This preview shows page 1. Sign up to view the full content.
Unformatted text preview: d in Chapter Eight.
Re Polemis andFurness, Withy & Co. Ltd.  3 K B 560.
 3 K B 560 at 577.
Overseas Tankship (U.K.) Ltd. v Morts Dock and Engineering Co. Ltd. (The Wagon Mound) (No. 1)
 A C . 388.
There are wider grounds upon which to criticize the court's ruling in the Wagon Mound cases. A single
event caused the loss of a complete dock and works, and also a ship moored alongside the docks. It defies
c o m m o n analysis of causation, fault, and recovery to hold the two cases of damages claims, w hich resulted
from a single event, consistent with any form of social logic where the owners of the dock failed to
recover, but the owners of the ship recovered substantial s ums. Legal counsel burdened with the obligation
to explain this anomaly to a client, as the loser, is certainly not to be envied. 228 not be held responsible without other considerations. Viscount Simonds did not elaborate
upon what he meant with respect to the "probable consequences" exactly, but these issues are explored in other tort cases. In contract, Hadley v Baxendale94 has remained influential as the starting point in determining the remoteness of damages claimed for
breach of contract despite the wide variety of cases determined from the time it was
handed down in 1854. A Closer Look at Hadley's Limbs What is relevant with respect to the limbs of Hadley v Baxendale for this section is t qualitative character of the two limbs. The first limb, damages are recoverable if the the "natural, usual course of things arising from a breach" of the relevant kind, assu an actual knowledge on the part of all parties to the contract of this type. The court
assumes that the parties to the contract are knowledgeable enough to know what losses arise naturally or in the usual course of their own affairs such that it may be said t defendant party of full age and capacity acting at arm's length cannot escape the impa upon him/herself of a breach, without other mitigating circumstances to which the cour can turn to alleviate part of the damage or injury caused through the breach attribute
the defendant. The first limb, therefore, is as much an assumption with respect to the industry, trad circumstances of the parties and the contract, as it is a statement of law. It does no that the court will not recognise that any loss beyond the parameter of the first limb the rule is not a loss which the court will compensate. It is, however, a line which t court will draw, beyond which it will not presumptively hold the defendant responsible (1854) 9 Exch 341; 156 E.R. 145. 229 after breach and loss are proven. T he language used in contract and tort to portray the necessary knowledge and, as a result, the requisite foreseeability, changes as the case
may be, but there is at least some argument to be made that they should both be
reconciled philosophically into one single strand.95 The courts have been unwilling to make this change. The main reason seems to be that
with contract the parties are importing a certain ability to make their own law.96 The
terms of the contracts can dictate the parameters upon which the court may limit its
award. With tort, however, the usual tort being negligence, the parties involved don't
have the privilege of making provision ahead of time for the consequences of the act causing loss.97 In contract, this ability to provide for the losses resulting from breac results in a rather more restrictive interpretation of the limits of the losses for whi
remuneration is awarded. The second limb of Hadley's rule is that damages are recoverable if they are within the contemplation of the parties as liable to result from a breach of the relevant kind whe
they made the contract. This appears to deal with both imputed and actual knowledge. The second limb would also appear to exclude, by default, any characteristics which are able to be included in the first limb. Thus, the court in Hadley established the princi
that if the party to a contract is actually given notice of a special circumstance, as (then) instant case, the party who possessed the knowledge prior to the execution of th
contract should have communicated the special circumstances to the party contracting
opposite in order to claim and invoke the sanction of the State with respect to losses 95 Goff, LJ and Jones, G. 1993, The Law of Restitution, 4th edition, London, Sweet and Ma
G. 2000, The Modern Law of Restitution, London, Blackstone press; Ipp 1992, 14-21.
M.B.P. (S.A.) Pty. Ltd. v Gogic [1990-1991] 171 C.L.R. 657. 230 incurred w hich fall into the second limb. This perspective is supported by the comments
by Asquith LJ. in Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. (1949):
[K]nowledge possessed is of two kinds; one imputed, the other actual. Everyone, as a reasonable
person, is taken to k n o w the "ordinary course of things" and consequently what loss is liable to
result from a breach of contract in that ordinary course. This is the subject matter of the "first
rule" in Hadley v Baxendale. B ut to this knowledge, which a...
View Full Document