The case of Hadley v. Baxendale was decided in 1854 by a court in England. Although decided nearly 170 years ago in a foreign jurisdiction, the principle announced in that case, based upon even earlier decisions, is very much alive and well today.
The plaintiffs in the case were “Hadley and another” who “were proprietors and occupiers of the City Steam-Mills.” They used a steam-engine to run the mills. The defendants were “common carriers of goods and chattels for hire.”
When the iron shaft of the steam engine broke, the plaintiffs arranged with the defendants to transport the broken shaft to a business in Greenwich that would make a new shaft. Both the plaintiff shippers and the defendant carriers contemplated that the broken shaft would be delivered on the second day, but, for reasons not specifically described in the decision, it was not delivered for seven days, resulting in a delay of five days. Litigation ensued.
The plaintiffs’ position was that “the completing of the said new shaft was delayed for five days, and the plaintiffs were prevented from working their said steam-mills… and from carrying on their said business… for the space of five days beyond the time that they otherwise would have been prevented from so doing, and they thereby were unable to supply many of their customers… during that period, and were obliged to buy flour to supply some of their other customers, and lost the means and opportunity of selling flour… and were deprived of gains and profits… which otherwise would have accrued to them, and were unable to employ their workmen, to whom they were compelled to pay wages during that period, and were otherwise injured…” (Italics added.)
Defense counsel argued that it is not fair to hold the carrier liable for the damages resulting from the closure of the mill simply because the carrier knew that the defendant wanted this shipment to be transported as fast as possible. As the court pointed out, “But how could the defendants here know that any such result would follow?”, i.e., that the mill was closed and could not reopen until the replacement shaft was received.
In reaching its decision, the court acknowledged that there will almost always be damages arising out of a breach of contract beyond what are sometimes called the actual or general damages, such as the replacement costs for cargo that was totally lost or the cost of repair to damaged cargo.
The court stated:
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.
Put another way, one could only recover consequential damages if there was sufficient reason for the breaching party to have foreseen them. These are also referred to as incidental damages or special damages.
In 2022, this is still the rule used by courts: consequential damages can be awarded when foreseeable. However, since it would be very hard to determine exactly what the carrier foresaw or should have foreseen with respect to any given shipment, carriers or intermediaries almost always have tariff provisions or business terms stating: “In no event whatsoever shall any consequential damages be allowed, even if reasonably foreseeable.”
All for now!
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content Library” on the PARCEL website (PARCELindustry.com). Your questions are welcome at firstname.lastname@example.org.
This article originally appeared in the November/December, 2022 issue of PARCEL.