Rule in actions of contract.

diminution of his future enjoyment of life can, of course, never be made up to him by money; but the injury may even make it utterly impossible for him to continue his profession. Yet the jury could not in such a case award a successful surgeon such a sum as would purchase an annuity equal to his earnings.

In the case of contract the measure of damages is much more strictly confined than in cases of tort. As a general rule, the primary and immediate result of the breach of contract can alone be looked to. Hence, in the case of non-payment of money, no matter what the amount of inconvenience sustained by the plaintiff, the measure of damages is the interest of the money only (s). So where the contract is to deliver goods, replace stock, or convey an estate, the profit which the plaintiff might have made by the resale of the matter in question cannot in general be taken into account; nor the loss which he has suffered from the fact of his ulterior arrangements, made in expectation of the fulfilment of the bargain, being frustrated (t). The principle of all these cases seems to be, that, in matters of contract, the damages to which a party is liable for its breach ought to be in proportion to the benefit he is to receive from its performance. Now this benefit, the consideration for his promise, is always measured by the primary and intrinsic worth of the thing to be given for it, not by the ultimate profit which the party receiving it hopes to make when he has got it. A bottle of laudanum may save a man his life, or a seat in a railway carriage may enable him to make his fortune; but neither is paid for on this footing. The price is based on the market value of the thing sold. It operates as a liquidated estimate of the worth of the contract to both parties. It is obviously unfair, then, that either party should be paid for carrying out his bargain on one estimate of its value, and forced to pay for failing in it on quite a different estimate. This would be making him an insurer of the other party's profits, without any premium for undertaking the risk.

The law on the subject of damages where there has been

(8) Per Willes, J., Fletcher v. Tayleur, 17 C. B .p. 29; [Per Bovill, C. J., British Columbia Saw Mill Co. v. Nettleship, L. R. 3 C. P. at p. 506; 37 L. J. C. P. at p. 240. See also Duckworth v. Ewart, 2 H. & C. 129; 33 L. J. Ex. 24; and Prehn v. Royal Bank of Liverpool, post, p. 20.]

a breach of contract, has been much considered lately, and laid down with great fulness by the Court of Exchequer. The case arose out of the following facts:

The plaintiffs were owners of a steam-mill. The shaft was broken, and they gave it to the defendant, a carrier, to bring to an engineer, to serve as a model for a new one. On making the contract, the defendant's clerk was informed that the mill was stopped, and that the shaft must be sent immediately. He delayed its delivery, the shaft was kept back in consequence; and in an action for breach of contract they claimed as specific damages the loss of profits while the mill was kept idle. It was held that if the carrier had been made aware that a loss of profits would result from delay on his part, he would have been answerable. But as it did not appear he knew that the want of the shaft was the only thing which was keeping the mill idle, he could not be made. responsible to such an extent (t). The Court said, "We think the proper rule in such a case as the present 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. Now if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendant, and thus 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 follow from a breach of contract under these special circumstances so known and communicated. But on the other hand, if these special circumstances were 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

(t) Hadley v. Baxendale, 9 Exch. 341, 354; 23 L. J. Ex. 179, 182.

Hadley

V.

Baxendale.

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 above principles are those by which we think the jury ought to be guided in estimating the damages arising out of any breach of contract."

The principles laid down in the above judgment, that a party can only be held responsible for such consequences as may be reasonably supposed to have been in the contemplation of both parties at the time of making the contract, and that no consequence, which is not the necessary result of a breach, can be supposed to have been so contemplated, unless it was communicated to the other party, are of course clearly just. But it may be asked with great deference, whether the mere fact of such consequences being communicated to the other party will be sufficient, without going on to show that he was told that he would be held answerable for them, and consented to undertake such a liability? In all probability, if the carrier had been told that any delay in delivering the shaft would make him liable to pay the whole profits of the mill, he would have required an additional rate of recompense before facing such a responsibility. The question comes to this. The law says that every one who breaks a contract shall pay for its natural consequences, and in most cases states what those consequences are. Can the other party by merely acquainting him with a number of further consequences, which the law would not have implied, enlarge his responsibility to the full extent of all those consequences, without any contract to that effect? No doubt it may be said that it was in the power of the defendant to have expressly refused such responsibility. True. But ought not the onus of making a contract rather to lie on the party who seeks to extend the liability of another, than upon him who merely seeks to restrain his own within its original limits? (u).

