If the damage resulting from a breach of contract is greater or different from that which it would have been under normal circumstances, actual knowledge of the defendant, if invoked, must exist before or at the time of the conclusion of the contract. However, it is not necessary for the parties to have examined the amount of damage, provided that it falls within the type of damage envisaged. In the past, it was decided that mere knowledge was not enough; The defendant must be informed that he accepts the contract with full knowledge of the facts. The rules relating to the elimination of damages in the contract are contained in the judgment of the Court of the Exchequer in Hadley v. Baxendale[2], as interpreted in later cases. In Hadley v. Baxendale, the applicant`s plant had stopped due to a broken crankshaft. The defendant freight forwarder did not deliver the broken crankshaft to the manufacturer within the time limit. There has been a delay in the recommissioning of the plant. The plaintiff brought an action to recover the profits he would have made if the plant had been commissioned immediately. The court dismissed the action on the grounds that the factory`s profit should be interrupted by an unreasonable delay in the delivery of the broken tree to the third party by the carrier. The parties may expressly provide in their contract for the assessment of damages. If this is not the case, the test is applied by law in the form of revocation regulations, which indicate the extent of the liability that the promisor implicitly assumes.
It should be noted that there is a two-way allocation of risk, with the promisor implicitly assuming responsibility for the usual consequences of breaking a promise and the promisor implicitly accepting the risk of other consequences. For example, if the promisor is protected by the term excluded liability for damages, the promisor accepts the risk of such damages and promises not to hold the promisor liable for the consequences covered by the exclusion or limitation clause. The Promise expressly undertakes not to hold the Promisor liable for any unusual consequences, and the Promisor is liable for an unusual type of loss if advised of the risk and expressly or implicitly accepts responsibility for it. Plaintiff A purchased steel in Belgium from “B” and sold it to “C”, the defendant, in London at a higher price. A U.S. company was supposed to finance the purchase of “B” at the instigation of the buyers. The loan was never opened and “C” terminated the contract. In an action brought by “A” against “C” for breach of contract and loss of profits, it was decided that, knowing that sellers could only receive the goods without presenting the letter of credit, buyers were entitled to the loss of profits they would have realized by selling to buyers. This is foreseeable and reasonable damage at the time of conclusion of the contract and can therefore be recovered.
However, the damages paid by “A” to “B” constitute a particular loss that is not taken into account, since the buyer has no reason to believe that seller “B” has a claim against “A” in a growing market. Where two parties have entered into a contract which one of them has breached, the damages to which the other party should be entitled for such a breach should be deemed to have arisen either naturally, fairly and reasonably, that is, in the ordinary course of events, resulting from that breach itself or which could reasonably be assumed to have arisen during the examination of the contract. In the particular circumstances in which the contract was actually concluded, notified by the plaintiff to the defendant and thus known to both parties, the damage resulting from such a breach of contract, which they would reasonably consider, would be the amount of damage that would normally result from a breach of contract. In those particular circumstances, which were totally unknown to the infringer, he could, at most, have examined the amount of damage that would generally result from such a breach and the large number of cases which are not affected by any particular circumstance. “A”, a longshoreman, undertakes with “B”, the owner, to unload the cargo from his vessel and “B” undertakes to provide all necessary and appropriate chains reasonably suitable for this purpose. A chain provided by “B” is defective and breaks during use, injuring “Z”, a worker of “A”. “Z” sues “A” under the English Employer`s Liability Act, and “A” settles the claim by paying “Z” compensation, which is found to be reasonable. “B” is obliged to indemnify “A” for damages paid by “A” to “Z” as damages, which of course result from B`s breach of its warranty. “A” could rely on B`s guarantee over “B”, although this confidence was not an excuse for “A” over “Z”. This general principle imposes on the applicant a higher degree of consideration of the likelihood of special harm than the corresponding general principle of tort or quasi-delict. Reasonable foreseeability is a criterion of distance in tort law, in the case of a contract, a much higher degree of foreseeability is required, i.e. a serious or actual possibility that the damage will occur.
As a result, the damages in the contract are more limited than in the tort. In H Parsons Ltd v. Uttley Ingham and Co. Ltd,[3] the defendant did not consider that the feed supplied to the plaintiff should be properly ventilated, after which several of the plaintiff`s pigs died. The above-mentioned criterion of damages in the contract was considered to have been met, since the defendant could have considered a serious possibility that the pigs would fall ill. The term “removal of damage” refers to the legal review at the end of which it is decided what type of damage caused by the breach can be remedied by the award of damages. A distinction was made with the notion of measurement of damage or quantification, which referred to the method of valuing cash compensation for a particular consequence or loss that was not considered too remote. Well, the starting point for any damage elimination rule is the well-known idea that a line has to be drawn somewhere. It would be unacceptable for each offender to be responsible for all the consequences he or she has caused. The mere fact that the plaintiff concluded the contract with a third party relating to the subject matter of the contract, since the contract has been breached, does not affect recoverable damage, unless that contract was a matter for the party who committed the breach. This principle is based on the valid justification that it does not matter what the buyer intends to do with the purchased goods.
Therefore, a seller of defective goods cannot rely on the buyer`s resale contract to prove that the buyer resold the goods at a price higher than their market value. The word contemplation is considered more precise to describe the state of mind required for the functioning of the second branch of the rule, than foresight or reasonable foresight. With respect to consideration, the plaintiff does not need to prove that the parties have examined the breach or that a person reasonable in the defendant`s situation would have concluded, having regard to the issue, that the type of damage given was likely to occur. If a seller knows that he is not the owner of immovable property, he is liable for special damages suffered by the buyer as a result of the buyer`s non-performance. It is essential that the chain`s contracts be concluded on substantially similar terms if a recoverable amount for breach of the last contract is to be the measure of compensation for a similar breach upstream of the chain. The question arises as to how much variation in terms is sufficient to break the chain. The chain may also be interrupted if the buyer becomes aware of the material defect before reselling it to a third party. In Arun Mills Ltd v. Dhanrajmal Gobindram[1], it was established with respect to the removal of damage and, until recently, it was fair to say that, subject to the decision in The Parana, the Damage Removal Act was codified in a contract by the Hadley/Baxendale decision. In order to determine whether the damages claimed are too remote, it is examined whether the damage is such that it must have been taken into account by the parties as a possible consequence of the infringement. If this is the case, it cannot be considered too far away.