Hadley v. Baxendale
a. Facts: Hadley, P, sued Baxendale, D, for lost profits arising from breach of a carrier contract. P stopped operating its mill when a crank shaft broke. P contracted with D to deliver the broken shaft to the manufacturer within a reasonable amount of time so that a duplicate could be made. D was negligent in not completing the delivery within a reasonable amount of time, and P sued to recover lost profits and wages paid while the mill was idle. The carrier knew that it was transporting a shaft but it did not know that the mill would be idle while it was in transport. The jury awarded P 50 out of 300 it sought; the 50 included 25 for lost profits. D appeals.
b. Holding: A D is only responsible for damages that are foreseeable or that he knew of in relationship to his breach.
a. Only reasonably foreseeable damages are recoverable. This rule forces party with information to disclose it; also favoring those who talk a lot.
b. Prevents excessive cross-subsidization: In the absence of the rule, those with low damages would pay more for products/services.
i. Idea of the watch repairman. Someone charging $5 for watch repairs wouldn’t charge only $5 to repair a $20k watch.
c. In order for the concept of efficient breach to remain there needs to be a requirement that the D has to know or should have known the injury that the P is going to suffer because of the breach.
i. Damages are going to be capped at an amount reasonably foreseeable to the D.
a. Only reasonably foreseeable damages are recoverable.
b. Forces party with information to disclose it.c. Prevents excessive cross-subsidization: In the absence of the rule, those with low damages would pay more for products/services.