The plaintiffs claimed for loss of the profits from their laundry business because of late delivery of a boiler.
Held: The Court did not regard ‘loss of profits from the laundry business’ as a single type of loss. They distinguished losses from ‘particularly lucrative dyeing contracts’ as a different type of loss which would only be recoverable if the defendant had sufficient knowledge of them to make it reasonable to attribute to him acceptance of liability for such losses. The vendor of the boilers would have regarded the profits on these contracts as a different and higher form of risk than the general risk of loss of profits by the laundry. The court distinguished the approach to be taken in claims for damages under contract and tort. In cases of breach of contract the aggrieved can only recover such loss actually resulting as was at the time of the contract reasonably foreseeable as likely to result from the breach. In tort, the question whether loss was reasonably foreseeable is addressed to the time when the tort was committed. In contract, the question is addressed to the time when the parties made their contract. Where knowledge of special circumstances is relied on, the assumption is that the defendant undertook to bear any special loss which was referable to those special circumstances. It is assumed too that he had the opportunity to seek to limit his liability under the contract for ordinary losses in the event that he was in breach of it.
Asquith LJ said: ‘1: It is well settled that the governing purpose of damages is to put the party whose rights have been violated in the same position, so far as money can do so, as if his rights had been observed: (Sally Wertheim v..Chicoutimi Pulp Company [1911] AC 301. This purpose, if relentlessly pursued, would provide him with a complete indemnity for loss de facto resulting from a particular breach, however improbable, however unpredictable. This, in contract at least, is recognised as too harsh a rule : hence,
2: 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,
3: What was at that time reasonably so foreseeable depends on the knowledge then possessed by the parties or, at all events, by the party who later commits the breach.’ and
‘But to this knowledge, which a contract breaker is assumed to possess whether he actually possesses it or not [under the first rule] there may have to be added in a particular case knowledge which he actually possesses of special circumstances outside the ‘ordinary course of things’ of such a kind that a breach in those special circumstances would be liable to cause more loss. Such a case attracts the operation of the ‘second rule’ so as to make additional loss recoverable’.
Asquith LJ
[1949] 2 KB 528
England and Wales
Citing:
Restated – Hadley 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 . .
Cited – Wertheim v The Chicoutimi Pulp Company PC 18-Mar-1910
(Quebec) The buyer sought damages for late delivery of goods calculated on the difference between the market price at the place of delivery when the goods should have been delivered and the market price there when the goods were in fact delivered. . .
Cited by:
Cited – Watford Electronics Ltd v Sanderson CFL Ltd CA 23-Feb-2001
The plaintiff had contracted to purchase software from the respondent. The system failed to perform, and the defendant sought to rely upon its exclusion and limitation of liability clauses.
Held: It is for the party claiming that a contract . .
Cited – Jackson 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 . .
Cited – Pegler Ltd v Wang (UK) Ltd TCC 25-Feb-2000
Standard Conract – Wide Exclusions, Apply 1977 Act
The claimant had acquired a computer system from the defendant, which had failed. It was admitted that the contract had been broken, and the court set out to decide the issue of damages.
Held: Even though Wang had been ready to amend one or . .
Cited – Pegler Ltd v Wang (UK) Ltd TCC 25-Feb-2000
Standard Conract – Wide Exclusions, Apply 1977 Act
The claimant had acquired a computer system from the defendant, which had failed. It was admitted that the contract had been broken, and the court set out to decide the issue of damages.
Held: Even though Wang had been ready to amend one or . .
Cited – Wiseman v Virgin Atlantic Airways Ltd QBD 29-Jun-2006
The claimant said that he was refused permission to board a flight by the defendants representative without paying a bribe, and was publicly humiliated for not doing so.
Held: Whilst the claimant could recover for his own additional expenses, . .
Cited – The ‘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 . .
Cited – Transfield 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 . .
Cited – Transfield 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 . .
Cited – Joyce v Bowman Law Ltd ChD 18-Feb-2010
The claimant asserted negligence by the defendant licensed conveyancers in not warning him of the effect of an option in the contract. He had been advised that it would allow him to choose to buy additional land, but it was in fact a put option. The . .
Lists of cited by and citing cases may be incomplete.
Damages, Contract
Updated: 17 November 2021; Ref: scu.187201