Hadley v. Baxendale – (limitation on expectation damages)
Brief Fact Summary:
- Plaintiffs operated a mill and a shaft in their mill broke. They contracted with a nearby common carrier (Defendants) to carry their shaft to a place where it was to be remade and then deliver the shaft back so that the Plaintiffs could begin milling grain once again.
- Defendant’s delivered the shaft 5 days late.
- Plaintiffs claim that the defendants were simply did not deliver the completed shaft, and that this neglect caused the mill to be closed for longer than expected.
- Plaintiffs claim that since they could not mill grain, the milled grain they had to purchase to supply their customers and the wages they had to pay to their workers were to be paid by the Defendants. The amount being sought was 3001.
- The Defendant’s pleaded nonassumpserunt with respect to the cost of the milled grain purchased. They argued that the damage was too remote.
- The Jury ruled that a payment of 251 was right for the payment of the workers.
- The Plaintiffs entered a nolle prosequi as to the first count and replied that the 251 was not enough for the second count and therefore the replication issue was joined (i am guessing that means the appeal was filed).
- A rule nisi was obtained for a new trial on the ground of misdirection.
Issue: What are the damages that the non-breaching party (Plaintiff) are due and entitled? Are they the loss suffered based on a reasonable calculation of damages based on the envisioned time required for performance at the time of contracting, or only the damages arising naturally from the breach itself.
- Only the damages arising naturally from the breach. The Defendant’s could not be said to know that the breach would cause a longer shutdown of the mill. The Plaintiffs did not properly communicate the special circumstances of the time exigency to the Defendant’s. This non-communication is unclear because the case itself seems to say the servant of the Plaintiff did in fact communicate the exigency, but the judgment comes back stating that the Plaintiff did not. Damages are limited to those that arise naturally from a breach and those that are reasonably contemplated by the parties at the time of contracting.
- This means that profits lost are too remote and too indeterminable to be calculated and added and only costs can be awarded, ie damages that arise naturally from the breach.
- To boot, though it was argued that the common carrier defendant was not aware of the time requirement of the plaintiff, it is easy to see that they were aware, but it is a non-issue for another reason, namely that there was no special contract for the timeliness acknowledging the time requirement of the plaintiff.
- NEW TRIAL ORDERED WITH THIS RULE TO GUIDE JURY: “Now we think the proper rule is such as the present is 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, i.e., according to the usual course 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.”
- “Now, if the special circumstances under which the contract was actually made where communicated by the plaintiffs to the defendants, 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 from a breach of contract under these special circumstances so known and communicated.”
- “But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract.”
- The New Trial was ordered because the Judge should have instructed the Jury that the profits were not to be calculated along the above lines of reasoning with respect to possession or non-possession of constructive knowledge of the time requirement and imminent probability of loss to be incurred by a time delay.