Hadley v. Baxendale

Millers in Gloucester sent a broken crank shaft by carrier to Greenwich to be copied. The carrier delayed delivery, and the mill stayed idle for extra days. The jury awarded 25l. beyond the sum paid into Court, and the Court of Exchequer ordered a new trial and laid down the rule on damages for breach of contract (a legally binding agreement).

Quick Revision

Read the full judgment: BAILII

Parties

Hadley and another — plaintiffs. They were millers and mealmen in partnership, and owned and occupied the City Steam-Mills at Gloucester.

Baxendale and others — defendants. They were common carriers trading as Pickford & Co.

W. Joyce & Co. — not parties. They were the engineers at Greenwich who made the plaintiffs' new crank shaft.

Procedural History

1. The plaintiffs sued the defendants on a declaration (the written statement of the claim) in two counts.
2. The first count alleged a promise to deliver the broken shaft at Greenwich on the second day after delivery. It said the defendants neglected to deliver it for seven days.
3. The second count alleged a promise to carry the shaft with due care and deliver it within a reasonable time. It said the defendants' carelessness delayed the new shaft by five days and stopped the mill for those extra five days. The plaintiffs claimed 300l.
4. The defendants pleaded non assumpserunt (they made no such promise) to the first count. To the second count they paid 25l. into Court in satisfaction of the claim.
5. The plaintiffs entered a nolle prosequi (a formal withdrawal of a count) on the first count. On the second count they replied that the sum paid into Court was not enough, and issue was joined.
6. The case was tried before Crompton, J. at the last Gloucester Assizes. The defendants objected that the damages were too remote (too distant a consequence of the breach) and that they were not liable for them.
7. The Judge left the case generally to the jury. The jury gave a verdict with 25l. damages beyond the amount paid into Court.
8. In last Michaelmas Term, Whateley got a rule nisi (an order to show why a step should not be taken) for a new trial on the ground of misdirection (a wrong direction to the jury).
9. Keating and Dowdeswell showed cause against the rule on 1 February. Whateley, Willes and Phipson supported the rule on 2 February.
10. The Court reserved judgment (Cur. adv. vult.). Alderson, B. delivered the judgment of the Court on 23 February 1854.

Facts

1. The plaintiffs carried on an extensive business as millers at Gloucester. They owned a steam-engine that worked the mills.
2. On 11 May, the mill stopped because the crank shaft of the engine broke.
3. The engine was made by Messrs. Joyce & Co., the engineers at Greenwich. The broken shaft had to be sent to Greenwich as a pattern for a new one.
4. The fracture was discovered on the 12th.
5. On the 13th the plaintiffs sent a servant to the office of the defendants, the well-known carriers Pickford & Co., to have the shaft carried to Greenwich.
6. The servant told the defendants' clerk that the mill was stopped and that the shaft must be sent immediately.
7. Asked when the shaft would be taken, the clerk said that if it was sent up by twelve o'clock, it would be delivered at Greenwich on the following day.
8. On the following day the defendants took the shaft before noon to convey it to Greenwich. The plaintiffs paid 2l. 4s. for carriage for the whole distance.
9. At the same time the defendants' clerk was told that a special entry, if required, should be made to hasten delivery.
10. The delivery at Greenwich was delayed by some neglect.
11. The plaintiffs therefore received the new shaft several days later than they otherwise would have. The working of their mill was delayed, and they lost the profits they would otherwise have received.

Issues Raised

The judgment does not list issues. The questions below come from the objection at trial and the rule the Court stated.

1. Were the damages for the mill's lost profits too remote, so that the defendants were not liable for them?
2. Was the Judge's general direction to the jury, without a definite rule for estimating damages, a misdirection warranting a new trial?
3. What is the rule by which a jury must estimate damages when one party has broken a contract?
4. On the facts before the jury, could the loss of profits be taken into account at all?

