The Treasury Chamber considered a very well-known case to date, the case of Hadley v Baxendale 1854. Hadley v Baxendale is the main example of an English contract. This contract establishes the basic rule for determining indirect losses from breach of contract: that is, the party responsible for the breach is liable for all losses that were provided by the contracting parties. However, this party is not liable for any damages that may not have been stipulated by the parties in the contract.
Hadley vs Baxendale case: The court considers the problem of compensation for a loss. The plaintiff managing the mill collided with a crash of the crankshaft and took advantage of the transport services of the defendant. The defendant violated the terms of delivery, in connection with which the plaintiff suffered losses.
Hadley v. Baxendale Case Brief Facts
Hadley (plaintiff) was the owner and manager of a corn mill which was located in Gloucester. The owner faced such a problem as a crankcase crash, which controlled the mill. This failure led to the fact that all production operations were stopped. The plaintiff decided to send his old crankshaft to Joyce & Co. to get a new one. Joyce & Co. is an engineering company that was based in Greenwich. A broken model was needed as a model for the production of a new crankcase. In order to transport the crankshaft, Hadley contacted Pickford & Co. (Pickford). This company was a shipping company that belonged to Baxendale (the defendant). Next, Hadley received the information about the delivery conditions of the crankshaft.
The shipping company informed him that if he brought the crankshaft to Pickford before noon, he would be sent and brought to Greenwich the next day. Hadley transported the crankshaft to Pickford and paid the full amount of delivery the next day. Nonetheless, Pickford carelessly postponed the delivery and therefore the crankshaft was not delivered on time, but only a few days later. Consequently, the plaintiff received his new crankshaft a few days later than he expected. In the connection with this, these days the mill was closed and Hadley suffered losses because of this. Based on this accusation, Hadley demanded £ 300 of compensation. However, Pickford requested that the demanded losses of Hadley exceeded the real amount. As a result, the court of the first instance left the case mainly to the jury, which awarded the plaintiffs damages of only 25 pounds, which Pickford had already paid in court.
The Treasury Chamber overturned the decision of Hadley v Baxendale case that only the damage that was stipulated in the contract of both sides should be reimbursed. That's why Hadley sued Baxendale for damages, namely the lost profit from the delay in delivery.
The jury issued a verdict Hadley v. Baxendale, to award Hadley a loss of profits, and Baxendale turned. Baxendale filed an appeal, based on the fact that he did not know that Headley could suffer losses due to the late delivery of the crankshaft. In this case, the question was raised whether the defendant could be held liable for the damage that the defendant did not indicate in connection with the violation of their contract. Ultimately, the court issued a verdict that in order for the party that violated the rights to reimburse the losses that arose in connection with the failure to fulfill the contract, these consequences and the reasons must be known to both parties. Proceeding from this, Hadley could not get compensation for the lost profit due to the fact that he did not mention the special circumstances in the contract with Baxendale.