“The rationale of the decision appears in Baron Alderson’s noted statement of what came to be known as the two rules of Hadley v. Baxendale. The first rule was that the injured party may recover damages for loss that ‘may fairly and reasonably be considered [as] arising naturally, i.e., according to the usual course of things, from such breach of contract itself.’ … The second and more significant rule went to recovery of damages for loss other than that ‘arising naturally’ — to recovery of what have come to be known as ‘consequential’ damages…. By introducing this requirement of ‘contemplation’ for the recovery of consequential damages, the court imposed an important new limitation on the scope of recovery that juries could allow for breach of contract. The result was to impose a more severe limitation on the recovery of damages for breach of contract than that applicable to actions in tort or for breach of warranty, in which substantial or proximate cause is the test.” E. Allan Farnsworth, Contracts § 12.14, at 822–23 (3d ed. 1999).
hadley v baxendale rule
Hadley v. Baxendale rule. Contracts. The principle that consequential damages will be awarded for breach of contract only if it was foreseeable at the time of contracting that this type of damage would result from the breach. Hadley v. Baxendale, 9 Exch. 341 (1854). • Hadley v. Baxendale is best known for its impact on a nonbreaching party’s ability to recover consequential damages, but the case also confirmed the principle that the nonbreaching party may recover damages that arise naturally from the breach. See foreseeable damages under DAMAGES. [Cases: Damages 23. C.J.S. Damages §§ 28–33.]