Arguments Contended

For the plaintiffs (Keating and Dowdeswell, showing cause, 1 February)

1. The jury's damages are not too remote. They are the natural and necessary consequence of the defendants' default and the only loss the plaintiffs actually sustained.
2. Damages are assessed to compensate the injured party. Sedgwick on the Measure of Damages treats the subject, and counsel cited his third chapter.
3. Sedgwick (page 64) says it is sometimes said that the civil law holds a defendant liable only for damages both parties may fairly be supposed to have contemplated. The damages must be likely to result from the agreement (a promise or set of promises). He adds (page 66) that in cases of fraud (deliberate deception) the debtor was liable for all consequences.
4. Counsel said it is hard to see the ground for that principle or how fraud can affect the question. If the defendants had fraudulently kept the shaft, it is not easy to see why they would be liable, while negligent delay leaves them free.
5. Sedgwick (page 80) says that for breach of a contract to transport goods, the difference in value between the two places is the measure of damages. He says this in effect allows profits. In sale cases the buyer gets the benefit of the rise in market price.
6. If that rule is adopted, there was ample evidence that the defendants knew of a state of things that would necessarily result in the damage the plaintiffs suffered.
7. The authorities favour the plaintiffs on the general ground. In Nurse v. Barns the plaintiff recovered 500l. for loss of stock laid in, although he had paid only 10l. as consideration (the price or benefit given for a promise).
8. In Borradaile v. Brunton the plaintiff recovered for the loss of an anchor caused by a chain cable that broke within the warranted two years.
9. These extreme cases and the difficulty of estimating true damages show that the question is for the jury. The matter could not properly have been withdrawn from them.
10. In Ingram v. Lawson, a libel case, evidence that the plaintiff's profits fell by 1500l. below average was admissible. It let the jury judge the nature of his business and his general rate of profit.
11. The plaintiffs have sustained no loss beyond what was put to the jury. Bodley v. Reynolds and Kettle v. Hunt are similar in principle. In Kettle v. Hunt, the loss of trade from the detention of a man's tools is recoverable as special damage.
12. In Black v. Baxendale, the defendant delivered goods late at Bedford. The Court held the plaintiff's agent's additional expenses could be given by the jury as damages.
13. In Brandt v. Bowlby, Parke, J. said the plaintiffs are entitled to be put in the same situation as if the cargo had been delivered to their order. The sum it would have fetched is the loss.
14. Waters v. Towers seems strongly in the plaintiffs' favour. The defendants had agreed to fit up a mill within a reasonable time and did not. The plaintiffs recovered the loss of profit on a contract with third parties that they could not fulfil.
15. There was ample evidence that the defendants knew why the shaft was sent. Their agent was told the mill was stopped and the shaft must be delivered immediately. Counsel said the stoppage of the mill was the necessary and natural result of their wrongful act.
16. Counsel also cited Ward v. Smith. Parke, B. referred to Levy v. Langridge.

For the defendants (Whateley, Willes and Phipson, supporting the rule, 2 February)

