Hadley v. Baxendale Rule Law and Legal Definition

Hadley v Baxendale 9 Exch. 341 (1854) is a leading English contract law case which laid down 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. The two important rules set out in the case are:

1. 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.

2. The injured party may recover 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. This resulted in imposition of 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.