Hadley v Baxendale

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Hadley v Baxendale
Court Exchequer of Pleas
Citation 156 Eng. Rep. 145, 9 Exch. 341
Date decided February 23, 1854

Facts

Plaintiff operated a flour mill. Due to a break of the crack shaft of the steam engine that ran the plant, they needed a replacement.

  • Hadley = plaintiff = owner of a corn mill in Gloucester, England in the 1850s
  • Baxendale = defendant = a shipping company
  • Pickford & Co. = "Pickford", a shipping company = a subsidiary of Baxendale
  • Joyce & Co. = "Joyce" = an engineering company in Greenwich
  • Hadley contacted Joyce Pickford to ship the broken crank shaft of its mill to Joyce so that a new replica could be produced.
  • Pickford delayed shipping the crank shaft to Joyce.

Procedural History

Hadley sued the parent shipping company Baxendale for breach of contract. He asked for damages for the lost profits because of the shipping delay.

The jury sided with Hadley.

Issues

Must a party that breaches a contract pay for unforeseeable damages that result from a breach?

How much damages should be awarded?

Holding

Baxendale is only liable for reasonably foreseeable damages at the time the contract was made. Consequently, Baxendale (the shipping company) isn't liable for the lost profits.

The amount of injury which would ordinarily follow from a breach of contract under the special circumstances known and communicated to the other party. The loss of profits were a special circumstance that couldn't be known by the defendant, so they can't be considered in determining damages.

Judgment

New trial is ordered

Reasons

Defendant [Baxendale] should be liable for damages that are foreseen at the time of the creation of the contract. If the potential damages are unforeseen, the defendant cannot be liable for them.

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