick up Boiler June 5th
Boiler had been damaged 4 days earlier by contractors of defendant
Should the plaintiffs receive damages for lost profits due to a delay in shipping the boiler they contracted to purchase from a company
A contracted to by a Boiler from B. B knew A wanted the boiler for business. B caused the boiler to be delayed unreasonably.
Decision:
For Plaintiffs
Reasons:
Defendant counsel argues that under Hadley v Baxendale no damages for lost profits can be rewarded because no communication was given at the time of contract about the possible damage resulting in a breach
Court summarizes the law in these cases:
In cases of breach of contract the aggrieved party is only entitled to recover such part of the loss actually resulting as was at the time of the contract reasonably foreseeable as liable to result from the breach
What was at that time reasonably foreseeable depends on the knowledge then possessed by the parties, or at all events, by the party who later commits the breach
For this purpose: Knowledge possessed is either i) imputed; or, ii) actual
Individuals are expected to know the ordinary course of things
If an individual has knowledge outside the ordinary that allows them to infer the damage that would be received by the plaintiffs then the damage is recovering
The contract -breaker is liable is he, having considered the question of liability, would have reasonably concluded that the loss in question was liable to result.
Liability does not require the contract-breaker to know the loss would necessarily result, it is enough that the loss would likely result.
Applying this:
Defendants knew the plaintiffs wanted the boiler for business
Defendants were not aware at the time of contracting of the plaintiffs contracts which they stood to lose and so they cannot be expected to pay for those losses
Plaintiffs can recover some losses of business
Koufos v C. Czarnikow, Ltd. (The Heron II)
Ratio:
Modifies Victoria Laundry in that if a loss is sufficiently likely to result from a breach the contract-breacher will be liable for the damages
Facts:
Plaintiff chartered defendants vessel to move pick up 3000 tons of sugar in Constanza and carry it to Basrah or Jeddah
This should have taken 20 days
Deviations caused the trip to take 29 days
Defendant didn't know that plaintiff's wanted to sell sugar "promptly" but knew there was a sugar market in Basrah
Sugar was sold but the market price had gone done shortly before
Sold sugar for 31 pounds 2s. 9d. / ton
Could have sold for 32 pounds 10 s. 0d. / ton
Plaintiffs want the difference as damage for breach of contract
Issue:
Carrier deviated course and delayed shipment by 9 days. Market value of cargo went down. Can charter recover damage for difference in market value?
Decision:
For Plaintiff
Reasons:
Court acknowledges the use of Hadley v Baxendale and Victoria Laundry (Windsor) Ltd. v Newman Industries Ltd. And then applies these tests
Knowledge and intentions of parties:
Charterers:
Intended on selling sugar at basrah immediately after arrival
No evidence they had expected date of arrival
No evidence they were aware of rising or falling markets
Shipowner:
Knew nothing of the charterer's plan
Ought the shipowener have realised that the loss incurred due to breach of contract causing delay was not unlikely to result?
Court states that it is not unlikely knowledge for carrier's that prices in markets go up and down and that the breach of contract might cause the defendant's to lose profit.
Transfield Shipping Inc. v Mercator Shipping Inc. (The Achilleas)
Ratio:
In cases involving remote damages the court will interpret the contract to determine the liabilities which the parties may reasonably be expected to have assumed and paid for.
Is the loss the kind of loss that risk would be considered to be assumed for when entering into the contract
Facts:
Defendants had been chartering a boat (the Achilleas) from the plaintiffs for over a year
The latest date of delivery was set as May 2nd, 2004
Rates had gone up significantly for charters
Plaintiffs contracted with new charterer's to charter the vessel for 39,500/day; latest date for delivery May 8th, 2004
Defendants were unfortunately delayed, not due to their own negligence, and delivered the boat on May 11th
By this period rates had gone down
Plaintiff, renegotiated the daily rate for the new charterers down to $31,500/day in order to extend the date of delivery to May 11th
Plaintiffs sue for lost profit ($1,364,584.37)
Issue:
A charters vessel from B. A is late returning vessel to B. Delay causes B to lose next lucrative charter.
Is the rule that a party may recover losses which were foreseeable an external rule of law, imposed upon parties to every contract unless express contrary provisions, or is it a prima facie assumption that can be rebutted in certain contexts?
Decision:
Reasons:
Defendant's argue they are only liable for the difference between the market rate and the charter rate and the market rate they were deprived by over those 9 days
Lots of academic works recently state that liability for damage is foudned upon the interpretation of the particular contract (it's type, form, context, intentions, etc.)
It is wrong to hold a party liability for risks that people entering into a contract in that market would not consider
The original starting point for a remedy is to see what would put the plaintiff into the position he/she would be in had the contract been performed
Judge disagrees:
First determine "type" or "kind" of loss the plaintiff is seeking to be compensated for
Implied contractual duty; and,
Express contractual duty
The consequences of either of these duties for which the contracting party will be liable are those which the law regards as best giving effect to the express obligations assumes
Party will not be liable for risks which fall outside risk considerations that generally exist in contracts in a given market
Foreseeability will not always lead to damages:
A party may not be liable for foreseeable losses because they are not of the type or kind for which he can be treated as having assumed responsibility
How does one determine if a loss is of the same or different type?
"the only rational basis for the distinction is that it reflects what would have reasonably have been regarded by the contracting party as significant for the purposes of the risk he was undertaking
The question of whether a given type of loss is one for which a party assumed contractual responsibility involves the interpretation of the contract as a whole against its commercial background-> questions involving contractual interpretations are questions of law
In cases involving remote damages the court will interpret the contract to determine the liabilities which the parties may reasonably be expected to have assumed and paid for.
Is the loss the kind of loss that risk would be considered to be assumed for when entering into the contract
Cornwall Gravel Co. Ltd. v Purolator Courier Ltd.
Class Notes:
Business gives job tender to a delivery man (agent of Purolator) and explicitly states that it must get to its location before 3 (so that it would be accepted for the bid)
Delivery man acknowledges this and states it will
It doesn’t
The delivery man in court admits that he knew what a tender was