1. The question remains in what way the jury ought to have been directed. It is clear that complete compensation is not awarded.
2. Non-payment of a bill of exchange might ruin the holder, yet that damage is not treated as necessarily resulting from the breach. A breach of contract to supply a rick-cloth, followed by bad weather that spoils the hay, is another example. That damage could not be recovered.
3. The true principle is the maxim In jure non remota causa sed proxima spectatur (in law the near cause, not the remote one, is looked at).
4. Sedgwick (page 38), quoting Domat, says the aim is to discriminate between the loss the offending party must bear and the loss the sufferer must bear. The law aims at a division of the loss, not at satisfaction. Sedgwick also cites Broom's Legal Maxims for the point that every defendant suffers some injury or inconvenience beyond what costs compensate.
5. Sedgwick (page 78), after Flureau v. Thornhill, says English and American Courts have generally denied profits as part of damages, in contract and in tort.
6. Counsel read a passage of Mr. Justice Story in a case of illegal capture. He rejected the item of profits on the voyage and held that damages on a calculation of profits are inadmissible. The rule would be unfavourable to the community and uncertain, and would rest on conjecture. Courts apply a uniform interest as the measure for detention of property.
7. Counsel said the American decisions on this subject deserve due homage. The damages here are too remote.
8. Several of the plaintiffs' cases are distinguishable. In Waters v. Towers there was a special contract to do work in a particular time. In Borradale v. Brunton there was a direct engagement that the cable would hold the anchor. In taking a workman's tools, the natural consequence is loss of employment (Bodley v. Reynolds).
9. The defendants cited Jones v. Gooday, Walton v. Fothergill, Boyce v. Bayliffe and Archer v. Williams as decisions on the principle within which this case falls. The immediate cause is the one to regard in considering the loss.
10. There was no special contract between these parties. A carrier has a duty cast on him by law, and it is not to be enlarged to an indefinite extent without a special contract, or fraud or malice.
11. The maxim dolus circuitu non purgatur (fraud is not cleansed by a roundabout route) does not apply. Lumley v. Gye treats how far malice affects liability.
12. The declaration rests on the defendants' duty as common carriers. They did not agree to bear all the consequences of non-delivery. They were bound only to carry the article safely and deliver it within a reasonable time.
13. The clerk's duty was to enter the article and take the carriage. A mere notice to him could not make the defendants liable as on a special contract. Such matters should be rejected from consideration.
14. If carriers were liable here, sound judgment would not suffice, and they would need a spirit of prophecy. Counsel quoted Patterson, J. in Kelly v. Partington that the special damage must be the natural result of the thing done. He said that is the true test. He said the Court of Queen's Bench applied it in Foxall v. Barnett.
15. This is a question of law. The jury should have been told the damages were too remote. Without proof of other damage, the plaintiffs were entitled to nominal damages (a token sum) only (Tindall v. Bell).
16. Siordet v. Hall and De Vaux v. Salvador are cases where Courts went to opposite extremes. One unduly favoured the carrier and the other held carriers liable for results that seem too remote.
17. If the defendants were liable for these damages, they would be better off carrying only gold. They cannot answer for results that, when the goods are delivered, are beyond human foresight.
18. Take a manufacturer who contracts with a coal merchant or mine owner for a boat load of coals, with no sign that they are needed at once. The vendor would not be liable for the stoppage of the buyer's business. The vendor has no knowledge that the goods are not for the buyer's general stock.
19. Where the contracting party is shown to know all the consequences that must follow from breach, it may be reasonable to say he takes the risk of them. If that liability does not exist between vendor and vendee, then a fortiori (all the more) a carrier should not carry it.
20. In personal injury cases the damage a passenger recovers is the direct and immediate consequence of the wrongful act.

Court's Reasoning

The judgment has no numbered paragraphs. It was delivered by Alderson, B. for the Court, so the steps below are cited to the judgment's own blocks in order.

Alderson, B. (for the Court)

