Legal Analysis: Remoteness of Damage in Hadley v Baxendale and Others

This assignment delves into the legal concept of remoteness of damage, a crucial aspect of contract law, examining how courts determine the extent of damages for breach of contract. The analysis centers on the landmark case of Hadley v Baxendale, which established the principles of foreseeability in assessing damages, distinguishing between general and special damages. The assignment explores the two limbs of the Hadley v Baxendale test, focusing on what parties contemplate in the ordinary course of things and the importance of communicating special circumstances. It then compares Hadley v Baxendale with Victoria Laundry (Windsor) Ltd v Newman Industries Ltd, illustrating how courts apply these principles in determining the success of damage claims, specifically focusing on the recovery of loss of profits. The assignment provides a clear understanding of how remoteness of damage impacts the outcome of contract disputes and the assessment of financial compensation.

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Contents
Part 1...........................................................................................................................................................2
1. Explain the term ‘remoteness of damage’........................................................................................2
2. Hadley v Baxendale and Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB
528 2
a) Identify the two ‘limbs’ of the Hadley v Baxendale test..............................................................2
b) Damages and success...................................................................................................................2
Reference List.............................................................................................................................................4

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Part 1
1. Explain the term ‘remoteness of damage’
Remoteness is a term that refers to the presence of causation which helps in analyzing the kind of
damages that is caused to the plaintiffs. It also help in analyzing whether the defendant is
actually bound by the loss that is caused to the plaintiff. In the leading case of Hadley v
Baxendale1, the court held that it is the analysis of the concept of ‘foreseeability’ that determines
whether the damage so caused is remote or not. Remoteness implies that the plaintiff is
permitted to secure such loss which is foreseen by the defendant and which is caused because of
the acts of the defendant. If the loss is not anticipated by a normal prudent man in the similar
situation, then the loss is remote and the defendant is not answerable for such losses.2
In Transfield Shipping Inc v Mercator Shipping Inc3, thus, whether the damage is remote n[or not
is contingent upon the forseeability of the damage.
2. Hadley v Baxendale and Victoria Laundry (Windsor) Ltd v Newman Industries
Ltd [1949] 2 KB 5284
a) Identify the two ‘limbs’ of the Hadley v Baxendale test
In Hadley v Baxendale in order to analyze the contemplation of the parties there are two limbs
that are laid down by the courts:
i. That the parties must contemplate the events in the ordinary course of things in order
to determine whether they knew of the event or not;
ii. The presence of the special circumstances that are present apart of the ordinary course
of things but such special circumstances must be communicated by the plaintiff to the
defendant.
b) Damages and success
Damages sought by plaintiff
In Hadley v Baxendale
In the leading case Hadley crank shaft broke and thus he established a contract with Baxendale
wherein the shaft was to be delivered to a particular company at a particular date. However,
Hadley did not inform Baxendale that if the shaft will not be delivered within sue time, the mill
will not work. Baxendale was not able to deliver the shaft on the said date and thus the mill
remain non functional resulting in loss of profit.
Hadley claimed special damages (loss of profits).
In Victoria Laundry (Windsor) Ltd (VLL) v Newman Industries Ltd (NIL)
VLL ordered boiler from NIL and NIL is aware that the need of the boiler is urgent. But, the
boiler was delayed by 5 months. VLL claimed loss of profits.
Success of the claim
In Hadley v Baxendale
1 Hadley v Baxendale ([1854] 9 Ex 341).
2 Katy Barnett and Sirko Harder, Remedies in Australian Private Law, Cambridge University Press, 02-May-2014.
3 Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48.
4 Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528

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The court held that if the plaintiff wants to seek special damages, then, the special circumsttbces
must be communicated, since Hadley did not communicate the same, thus, he is not liable to
seek loss of profits.
In Victoria Laundry (Windsor) Ltd v Newman Industries Ltd
The court ordered loss of profits to VLL as NIL is aware that of boiler is not delivered they VLL
might suffer damages. Thus, the special circumstances are communicated and thus VLL is
eligible for loss of profits.

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Reference List
Books/Articles/Journals
Barnett, Katy and Harder, Sirko, Remedies in Australian Private Law, Cambridge University
Press, 02-May-2014.
Case Laws
Hadley v Baxendale ([1854] 9 Ex 341).
Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48.
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528