156 Eng. Rep. 1220
In the 1854 case of Hadley v. Baxendale, the Court of Exchequer ruled on a contract dispute involving a delayed delivery of a broken crankshaft for repair. The case had first gone through a lower court, which awarded damages to Hadley and his associates, who then sued Baxendale and his associates for not delivering the crankshaft in a timely manner. Baxendale appealed, saying they shouldn't be held responsible for the lost profits caused by this delay.
The central issue was whether Baxendale could be held liable for the indirect damages Hadley claimed. The court found Baxendale not responsible for those damages because they weren't predictable by both parties when the contract was made. The judges decided that damages awarded for a breach of contract should only be those that come naturally from the breach or those that both parties could've reasonably predicted as a likely outcome of the breach.
This ruling demonstrated how courts use the doctrine of remoteness, which means a party that breaks a contract is only responsible for losses within the scope of their liability. It highlighted how courts determine foreseeable losses and try to avoid uncertain or speculative results. This case remains a significant example in English contract law, with an opinion written by Baron Alderson.
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