## Facts

- Evra Corporation (then Hyman-Michaels Company), a Chicago scrap-metal dealer, chartered the vessel *Pandora* to ship scrap to Brazil under a contract requiring semi-monthly hire payments in advance.
- The charter allowed the shipowner to cancel if payment was not timely made; payments were to be deposited into the owner’s account at a Geneva bank.
- Evra typically paid by instructing Continental Illinois (its Chicago bank) to send a wire transfer request; Continental transmitted a telex to Swiss Bank in Geneva, which was to credit the owner’s account at the designated bank.
- After charter rates rose sharply, the shipowner had a strong financial incentive to terminate the low-rate charter.
- On April 25, 1973, Evra instructed Continental to make the next hire payment by wire one day before the due date.
- Continental sent the telex, but Swiss Bank did not complete the transfer (apparently due to mishandling or an operational failure), and the funds did not arrive by the due date.
- On April 27, 1973, the shipowner declared the charter canceled for nonpayment; the funds arrived on May 2, but the owner rejected them as untimely.
- A London arbitration upheld the shipowner’s cancellation as valid; Evra incurred higher substitute shipping costs and arbitration-related expenses.
- Evra sued Swiss Bank for negligence, breach of contract, and breach of fiduciary duty, seeking consequential damages tied to the canceled charter and related costs.
- After a bench trial, the district court awarded Evra about $2.1 million in damages; Swiss Bank appealed and Evra cross-appealed.

## Issues

1. Whether a bank that negligently fails to execute a requested wire transfer is liable in tort for purely economic, consequential losses suffered by the customer.
2. Whether consequential damages are recoverable when the bank lacked notice of special circumstances (including contract terms and magnitude of exposure) making such losses foreseeable.

## Decision

- The Seventh Circuit reversed the district court’s consequential-damages award.
- The court held Swiss Bank was not liable for Evra’s claimed lost profits and related consequential economic losses because the bank lacked sufficient notice of the special circumstances that produced those losses.
- The court accepted that the transfer failure was negligent and a factual cause of the cancellation, but limited liability based on foreseeability and economic-loss constraints.
- Any recovery, if available, was limited to direct, relatively minor losses associated with the delayed payment rather than multimillion-dollar downstream commercial losses.

## Legal Principles

- Consequential damages for negligent performance of a service causing purely economic loss are restricted; liability does not extend to extraordinary commercial losses absent adequate foreseeability.
- Foreseeability of consequential damages depends on the defendant’s notice of special circumstances; without knowledge of contract terms and the risk of cancellation, a bank is not charged with anticipating catastrophic downstream losses.
- A Hadley v. Baxendale-type limitation can apply to negligence claims seeking consequential economic damages, requiring notice sufficient to allow the defendant to assess and price the risk.
- Where a sophisticated commercial party can take precautions against payment-delay risks, courts may place the burden of guarding against large downstream losses on that party rather than on a service provider through open-ended tort liability.
- If a party seeks to shift extraordinary payment-delay risk to a bank, the obligation ordinarily must be expressly allocated and compensated through contractual arrangement.

## Conclusion

The Seventh Circuit held that a negligent failure to execute a wire transfer does not, without notice of special circumstances, make a bank liable for a customer’s consequential economic losses arising from downstream contract cancellation and related expenses.


Evra Corp. v. Swiss Bank Corp., 673 F.2d 951 (7th Cir. 1982)