1. Held: There ought to be a new trial. (Opening block)
2. Noted: The Court thought it expedient and necessary to state the rule explicitly. The Judge at the next trial should direct the jury by it when they estimate damages. (Opening block)
3. Noted: The Court said it is of the last importance to state the rule. Without a definite rule the jury will, in such cases, manifestly reach the greatest injustice. (Second block)
4. Noted: The Courts have done this on several occasions. In Blake v. Midland Railway Company, the Court granted a new trial on the ground that the Judge at Nisi Prius had not laid the rule down definitely to the jury. (Second block)
5. Noted: In Alder v. Keighley, the Court said "There are certain establishing rules"; the jury ought to find according to them. It added that the amount which would have been received if the contract had been kept is the measure of damages if the contract is broken. (Third block)
6. Held: One party has broken a contract. The other party ought to receive damages that may fairly and reasonably be considered to arise naturally from the breach. The judgment's words are "arising naturally, i.e., according to the usual course of things, from such breach of contract itself". (Fourth block)
7. Held: Damages may also be those that may reasonably be supposed to have been in the contemplation of both parties. The judgment's words are "in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it". (Fourth block)
8. Held: Special circumstances under which the contract was made may have been communicated by the plaintiffs to the defendants, so that both parties knew them. Then the damages the parties would reasonably contemplate are the injury that would ordinarily follow a breach under those special circumstances so known and communicated. (Fourth block)
9. Held: Suppose the special circumstances were wholly unknown to the party who broke the contract. Then he could at most be supposed to have contemplated the injury that arises generally from such a breach. That means the great multitude of cases not affected by any special circumstances. (Fourth block)
10. Why: Such a loss would not have flowed naturally from the breach in the great multitude of such cases under ordinary circumstances. Nor were the special circumstances that might have made it a reasonable and natural consequence communicated to or known by the defendants. (Fourth block)
11. Held: The Judge ought to have told the jury that, on the facts then before them, "they ought not to take the loss of profits into consideration at all in estimating the damages". (Fourth block)
12. Held: There must therefore be a new trial. Rule absolute. (Fourth block)

Authorities

• Blake v. Midland Railway Company (18 Q. B. 93): the Court granted a new trial because the rule on damages had not been definitely laid down to the jury. The Court relied on it. (Court, second block)
• Alder v. Keighley (15 M. & W. 117): there are established rules for the jury, and the amount that would have been received if the contract had been kept is the measure of damages on breach. The Court quoted it. (Court, third block)
• Nurse v. Barns (1 Sir T. Raym. 77): plaintiff held entitled to 500l. for loss of stock laid in, though he paid only 10l. as consideration for letting iron mills. Argued by the plaintiffs. (Counsel, plaintiffs)
• Borradaile v. Brunton (8 Taunt. 535; 2 B. Moo. 582; spelt Borradale in the defendants' argument): breach of warranty (a promise about the quality of goods) that a chain cable would last two years. Loss of the anchor was recovered. Argued by the plaintiffs, and distinguished by the defendants as a direct engagement that the cable would hold the anchor. (Counsel, both sides)
• Ingram v. Lawson (6 Bing. N.C. 212): libel on a ship owner and master. Evidence of profits 1500l. below average was admissible to let the jury judge his business and general rate of profit. Argued by the plaintiffs. (Counsel, plaintiffs)
• Bodley v. Reynolds (8 Q. B. 779): similar in principle for the plaintiffs. The defendants used it to show that loss of employment is the natural consequence of taking a workman's tools. (Counsel, both sides)
• Kettle v. Hunt (Bull. N. P. 77): loss of the benefit of trade from detention of tools is recoverable as special damage. Argued by the plaintiffs. (Counsel, plaintiffs)
• Black v. Baxendale (1 Exch. 410): late delivery at Bedford. The plaintiff's agent's additional expenses could be given by the jury as damages. Argued by the plaintiffs. (Counsel, plaintiffs)
• Brandt v. Bowlby (2 B. & Ald. 932): non-delivery of a cargo of wheat. The measure was what the cargo would have fetched, per Parke, J. Argued by the plaintiffs. (Counsel, plaintiffs)
• Waters v. Towers (8 Ex. 401; cited by the defendants as 1 Exch. 401): defendants agreed to fit up a mill in a reasonable time and did not. The plaintiffs recovered lost profit on a third-party contract. The plaintiffs relied on it. The defendants said there was a special contract to do the work in a particular time. (Counsel, both sides)
• Ward v. Smith (11 Price, 19) and Levy v. Langridge (4 M. & W. 337): cited for the plaintiffs, the second referred to by Parke, B. (Counsel, plaintiffs)
• Flureau v. Thornhill (2 W. Blac. 1078): cited in Sedgwick for the denial of profits as damages. Argued by the defendants. (Counsel, defendants)
• Jones v. Gooday (8 M. & W. 146), Walton v. Fothergill (7 Car. & P. 392), Boyce v. Bayliffe (1 Camp. 58) and Archer v. Williams (2 C. & K. 26): decisions on the principle within which the defendants said the case fell. (Counsel, defendants)
• Lumley v. Gye (2 E. & B. 216): treats how far malice affects liability. Cited by the defendants. (Counsel, defendants)
• Kelly v. Partington (5 B. & Ad. 651): Patterson, J. said special damage must be the natural result of the thing done. Cited by the defendants. (Counsel, defendants)
• Foxall v. Barnett (2 E. & B. 928): the Queen's Bench acted on the "natural result" rule. Cited by the defendants. (Counsel, defendants)
• Tindall v. Bell (11 M. & W. 232): cited for nominal damages only where no other damage is proved. (Counsel, defendants)
• Siordet v. Hall (4 Bing. 607) and De Vaux v. Salvador (4 A. & E. 420): cases where Courts went to opposite extremes, one unduly favouring the carrier and the other holding carriers liable for remote results. (Counsel, defendants)
• Other authorities cited by counsel: Sedgwick on the Measure of Damages (pages 38, 64, 66, 78, 80), Domat, Broom's Legal Maxims and Mr. Justice Story's judgment in a case of illegal capture. (Counsel, both sides)
• Also cited in footnotes: Broom's Legal Maxims, p. 95, and Davies v. Jenkins (11 M. & W. 755).

