Czarnikow (C ) Ltd v Koufos; The Heron II: HL 17 Oct 1967

The vessel had arrived late at Basrah in breach of the terms of the charterparty. The House was asked as to the measure of damages. The charterers had intended to sell the cargo of sugar promptly upon arrival, and now claimed for the fall in the market price of the sugar during the period of delay. The owners did not know what the charterers intended to do with the sugar. But they did know that there was a market in sugar at Basrah and, if they had thought about it, must have realised that, at the least, it was ‘not unlikely’ that the sugar would be sold in the market at its market price on arrival.
Held: The House explained the rule in Hadley v Baxendale: ‘I do not think that it was intended that there were to be two rules or that two different standards or tests were to be applied.’ and ‘The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.’
Lord Upjohn: ‘If parties enter into the contract with knowledge of some special circumstances, and it is reasonable to infer a particular loss as a result of those circumstances that is something which both must contemplate as a result of a breach. It is quite unnecessary that it should be a term of the contract’.

Lord Reid, Lord Upjohn, Lord Morris of Both-y-Gest, Lord Hodson, Lord Pearce
[1967] 3 All ER 686, [1969] 1 AC 350, [1967] 3 WLR 1491, [1967] UKHL 4
England and Wales
CitedHadley v Baxendale Exc 23-Feb-1854
Contract Damages; What follows the Breach Naturaly
The plaintiffs had sent a part of their milling machinery for repair. The defendants contracted to carry it, but delayed in breach of contract. The plaintiffs claimed damages for the earnings lost through the delay. The defendants appealed, saying . .

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CitedG and K Ladenbau (UK) Ltd v Crawley and De Reya QBD 25-Apr-1977
The defendant solicitors acted for the plaintiff in the purchase of land, but failed to undertake a commons search which would have revealed an entry which would prevent the client pursuing his development. The defect was discovered only when . .
CitedJackson and Another v Royal Bank of Scotland HL 27-Jan-2005
The claimants sought damages, alleging that a breach of contract by the defendant had resulted in their being unable to earn further profits elsewhere. The defendant said the damages claimed were too remote. The bank had, by error, disclosed to one . .
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The employer appealed a finding that it was liable in damages for negligence to the claimant, and employee who suffered psychiatric injury cause by stress at work. He said he had been left to work very excessive hours, between 89 and 92 hours a . .
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CitedThe ‘Pegase’ 1981
The court considered the measure of damages for breach of contract in the light of the cases in the Heron II and Victoria Laundry: ‘the principle in Hadley v Baxendale is now no longer stated in terms of two rules, but rather in terms of a single . .
CitedTransfield Shipping Inc of Panama v Mercator Shipping Inc of Monrovia ComC 1-Dec-2006
The owners made substantial losses after the charterers breached the contract by failing to redliver the ship on time as agreed.
Held: On the facts found the Owners’ primary claim is not too remote. To the knowledge of the Charterers, it was . .
CitedTransfield Shipping Inc v Mercator Shipping Inc (The Achilleas) HL 9-Jul-2008
The parties contracted to charter the Achileas. The charterer gave notice to terminate the hire, and the owner found a new charterer. Until the termination the charterers sub-chartered. That charter was not completed, delaying the ship for the . .
CitedBorealis Ab v Geogas Trading Sa ComC 9-Nov-2010
The parties had contracted for sale and purchase of butane for processing. It was said to have been contaminated. The parties now disputed the effect on damages for breach including on causation, remoteness, mitigation and quantum.
Held: The . .
CitedKpohraror v Woolwich Building Society CA 1996
The Society, acting as a bank, had at first failed to pay its customer’s cheque for andpound;4,550, even though there were sufficient funds. The bank said that it had been reported lost. The customer sought damages to his business reputation.
Contract, Damages, Negligence

Leading Case

Updated: 09 November 2021; Ref: scu.180940