What is the rule from Hadley v. Baxendale?

Damages are limited to losses that arise naturally from the breach or those that the parties reasonably contemplated when they made the contract.

Why were lost profits not awarded?

Because the carrier did not know the mill would stay shut if delivery was delayed. That special loss was not within the parties’ reasonable contemplation.

Does a promise of next-day delivery change the result?

Not by itself. Without notice of the mill’s dependency on the part, the loss of profits remains too remote.

How can a party recover special losses?

Give clear notice of special circumstances at the time of contracting. Then such losses may be within reasonable contemplation.

Is Hadley v. Baxendale used in India?

Yes, Indian courts often apply the same remoteness principle while assessing contract damages.

Hadley v. Baxendale

9 Ex 341 (1854) — Remoteness of Damages in Contract

Court of Exchequer 1854 9 Ex 341 Contract • Damages ~7 min India (explainer)

Author: Gulzar Hashmi • Published: 26 Oct 2025

Quick Summary

The mill’s crankshaft broke. The carrier delayed sending the old shaft to make a new one. The mill stayed shut for a week and claimed lost profits. The Court said: such profit loss is too remote unless both sides could reasonably expect this kind of loss when they made the contract. No recovery here.

Issues

Are the carriers liable for the mill’s lost profits caused by delay?
Was the loss of profits too remote to be claimed as damages?

Rules

Recoverable damages are those that arise naturally from the breach in the usual course of things.
Plus, damages that were within the reasonable contemplation of both parties at the time of contracting.

Classic rule on remoteness of damages from Hadley v. Baxendale.

Facts — Timeline

Sequence

Crankshaft breaks: The mill stops working and needs a new shaft made from the old pattern.

Carrier engaged: Hadley instructs Baxendale to carry the old shaft to the maker.

Urgency stated: Servant says shipment should go at once; clerk mentions next-day delivery if handed in by noon.

Delay occurs: The shaft is delivered a week late due to the carrier’s error.

Loss claimed: Mill remains shut; Hadley claims a week’s lost profits for negligence and delay.

Defence: Carrier says he did not know the mill would be idle without the shaft; such loss was not in contemplation.

Timeline visual for Hadley v. Baxendale case events

Arguments

Appellant (Hadley)

Carrier promised quick delivery; delay shut the mill for a week.
Lost profits flow directly from the delay.
Professional carrier should foresee such business loss.

Respondent (Baxendale)

No notice that the mill would be idle until replacement.
Lost profits are special and outside ordinary course.
Not within reasonable contemplation at contracting time.

Judgment

For the Defendant

The Court found for the carrier. Lost profits were not recoverable. The loss did not arise naturally from delay in the ordinary course, and the carrier lacked notice of special circumstances. So the profits were too remote.

Judgment concept image for Hadley v. Baxendale

Ratio (Legal Principle)

Damages for breach of contract are limited to losses that (1) arise naturally in the usual course, or (2) were within the parties’ reasonable contemplation when they formed the contract.

Why It Matters

Sets the foundation for assessing consequential losses.
Encourages parties to share special risks up front.
Keeps liability predictable and fair in commerce.

Key Takeaways

No notice = no special loss recovery.
Lost profits need foreseeability at contracting time.
Give clear written notice to shift risk of unusual loss.

Mnemonic + 3-Step Hook

Mnemonic: “Natural or Notified.”

Natural: Loss that usually follows the breach.
Notified: Special loss told at the start.
No Recovery: If neither applies, damages are too remote.

IRAC Outline

Issue

Is the carrier liable for the mill’s lost profits from delayed delivery?

Rule

Recover only natural losses or those reasonably contemplated by both parties.

Application

No clear notice that the mill would be idle; profit loss is special and outside ordinary course.

Conclusion

Loss of profits too remote; carrier not liable.

Glossary

Remoteness: Limits which losses are claimable after a breach.
Consequential Loss: Loss caused by special circumstances beyond the usual course.
Reasonable Contemplation: What both sides could fairly foresee when contracting.