Hadley v. Baxendale (a.k.a., the shaft)

Hadley v. Baxendale
In the Court of Exchequer,
9 Ex. 341, 156 Eng. Rep. 145 (1854)

Justice Crompton delivered opinion

Facts:

• May 11, crank shaft broke and mill work stopped
• May 13, broken crank shaft sent to Greenwich (where manufacturer of product resided, Messrs. Joyce & Co.) to serve as a model for construction of new crank shaft, using carrier service Pickford & Co.
• plaintiff's servant told clerk "shaft must be sent immediately"
• def.'s advised shaft would be delivered to Greenwich the following day

• Delivery delayed because of neglect; plaintiff's didn't recv new shaft for several days, working of mill was stopped
• Plaintiff claimed damages of ₤300 for lost business and wages paid to idle employees
• Def.'s denied making any promises and paid ₤25 to the ct to satisfy any liability for their negligence
• Plaintiff's entered a nolle prosequi* in regards to first count and claimed amount paid to ct was insufficient to satisfy their claim
• Jury returned w/ a verdict for ₤25 damages beyond what had already been paid to ct
• Whateley (attrny for def.) obtained a rule nisi** for a new trial, on grounds of misdirection
• Keating and Dowdeswell (attrnys for plain.) showed cause
  

Issue:
Should plaintiff be able to recover lost profits?

Holding: No. Judge should not have told jury to include loss of profits when estimating damages

Reasoning:

• Consult Sedgwick on the Measure of Damages, rule adopted for this case, ample evidence that def.'s knowledge of situation would cause him to foresee damages that might be suffered by plain. because of his (the def.'s) actions
  
• Def. knew about potential loss of profit (damages) because of all of the info presented when crank shaft originally brought in to be sent out for repair
• Complete compensation not to be awarded, per Sedgwick, "the object is to discriminate between that portion of the loss which must be borne by the offending party and that which must be borne by the sufferer" - a division of loss, if you will
• When two parties have contract which one breaks, damages the other party ought to recv bec. of said breach should be such "as may fairly and 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"
• In this case, loss suffered by plain. not likely to have been reasonably contemplated by def. because def. could have considered the plain. had other shafts or that there might have been other reasons for shut-down of mill, etc.
• Loss did not "flow naturally from breach" and there were no special circumstances
  

Judgment: New trial, with rules on how the judge should instruct the jury to award damages

*nolle prosequi - entry made on record where prosecutor or plaintiff declares that he/she will proceed no further; used in civil and criminal cases

**rule nisi - an order to show cause, meaning the ruling is absolute unless the party to whom it applies can show cause why it should not apply