might accrue as a probable result of his breach of his agreement? 1757. General rule of damages for breach of contract - Hadley v. Baxendale.-The general rule governing the allowance of damages for breach of contract generally has in view the two conditions referred to in the preceding section. As stated in substance in the famous English case of Hadley v. Baxendale, and in the American case of Griffin v. Colver, that 1(1854) 9 Exch. 341, Mechem's these special circumstances were Cases on Damages (2d ed.), 116. 2(1858) 16 N. Y. 489, 69 Am. Dec. 718, Mechem's Cases on Damages (2d ed.), 126. The precise statement of the rule in Hadley v. Baxendale is this: "Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e. according to the usual course of things, from such breach of contract itself, or such as may 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." Continuing further, the reasons are given thus; "Now, if the special circumstances under which the contract was actually made were communicated by the plaintiff to the defendant, and thus actually known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily flow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case; and of this advantage it would be very unjust to deprive them." The precise statement in Griffin v. Colver, decided four years later, and, so far as any internal evidence goes, without knowledge of Hadley v. Baxendale, is this: "The broad, general rule in such cases is, that the party injured is entitled to recover all his damages, including gains prevented as well as losses sustained; and this rule is subject to but two conditions: the damages must be such as may fairly be supposed to have entered into the contemplation of the parties when they made the contract, that is, must be such as might naturally be expected to follow its violation; and they must be certain, both in their nature and in respect to the cause from which they proceed." rule is this: The party who has broken his contract is liable to make compensation to the other for all such losses resulting from that breach as are either (1) The ordinary, the usual, the commonly-to-be-expected consequences of such a breach of such a contract; or (2) The peculiar or unusual consequences of the breach of the particular contract in question, if, under the circumstances, it can fairly be said that both parties had those consequences in their contemplation, at the time the contract was made, as a probable result of its breach; and if those unusual consequences are neither uncertain in their nature nor remote as to their cause. § 1758. So far as liability for losses under the first branch of the rule is concerned, there can, ordinarily, be but little difficulty. The law conclusively presumes that parties contemplate the usual and ordinary consequences of their acts, and it would not be necessary for the plaintiff to allege or prove that the defendant, in the particular case, did contemplate them; nor could the defendant escape responsibility by showing that they were not called to his attention and were, in fact, not within his contemplation. § 1759. So far as liability under the second branch of the rule is concerned, it would be essential for the plaintiff to show, not perhaps that the defendant did actually contemplate the special consequences which might ensue from his breach of the contract, for actual mental conditions are not easily inquired into, but that, under the circumstances, there was such notice or disclosure or other evidence of those consequences that it can fairly and reasonably be said that they must have entered into the contemplation of both parties, at the time the contract was made, as a probable consequence of its breach, and that therefore the defendant assumed them when he made his promise. § 1760. How these rules apply to sales.-Applying these principles to the subject now being considered, the first branch of the rule would reach those cases, already dealt with, in which the loss of differences in value is the usual and ordinary result.1 The second branch will extend to all those cases in which both parties, at the time they made the contract,3 can fairly be said to have had within their contemplation some special loss or injury which would probably result to the buyer from the failure to obtain the goods, and in which that loss so contemplated has, in fact, naturally and proximately resulted from such failure. § 1761. Loss of profits on resale contracted for. The case of the vendee who is seeking to recover damages for the loss of profits which he might have made upon a resale of the goods furnishes a typical instance of the application of the rule. If the purchaser intended to resell the goods in the market, but had not in fact contracted for their resale; or if he had contracted to resell them, but at the market price, then the usual rule of the difference between the contract and the market price furnishes an adequate remedy. But, supposing that the vendee bought the goods for resale in a particular market, or had actually made a contract for their resale at more than the market price, and loses the benefit or profit he might so have made, how then are his damages to be estimated? § 1762. Resale not contemplated.