Classic case studies

No.3 - Hadley v Baxendale

Ten cases every consulting engineer should know

Hadley v Baxendale (1854) 9 Ex 341

In summary

Hadley v Baxendale established a ‘remoteness’ test identifying the type of losses recoverable following a breach of contract. 


The crank shaft of a steam engine used by the claimants in their mill had broken and needed to be replaced.  The claimants contracted with the defendant to deliver the broken shaft to an engineering firm to be used as the model for a new one.

The claimants told the defendant that the shaft had to be sent immediately and the defendant promised to deliver it the next day. The defendant was unaware that without the shaft the mill could not operate. 

The defendant delivered the shaft seven days after receiving it and the claimant alleged that the defendant’s actions in delaying the delivery of the shaft had caused a further five days of “down time” for the mill. The claimants sought compensation for their loss of profits and payment of wages.   At first instance the court awarded damage on this basis. 

The defendant appealed the decision and the appeal was allowed. The claimants were not entitled to damages for loss of profit due to the mill being inoperable. 

The Court of Appeal held that: 

Damages recoverable for a breach of contract should be those which are fairly and reasonably considered as arising naturally from the breach, or which might reasonably have been in the contemplation of the parties at the time the contract was made. 

If special circumstances are communicated by one party to the other at the time of entering into contract, then in principle losses arising out of those circumstances will be recoverable. But if those circumstances were unknown to the party in breach (as was the case here, i.e. that without the shaft the mill could not produce anything) then that party is deemed to have contemplated only the losses arising generally from such a breach. 

The remoteness test for breach of contract is therefore twofold. The claimant will be entitled to recover either:

  1. Losses arising naturally, accordingly to the normal or ordinary course of things, from the breach of contract; or
  2. Such loss as may reasonably be supposed to have been in the contemplation of the parties at the time they entered into contract, as being a possible result of the breach.

The first limb of the test is objective and relates to what a reasonable person would recognise as being ‘in the ordinary course of things’ and what is in their reasonable contemplation. This will be a question of fact in the circumstances.

The second limb of the test is subjective and covers knowledge of special circumstances outside the ordinary course of things. 

To contact Griffiths & Armour about this story, please email