Maxims mentioned

• In jure non remota causa sed proxima spectatur: the defendants' maxim that the immediate cause, not the remote one, is looked at. (Counsel, defendants)
• Dolus circuitu non purgatur: the defendants said this maxim does not apply here. (Counsel, defendants)
• Non assumpserunt, nolle prosequi, Cur. adv. vult.: pleading and procedure terms as used in the judgment. (Procedural blocks)

Judgement

1. The Court held there ought to be a new trial.
2. The Judge at the next trial should direct the jury by the rule the Court stated.
3. On the facts then before the jury, the Judge ought to have told them not to take the loss of profits into consideration at all in estimating damages.
4. Rule absolute. The judgment records no order on costs.

Legal Principle / Ratio

Where one party has broken a contract, the other may recover damages that arise naturally from the breach, or that both parties reasonably contemplated when they made the contract. Special circumstances count only if they were communicated to, and so known by, both parties. The Court said damages must be "arising naturally, i.e., according to the usual course of things, from such breach of contract itself".

Critical Analysis

Analysis based on the judgment text.

• The Court states the rule in general terms. Its short application says only that, on the facts before the jury, loss of profits should not have been considered.
• The judgment does not spell out which facts the Court treated as communicated to the defendants. The record says the servant told the clerk the mill was stopped and the shaft must go immediately.
• The Court did not discuss the plaintiffs' authorities or Sedgwick and Mr. Justice Story in its reasons. It stated the rule directly.
• The judgment records no bench beyond Alderson, B. and records no order on costs.

Significance

• The Court explains why it states the rule: without a definite rule the jury may reach injustice.
• It sets a two-part test for recoverable damages: natural result, or contemplation of both parties at the time of contracting.
• It links the second part to what was communicated at the time of contracting.

Exam-Important Points

• Rule: damages are loss arising naturally from the breach, or reasonably contemplated by both parties when the contract was made.
• Trap: the test looks at the time of the contract. Special circumstances must have been communicated to the defendant.
• Facts to remember: the mill's crank shaft, carriage by Pickford & Co., 2l. 4s. paid, 25l. paid into Court and a jury award of 25l. more.
• Outcome: rule absolute for a new trial. The Judge should have told the jury not to take lost profits into account on those facts.
• Procedure: Crompton, J. at the Gloucester Assizes; rule nisi for misdirection; Alderson, B. delivered the Court's judgment on 23 February 1854.

Prepared from the full text of the judgment. The judgment text has no numbered paragraphs, so no paragraph numbers are cited. The citation is not in the judgment text beyond the header.