CASE BRIEF

Parties: Hadley and Baxendale


Facts: Hadley and Baxendale made a contract that Baxendale would transport broken shaft of the
Hadley’s mill. The broken mill shaft was not operable. Baxendale was supposed to take the shaft to
an engineer in Greenwich who should make a duplicate of that shaft. He was told to transport the
shaft immediately, so that the mill could work again soon. Baxendale promised to take it to the
engineer next day, but he failed to do that because of his negligence. The result of his inactivity
was that the mill remained shut down for another 5 days. Hadley paid for transport by himself (It
cost him around 2 pounds.)


Legal issue:

The issue in this case is whether the defendant should be liable for damages about which he was not
aware that will arise in the case of breaching the contract.


Procedural history:

In the first instance, the court held that Hadley should be awarded 25 pounds. The usual rule is
that the claimant is entitled to the amount of money that he would received if there hadn’t been
the breach of the contract. Therefore, Hadley would have been awarded damages for the lost profit
from 5 extra days when the mill wasn’t working.


In the view of the Court of Appeals, Baxendale did not know that because of the shaft the mill was
shut down. Hadley hasn’t told to Baxendale that there were special circumstances. The court held
that Baxendale was only liable for losses that he could have foreseen. The Court of Appeals
remanded the case for a new trial.


Reasoning of the court:

The court pointed out that the consequential damages should be awarded when there’s clarity that
the guilty party knew or could foresee the consequences of breaching the contract. It requires
evidence of the circumstances under which the parties made the contract.