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Hadley v Baxendale
2
Y
Law of Remedies
Unit 4 - Review Question 2
Subgroup 8A-1
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m
1
p
F
Discuss with examples, the circumstances in which the second limb of the rule in Hadley v Baxendale, concerning the recoverability of damages for breach of contract, can be applied.
E
The Rule in Hadley v Baxendale (1854) 9 Exch. 341 per Baron Alderson
Where two parties have made a contract which one of them has broken the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered as either:
(1) Arising naturally from the breach of contract itself (direct loss); or
(2) May reasonably be supposed to have been in the contemplation of both parties at the date of the contract as a probable result of the breach (indirect/consequential loss).
This means that losses are not too remote and thus recoverable if they fall within the two limbs mentioned above.
Limb 2 - Indirect/Consequential Loss
May reasonably be supposed to have been in the contemplation of both parties at the date of the contract as a probable result of the breach.
In what circumstances can this limb be applied for loss to be recovered in respect of breach of contract?
Most frequently seen in:
- Construction Contracts
- Shipbuilding Contracts
- Contracts for Goods and Services
- Oil and Gas Contracts
- High-end Commercial Contracts
It must be noted that these contracts have sought to include exclusionary clauses for liability in respect of consequential losses as a result of the judgment in Hadley v Baxendale.
For example: The BP Oil International Limited General Terms & Conditions for Sales and Purchases of Crude Oil, used in global oil sales, state “...in no event, ... shall either party be liable to the other… in respect of any indirect or consequential losses or expenses …”.
But how have courts interpreted this limb?..
D
Star Polaris LLC v HHIC-Phil Inc [2016] EWHC 2941 - consequential loss in ship-building disputes
TITLE
Transocean Drilling UK Ltd v Providence Resources Plc [2016] EWCA Civ 372 - oil and gas contract
Subsequent judgment
C
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B
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