The rule laid down in Hadley v. Baxendale was acted upon in a very recent case (x). The defendant had con

[(u) See in confirmation of this view, British Columbia Saw Mill Co. v. Nettleship, per Willes, J., post, p. 18.]

(x) Fletcher v. Tayleur, 17 C. B. 21, 25 L. J. C. P. 65.

tracted to build a ship, which was to be delivered to the plaintiff on the 1st of August, 1854. It was not delivered till March, 1855. The vessel was intended by the plaintiffs, -and from the nature of her fittings the defendants must have known the fact,-for a passenger ship in the Australian trade. Evidence was given that freights to Australia were very high in July, August, and September, but fell in October, and continued low till May, when the vessel sailed; and that had she been delivered on the day named, she could have earned 27501. more than she did. On the other hand it was shown, that the plaintiffs would have extended the time for delivery till the 1st October, if the defendants would have bound themselves to that day under a demurrage (which however was refused); and that they had stated as their reason for wishing to have the ship then, "that after that time the days would be shortening so fast, that they would be seriously inconvenienced and prejudiced in fitting the vessel out." The judge charged in the words of Hadley v. Baxendale, and the jury found a verdict of 27501. An attempt was made to set aside the verdict for excess of damages, on the ground that if the plaintiff's offer had been complied with, the loss of freight would have been suffered; and that the damages should be measured rather by the species of loss which they had themselves pointed out, than by that which they afterwards set up. The rule was refused.

This case clearly does not go as far as Hadley v. Baxendale. The primary object of the ship was to earn freight by carrying passengers. The defendant was to be paid the value of such a ship. Any delay in its completion would clearly subject it to a diminution in value by a fall in freight. The measure of that diminution in value was accurately expressed by the difference in profits obtained on the first voyage. But suppose the plaintiff had told the defendant that he intended to send. out his own goods in it to the Australian market, and that, in consequence of the delay, the goods had sold under prime cost, could the defendant have been charged with a loss which arose, not from any depreciation in the value of the ship, for which he had contracted, but in the value of goods, with which he had no connection ?

It may be observed also that Fletcher v. Tayleur is by no

New rule of damages suggested by

Court of C. B.

means a decision in affirmance of Hadley v. Baxendale. The principles laid down in the Exchequer were not even discussed in the C. B., cn the express ground that the ruling of the learned judge had been acquiesced in on both sides at the trial.

The same case was remarkable for the suggestion of a new principle in the assessment of damages thrown out by Jervis, C. J., and Willes, J. The latter said, "It certainly is very desirable that these matters should be based upon certain and intelligible principles, and that the measure of damages for the breach of a contract for the delivery of a chattel should be governed by a similar rule to that which prevails in the case of a breach of a contract for the payment of money. No matter what the amount of inconvenience sustained by the plaintiff, in the case of non-payment of money, the measure of damages is the interest of the money only; it might be a convenient rule if, as suggested by my lord, the measure of damages in such a case as this was held, by analogy, to be the average profit made by the use of such a chattel” (y). Such a rule as this would plainly have the same effect of excluding all uncertain ulterior profits as that contended for above. It would, however, still leave the same question open as that in Hadley v. Baxendale. Where the chattel was itself only part of something else which was rendered useless for want of it, should the profit of the entire chattel be recovered? If a vessel were delayed in port for want of a bowsprit, should a loss of freight, to the amount, perhaps, of thousands of pounds, be obtained in damages? It would, of course, in such a case be essential to show that no other could have been obtained elsewhere. But it may be a further question, whether a person who is under no obligation to enter into a contract entailing so great a responsibility, should be answerable to such an extent, without consideration, unless upon a clear understanding to that effect.

(y) 17 C. B. 29. See 25 L. J. C. P. 66. [In Ex parte Cambrian Steam Packet Co., L. R. 4 Ch. at p. 117, Lord Cairns, C., said that he had proceeded on the principle that if a profit would arise from a chattel, and it is left with a tradesman to repair, and detained by him beyond the stipulated time, the measure of damages is prima facie the sum which would have been earned in the ordinary course of employment of the chattel in the time. So in the Court below, Giffard, V. C., L. R. 6 Eq. at p. 408; 37 L. J. Ch. at p. 690.]