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BE 4605: Claim Management Course Work
BE 4605: Claim Management Course Work
CONSTRUCTION CASE LAW
CONSTRUCTION CASE LAW

Eshantha Samarajiwa

CASE 1: HADLEY v BAXENDALE (1854)
CASE 1:
HADLEY v BAXENDALE (1854)

© Eshantha Samarajiwa

Facts of the Case - Background

• Hadley v Baxendale (1854) is a leading English Contract Law Case. • It sets the
Hadley
v
Baxendale
(1854)
is
a
leading
English
Contract Law Case.
It
sets
the
basic
rule
to
determine
consequential
damages from a breach of contract.
The incidents took place in Gloucester,
a major city in England.
Map of England

© Eshantha Samarajiwa

Facts of the Case - Claimants

• The Claimants were two brothers - Joseph and Jonah Hadley who owned the City Flour
The Claimants were two brothers - Joseph and Jonah
Hadley who owned the City Flour Mills.
• The mill was built in 1850 and milled wheat imported through Gloucester docks to make
The mill was built in 1850 and milled wheat imported
through Gloucester docks to make flour, sharps & bran.
City Floor Mills - c.1920s

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Facts of the Case - Claimants

• Their venture was highly successful and a warehouse was built and installed with 2 steam
Their venture was highly successful and a warehouse
was built and installed with 2 steam engines and other
machinery to double the output of the mill.
The renovated mill - 2007
The renovated mill - 2007

© Eshantha Samarajiwa

Facts of the Case

• The crankshaft of one of the steam engines broke which rendered the mill inoperable. •
The crankshaft of one of the steam engines broke
which rendered the mill inoperable.
In the 1850′s there were no standardized replacement
parts available.
The
original
manufacturers
custom
made
the
replacement parts.
An old steam engine

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Facts of the Case

• The manufacturer needs the broken crankshaft as a model to create a new replacement part
The manufacturer needs the broken crankshaft as a
model to create a new replacement part that will fit
with the other custom made machinery of the mill.
The broken part had to be sent to the manufacturer
who was in Greenwich, nearly 200km’s away.
Hadley had to get the service of a transporter to get
the broken crankshaft to the manufacturer.

© Eshantha Samarajiwa

Facts of the Case - Defendants

• Hadley hired Pickford & Co to transport the broken shaft to the manufacturer by a
Hadley hired Pickford & Co to transport the broken
shaft to the manufacturer by a certain date at a cost of
£2 and 4 shillings.
Pickford & Co
is
a
moving
company
based
in
the
United Kingdom which was founded in the 17 th century.
During that time Joseph Baxendale was the senior
partner of the transporter Pickford & Co.
Transport Truck of Pickford & Co.

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Facts of the Case - Litigation

• Hadley told the transporter that the shaft must be sent immediately and promised to deliver
Hadley told the transporter that the shaft must be sent
immediately and promised to deliver it the next day.
The transporter (Baxendale) did not know that the mill
would be inoperable until the new shaft arrived.
• However due to negligence and the crankshaft was
delivered 5 days late which caused the mill to remain
idle for additional 5 days.
• The Hadley brothers sued Joseph Baxendale and
claimed for damages due to lost profits and wages paid
to idle workers.

© Eshantha Samarajiwa

Facts of the Case - Judgement

• The jury awarded Hadley damages of £25 at the initial hearing at Assize court of
The jury awarded Hadley damages of £25 at the initial
hearing at Assize court of Gloucester.

© Eshantha Samarajiwa

Facts of the Case - Judgement • The jury awarded Hadley damages of £25 at the

Facts of the Case - Judgement

• The defendant Baxendale considered that this was unreasonable and too remote and appealed to the
The defendant Baxendale considered that this was
unreasonable and too remote and appealed to the
Court of Exchequer.
• He competed that he did not know that Hadley would
suffer any particular damage by reason of the late
delivery.
Court of Exchequer

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Facts of the Case - The Issue

What is the amount of damages to which an injured party is entitled for breach of
What
is
the amount of
damages to which an
injured party is entitled for breach of contract?

© Eshantha Samarajiwa

Facts of the Case - The Issue What is the amount of damages to which an

Key Contractual & Legal Principles

• Before Hadley v Baxendale the usual legal principle was the claimant is entitled to the
Before Hadley v Baxendale the usual legal principle
was the claimant is entitled to the amount he would
have received if the breaching party had performed.
The plaintiff is placed in the same position he would
have been in had the breaching party performed.
• Under this rule, Hadley would have been entitled to
recover lost profits from the 5 extra days the mill was
inoperable.

© Eshantha Samarajiwa

Upheld Principles by Judges

• The Court of Exchequer Chamber during that time was led by judge Baron Sir Edward
The Court of Exchequer Chamber during that time was
led by judge Baron Sir Edward Hall Alderson.
The Court declined to allow Hadley to recover loss of
profits.
Judge Baron Alderson

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Upheld Principles by Judges

• It was held that Baxendale could only be held liable for losses that were generally
It was held that Baxendale could only be held liable for
losses that were generally foreseeable.
If Hadley had mentioned his special circumstances in
advance he would have recovered loss of profits.
Just because a party is sending something to be
repaired does not indicate that they would lose profits
if it were not delivered on time.
• Where special circumstances
exist provisions can be made in
the contract to impose extra
damages for a breach.

© Eshantha Samarajiwa

Upheld Principles by Judges

• This landmark case of Hadley v Baxendale established the foreseeability of damages rule in English
This landmark case of Hadley v Baxendale established
the foreseeability of damages rule in English Law.
It sets down the principles which any jury should
consider when estimating damages.
The Plaque in City Flour Mills
The Plaque in City Flour Mills

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Upheld Principles by Judges

“An injured party may recover those damages reasonably considered to arise naturally from a breach of
“An injured party may recover those damages reasonably
considered to arise naturally from a breach of contract,
or those damages within the reasonable contemplation of
the parties at the time of contracting”.
Direct losses Arises naturally with the usual course of breach Recoverable Losses Needs to be contemplated
Direct losses
Arises naturally
with the usual
course of breach
Recoverable
Losses
Needs to be
contemplated by
parties or
Indirect &
Consequential
losses
Include additional
provisions for
extra damages

© Eshantha Samarajiwa

Upheld Principles by Judges

So before the mill operator can get consequential damages—wages paid and sales lost while the mill was idle—they must prove that the shipping company contemplated those damages as a risk of agreeing to ship the broken crankshaft.

Requiring that proof of contemplation helps ensure the shipping company had the opportunity to consider the extra risk and decide whether to raise their price above the customary £2.

© Eshantha Samarajiwa