Hadley & Anor v Baxendale & Ors is a landmark case in English contract law that established the principle of consequential damages, also known as special damages.
In 1854, the crankshaft of the flour mill broke, causing the mill to shut down. The owners of the mill contacted Baxendale & Ors to transport the broken crankshaft to a manufacturer for a replacement to be made. Baxendale & Ors were informed that the crankshaft was required urgently to restore the mill's operations, and the owners of the mill requested that Baxendale & Ors make every effort to deliver the part quickly.
Baxendale & Ors collected the broken crankshaft and promised to deliver it to the manufacturer as soon as possible. However, due to a delay on their part, they did not deliver the part to the manufacturer for several days. This delay caused the mill to remain shut down, and Hadley & Anor suffered significant losses as a result.
Hadley & Anor sued Baxendale & Ors for the losses they suffered due to the delay. Baxendale & Ors argued that they could not be held liable for the losses because they were not informed of the specific circumstances of the case, namely, that the mill would be shut down until the replacement part arrived.
The court ruled in favour of Hadley & Anor, establishing the principle of consequential damages. The court held that Baxendale & Ors should have known that the delay in delivering the crankshaft would result in the mill remaining shut down and causing the owners to suffer significant losses. Therefore, Baxendale & Ors were liable for the consequential losses that resulted from their delay in delivering the crankshaft.
The ruling in Hadley & Anor v Baxendale & Ors established the principle that when a breach of contract occurs, the party who breaches the contract is liable for any losses that were reasonably foreseeable at the time of the contract, including any consequential or special losses that result from the breach.
You can learn more about this topic with our Contract Law notes.