The Measure of Contract Damages 1854
Hadley v. Baxendale case
A brief summary of the facts. Plaintiffs owned and ran a mill, and when a component of their steam engine failed, they had to shut it down. Plaintiffs then hired Defendants, who were common carriers, to transport the component to W. Joyce & Co. for a replacement part to be made. Plaintiffs sought to collect damages when delivery was delayed owing to Defendants’ negligence, leading Plaintiffs’ mill to stay closed for longer than intended.
A summary of the Rule of Law. Damages flowing naturally from the breach or those in the reasonable comprehension of the parties at the time of contracting are those to which a nonbreaching party is entitled.
Facts. Plaintiffs ran a mill that was forced to close due to a broken crank shaft in their steam engine. They contacted the engine’s manufacturer, W. Joyce & Co. (Joyce), who agreed to create a new shaft based on the previous one’s pattern. As a result, a servant of Plaintiffs went to Defendants’ office, common carriers, to have the crank shaft delivered to Joyce. The mill had been stopped down, and the shaft needed to be transported right away, according to Plaintiffs’ servant. Plaintiffs’ servant was told that if the shaft was brought to them by 12 p.m. on any given day, it would be delivered the next day.
The next day, about noon, Plaintiffs gave Defendants the shaft. The delivery to Joyce was delayed as a result of Defendants’ negligence, and Plaintiffs did not receive the replacement shaft for several days after it should have arrived.
ISSUE/QUESTION: Is Defendant responsible to Plaintiffs for damages incurred as a result of lost profits?
Held. No. Damages flowing naturally from the breach or those in the reasonable contemplation of the parties at the time of contracting are available to the nonbreaching party. While the Defendants’ breach was the direct cause of Plaintiffs’ lost earnings, such loss cannot be said to occur naturally from such a breach under normal circumstances. A miller may transmit a crank shaft to a third party for a variety of reasons. Defendants had no means of knowing that their breach would result in a prolonged mill outage and a loss of earnings. Furthermore, Plaintiffs never informed Defendants of the unusual circumstances, and Defendants were unaware of the special circumstances.
Discussion. Damages are restricted to those that occur naturally as a result of the breach and those that the parties reasonably anticipated at the time of contracting.
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