Tests of Causation and Remoteness of Damage in Contract Law

Running head: CONTRACT LAW
Contract Law
Name of Student
Name of University
Author Note

1CONTRACT LAW
Introduction
In this essay the tests of causation and the common law rules on remoteness of damage
are being discussed in details with relevant cases. The different tests of causation like the factual
test and the test of remoteness are discussed in this essay. Further the essay discusses the theory
of remoteness of damage in agreement with the statement that has been mentioned in the
question. The two limbs for the test of remoteness are also discussed in the light of the relevant
cases. Further the common law rules on the test of remoteness are critically discussed. For the
claim of damages in case of a contract breach the theory of remoteness is seen to be forming a
very critical part. The theory was first introduced in 1857 in case of Hadley v Baxendale1. After
that the theory had been used by judges in several cases. This theory was used in a recent case
known as the Achilleas case. The decision in this case is said to be seemingly changing the
principle that expands the scope of the liabilities of the party in breach. Thus it can be seen as an
essential judgment for the explanation of the law as it has formed modification of the subsequent
judgments.
Tests of Causation
Causation in the law of negligence can be described as the direct link between the loss
and damage of the claimant and the act of negligence by the defendant.2 In case there is a breach
of the duty of care by the defendant that would be seen to be causing damage and loss to the
claimant the liability of negligence can be established giving the right to the claimant to get
1 Paziue, Cristian. "Remoteness of Damage in Contract and Its Functional Equivalents: A Critical Economic
Approach." UCLJLJ 5 (2016): 87.
2 Hylton, Keith N., and Haizhen Lin. "Negligence, causation, and incentives for care." International Review of Law
and Economics 35 (2013): 80-89.

2CONTRACT LAW
compensation for the loss and damage by the defendant. For making a claim for the damages the
claimant is needed to prove that the damages were actually caused because of the breach in the
duty of care. For this purpose the test can be seen to be providing a balance between remoteness
and proximity by proving the link between the loss and damage of the claimant and the actions
of the defendant and further proving that the damage sustained by the action was foreseeable at
the relevant time. In the Lamb v Camden [1981]3 case it was stated by the court that duty,
causation and remoteness are the devices used by court for limiting the liabilities caused by way
of negligence.
There are two tests for the establishment of the causation. These two tests are factual test
for causation and legal test for causation or remoteness of the damage. The factual test also
known to be the ‘but for’ test can be considered as the basic test for the establishment of
causation. In this test defendant would only be held liable for paying damages if it is proved that
the damages would not be occurring ‘but for’ the act of negligence of the defendant. In an
alternate way the defendant on the balance of probability would not be held liable if it can be
proved that the damage of the claimant would have been happening anyways regardless of the
action of negligence. This was discussed in detail in the South Australia Asset Management Corp
v York Montague Ltd [1997]4 case. In this case the negligence caused by the doctor resulted in a
risk for the mountaineer which would not have occurred otherwise. Yet it was not seen to be
sufficient for incurring liabilities for the doctor. It was stated by the court that the duty of the
doctor is to be taking care of the injuries by way of knee failures, so even if the injury can be said
to be foreseeable the doctor could not be held liable.
3 Lamb v Camden LBC (1981) QB 625
4 South Australia Asset Management Corp v York Montague Ltd [1997] AC 191, 214