CHAPTER IV.

DIRECT AND CONSEQUENTIAL DAMAGES.

Breach of Contract.

HADLEY v. BAXENDALE.

Exchequer, 1854. 9 Ex. 341 (Eng.).

This was an action by the plaintiffs, owners of a steam gristmill, against the defendant, a carrier, for delay in delivering two pieces of iron, being the broken shaft of the mill of the plaintiffs, by reason of which delay the engineer to whom they were to be delivered was unable to supply a new shaft, and the mill of the plaintiffs was stopped, and the plaintiffs lost certain profits by the delay of their business, which was laid in the declaration as special damage. The defendant paid £25 into court.

At the trial, before Crompton, J., at the Summer Assizes for Gloucester, 1853, it appeared that the broken shaft was to be sent to the engineer as a model for a new one, and at the time of the contract for the carriage being made, the defendant's clerk was informed that the mill was stopped and that the shaft must be sent immediately. It further appeared that its delivery at its destination was delayed for several days, and, consequently, the plaintiffs did not receive the new shaft back as they expected, and their mill was kept idle. The learned judge left the question of damages to the jury, although it was objected that the special damage was too remote, and they gave a verdict for the plaintiffs for £25 beyond the sum paid into court.

A rule nisi for a new trial for misdirection was obtained in Michaelmas term, on the ground that the learned judge ought to have told the jury to throw out of their consideration the alleged special damage.

ALDERSON, B. We think that there ought to be a new trial in this case; but, in so doing, we deem it to be expedient and necessary to state explicitly the rule which the judge, at the

next trial, ought, in our opinion, to direct the jury to be governed by when they estimate the damages.

It is, indeed, of the last importance that we should do this; for, if the jury are left without any definite rule to guide them, it will, in such cases as these, manifestly lead to the greatest injustice. The courts have done this on several occasions; and, in Blake v. Midland Railway Company, 21 L. J., Q. B., 237, the court granted a new trial on this very ground, that the rule had not been definitely laid down to the jury by the learned judge at Nisi Prius.

"There are certain established rules," this court says, in Alder v. Keighley, 15 M. & W. 117, "according to which the jury ought to find." And the court, in that case, adds: "and here there is a clear rule, that the amount which would have been received if the contract had been kept, is the measure of damages if the contract is broken."

Now we think the proper rule in such a case as the present is this: 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 either arising naturally, i. e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case; and of this advan

tage it would be very unjust to deprive them. Now the above principles are those by which we think the jury ought to be guided in estimating the damages arising out of any breach of contract. It is said that other cases, such as breaches of contract in the non-payment of money, or in the not making a good title to land, are to be treated as exceptions to this, and as governed by a conventional rule. But as, in such cases, both parties must be supposed to be cognizant of that well-known rule, these cases may, we think, be more properly classed under the rule above enunciated as to cases under known special circumstances, because there both parties may reasonably be presumed to contemplate the estimation of the amount of damages according to the conventional rule. Now, in the present case, if we are to apply the principles above laid down, we find that the only circumstances here communicated by the plaintiffs to the defendants at the time the contract was made, were that the article to be carried was the broken shaft of a mill, and that the plaintiffs were the millers of that mill. But how do these circumstances show reasonably that the profits of the mill must be stopped by an unreasonable delay in the delivery of the broken shaft by the carrier to the third person? Suppose the plaintiffs had another shaft in their possession put up or putting up at the time, and that they only wished to send back the broken shaft to the engineer who made it; it is clear that this would be quite consistent with the above circumstances, and yet the unreasonable delay in the delivery would have no effect upon the intermediate profits of the mill. Or, again, suppose that, at the time of the delivery to the carrier, the machinery of the mill had been in other respects defective, then, also, the same results would follow. Here it is true that the shaft was actually sent back to serve as a model for a new one, and that the want of a new one was the only cause of the stoppage of the mill, and that the loss of profits really arose from not sending down the new shaft in proper time, and that this arose from the delay in delivering the broken one to serve as a model. But it is obvious that, in the great multitude of cases of millers sending off broken shafts to third persons by a carrier under ordinary circumstances, such consequences would not, in all probability, have occurred; and these special circumstances were here never communicated by the plaintiffs to the defendants. It follows,

therefore, that the loss of profits here cannot reasonably be considered such a consequence of the breach of contract as could have been fairly and reasonably contemplated by both the parties when they made this contract. For such loss would neither have flowed naturally from the breach of this contract in the great multitude of such cases occurring under ordinary circumstances, nor were the special circumstances, which, perhaps, would have made it a reasonable and natural consequence of such breach of contract, communicated to or known by the defendants. The judge ought, therefore, to have told the jury that, upon the facts then before them, they ought not to take the loss of profits into consideration at all in estimating the damages. There must therefore be a new trial in this case. Rule absolute.

In this case the trustees of a turnpike company built buttresses to support the turnpike on the land of plaintiff, without plaintiff's consent. For this trespass plaintiff sued defendant for damages. Thereupon defendant paid into court twenty-five pounds, the full amount of damages that plaintiff had sustained, by reason of said trespass, and plaintiff afterwards on Feb. 3rd, 1837, received this amount in full satisfaction for the action she had begun.

On the 13th of February, 1837, the plaintiff caused a notice to be served on defendants, requiring them, within twelve days, to remove the buttresses erected upon her land, and giving notice that, if they did not do so, an action would be brought for continuing the buttresses on the land, and further actions from time to time until compliance with the requisition. The trustees, considering that the buttresses were necessary to support the road, and that the former payment by them was an equivalent for the permanent use of the land, refused to remove them. On the 27th of April following, the present action was commenced. It was not shewn that the defendants, or any of them, had entered upon the land of the plaintiff, or had done any act upon it since the trespasses complained of in the first action (a). One of them (the contractor) had entered into an agreement with another of the defendants (the trustee) in 1836 to keep the road in repair for two years. On the part of the defendants it was contended that the action was improperly conceived in trespass, that, by force of the local act and of the General Turnpike Act, 3 G. 4. c. 126. s. 147, the plaintiff was barred of her action after three months from the