— Applying here the rules above laid down, the result will be that if the seller had, 1 See ante, §§ 1736 et seq. 2 It is, of course, essential that both parties shall have contemplated the possible injury. The buyer's knowl edge is not alone enough; it must appear that the seller also can fairly and reasonably be said to have the possible injury within his contempla. tion. Horne v. Midland Ry. Co. (1871), L. R. 7 C. P. 583, Mechem's Cases on Damages (2d ed.), 124; Mather v. American Express Co. (1884), 138 Mass. 55, 52 Am. R. 258, Mechem's Cases on Damages, 135; Hadley v. Baxen dale, supra; Griffin v. Colver, supra, and many other cases. 3 The notice or knowledge which is to affect the seller must also, of course, have been had when the contract was made, and no subsequent disclosure of possible or probable but unusual results can affect his liability. Jordan v. Patterson (1896), 67 Conn. 473, 35 Atl. R. 521, Mechem's Cases on Damages, 242; Coffin v. State (1895), 144 Ind. 578, 43 N. E. R. 654; Penn v. Smith (1894), 104 Ala. 445, 18 S. R. 38. at the time he made the contract to sell, no knowledge or notice that the goods were being purchased for resale in a particular market or to be supplied under an existing contract for their resale at a particular price, no damages based upon the loss of that particular market or of the profit under that particular contract can be recovered. The buyer must here content himself with the damages which may be estimated upon the basis of the general market or the actual value. A resale at a particular profit is not so far the usual and the natural result, even when goods are known to be purchased for resale, as to bring it within the first branch of the rule of Hadley v. Baxendale.2 Resale known to vendor. § 1763. If, however, at the time the contract is made, the seller has such notice or knowledge that the goods are being purchased for resale in a particular market, or to be supplied in pursuance of a particular contract, that he may fairly and reasonably be deemed to have made his contract in contemplation of that purpose, and to have assumed the risks thereby entailed, then, if he breaks his contract, damages for losses caused thereby, if not uncertain or remote, may be recovered.3 1 Williams v. Reynolds (1865), 6 Best & Smith, 495; Coffin v. State (1895), 144 Ind. 578, 43 N. E. R. 654; Jordan v. Patterson (1896), 67 Conn. 473, 35 Atl. R. 521, Mechem's Cas. on Damages (2d ed.), 242; Devlin v. Mayor of New York (1875), 63 N. Y. 8; MoffittWest Drug Co. v. Byrd (1899), — U. S. App. 19 34 C. C. A. 351, 92 Fed. R. 290; Orr v. Farmers' Alliance Co. (1895), 97 Ga. 241, 22 S. E. R. 937; Cockburn v. Ashland Lumber Co. (1882), 54 Wis. 619, 12 N. W. R. 49; Fox v. Harding (1851), 7 Cush. (Mass.) 516; Rahm v. Deig (1889), 121 Ind. 283, 23 N. E. R. 141; Barker v. Mann (1869), 5 Bush (Ky.), 672, 96 Am. Dec. 373. Certainly this must be true where the contract for resale is not made until a later time. Coffin v. State, supra. 2 Williams v. Reynolds, supra; Thol v. Henderson (1881), 8 Q. B. Div. 457. 3 Hydraulic Engineering Co. v. McHaffie (1878), 4 Q. B. Div. 670; Grébert-Borgnis v. Nugent (1885), 15 Q. B. Div. 85; Robinson v. Hyer (1895), 35 Fla. 544, 17 S. R. 745; Penn v. Smith (1894), 104 Ala. 445, 18 S. R. 38 [citing Bell v. Reynolds, 78 Ala. 511, 56 Am. R. 52; Young v. Cureton, 87 Ala. 727]; Messmore v. New York Shot Co. (1869), 40 N. Y. 422; Wakeman v. Wheeler & Wilson Mfg. Co. (1886), 101 N. Y. 205, 54 Am. R. 676; Jordan v. Patterson (1896), 67 Conn. 473, 35 Atl. R. 521, Mechem's Cases on Damages (2d ed.), 242; Campbells § 1764. As stated in a leading case,' the ordinary rule "is changed when the vendor knows that the purchaser has an existing contract for a resale at an advance price, and that the purchase is made to fulfill such contract, and the vendor agrees to supply the article to enable him to fulfill the same; because those profits which would accrue to the purchaser upon fulfilling the contract of resale may justly be said to have entered into the contemplation of the parties in making the contract. This rule is based upon reason and good sense, and is in strict accordance with the plainest principles of justice. It affirms nothing more than that, where a party sustains a loss by reason of a breach of a contract, he shall, so far as money can do it, be placed in the same situation with respect to damages as if the contract had been performed." § 1765. It is sometimes objected that a loss of profits is not a proper subject of compensation, and this is often true. It is not, however, because profits in themselves may not, if lost, be properly made the basis of a recovery, but because in most cases in which such a claim is made the profits in question were too speculative, uncertain or remote to be considered. Where, on the other hand, the loss of profits can be shown with reasonable certainty, it has been settled, since the case of Masterton v. Mayor of Brooklyn, that a recovery may be had for the amounts so lost. $ 1766. 2 Extent of knowledge required - Particular price. If, when the contract of sale is made, the seller knows not only of the fact of the resale, but also of the particular price to be received upon it, there can usually be but little difficulty in holding him responsible upon the basis of that ville Lumber Co. v. Bradlee (1895), 96 Ky. 494, 29 S. W. R. 313; Carpenter v. First Nat. Bank (1887), 119 Ill. 352; Barker v. Mann (1869), 5 Bush (Ky.), 672, 96 Am. Dec. 373. 1 Messmore v. N. Y. Shot Co., supra. 2(1845) 7 Hill (N. Y.), 61, 42 Am. Dec. 38, Mechem's Cases on Damages (2d ed.), 141. See also the full discussion in Wakeman v. Wheeler & Wilson Mfg. Co. (1886), 101 N. Y. 205, 54 Am. R. 676; Bluegrass Cordage Co. v. Luthy (1896), 98 Ky. 583, 33 S. W. R. 835. |
