Hadley was a mill owner.
A crank shaft became broken that stopped mill production.
The shaft had to be sent to engineers of the manufacturer Joyce &
Company, to serve as a pattern for a new one.
Hadley used Pickford & Company as carriers.
The Pl - servant advised the P&Cs clerk that the mill was stopped, and
that the shaft must be sent immediately.
The clerk answered by saying if it was sent up by twelve oclock ANY
day, it would be delivered at Greenwich on the following day.
The sum of 2 pounds and 4 shillings was paid for delivery.
P&Cs delivery of the shaft at Greenwich was DELAYED by some NEGLECT,
and the Pl did NOT receive the new shaft for several days.
The mill was not working for this time.
Pl - Action
The delay caused lost profits that would have otherwise been received.
Df - Response
Damages were too remote, and not liable.
Found for the Pl for 25 pounds.
Loss of profits here cannot reasonably be considered and such a
consequence of the breach of contract as could have been fairly and
reasonably contemplated by both the parties when they made this contract
An injured party may recover those damages reasonably considered to
arise naturally from a breach of contract, or those damages within the
reasonable contemplation of the parties at the time of contracting.
Where two other 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,
i.e,. according to the usual courts of things,
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 result of the breach of it.
consequential losses resulting from a breach, the following is required:
The loss must be a natural consequence of the breach, OR
The buyer communicates to the seller the probable result of the breach
If the special circumstances under which the contract was actually made
were communicate by the Pl - to the Dfs, and thus
known to both parties, the
damages resulting from the breach of such a contract, which they
would reasonably contemplate, would be the amount of injury which
would ordinarily follow form a breach of contract under these special
circumstances so known and communicated.
communicated to other party.
would reasonably be contemplated from the breach.
If these special circumstances were wholly unknown to the party
breaking the contract, the Df could ONLY be supposed to have had in his
contemplation the amount of injury which would arise generally.
Special Circumstances Damages Rule
Damages for special circumstances are assessed against a party only
when they were reasonably within the
contemplation of both parties as a probable consequence of a
Special Damages Reasoning
Baxendale did not know that the mill was shut down and would remain
closed until the new shaft arrived.
Loss of profits could not fairly or
reasonably have been contemplated by both parties in case of a
breach of this contract without Hadley having communicated the special
circumstances to Baxendale.
The court ruled that the jury should not have taken the loss of profits
The court reasoned that Pickford had no way of knowing that Pl - would
lose profits if the shipment of the shaft was delayed, as this
information was not communicated directly
to them and therefore
the loss of profits was not reasonably contemplated by both the parties
when they made the contract.
Although the fact that the mill was closed was communicated, it was
not made completely clear to the Df -
that the mill was closed because of the broken shaft and could
not re-open again until it was fixed.
For all the DFs knew, the mill was closed for another reason.
Remanded For New Trial