## Facts

- Sugar traders chartered the ship *Heron II* to carry about 3,000 tons of sugar from Constanza to Basra under a charterparty dated 15 October 1960.
- A reasonably accurate estimate for the voyage was about 20 days.
- The shipowners deviated from the usual route in breach of contract, causing arrival at Basra nine days late (2 December 1960).
- There was an established sugar market at Basra; the shipowners knew a market existed but did not know the charterers’ specific plan to sell immediately on arrival.
- During the delay, the Basra market price fell; the cargo would have realized £32 10s per ton on timely arrival but realized £31 2s 9d per ton on late arrival.
- The charterers claimed damages equal to the difference between the market price on the due date of arrival and the market price on the actual arrival date.

## Issues

1. Under the remoteness rule in *Hadley v Baxendale*, is loss of market (loss of profit from a price drop during a delay) recoverable for late delivery, or too remote?
2. Is there a special rule for sea carriage delay limiting damages to interest on the cargo value (as suggested by *The Parana*), excluding loss-of-market damages?

## Decision

- The House of Lords dismissed the shipowners’ appeal and upheld the award of damages for loss of market.
- Loss of profit from the fall in the Basra sugar market during the nine-day delay was not too remote.
- The governing standard in contract required that, on the information available when contracting, the relevant kind of loss was “not unlikely” to result from the breach.
- The House declined to treat *The Parana* as creating a special, restrictive rule for delay in sea carriage; ordinary remoteness principles applied.

## Legal Principles

- Contractual remoteness requires more than tort-style “reasonable foreseeability”; the defendant must have had reason to realize the kind of loss was “not unlikely” at the time of contracting.
- *Hadley v Baxendale* is applied by asking whether the loss is sufficiently likely to arise in the usual course of things or otherwise be within the parties’ contemplation on the information then available.
- In carriage to a recognized market, where the carrier knows the market exists and that prices fluctuate, loss from an adverse market movement during delay may be within contemplation even if the carrier did not know of an intended immediate resale.
- No special rule limits delay damages in sea carriage to interest on cargo value where loss of market is within contractual contemplation.

## Conclusion

Because the shipowners knew Basra had a sugar market and that market prices fluctuate, it was “not unlikely” that late arrival would expose the charterers to loss from an adverse price movement, making the loss-of-market damages recoverable under contractual remoteness principles.


C. Czarnikow, Ltd. v. Koufos (Heron II), [1969] A.C. 350 (H.L.)