## Facts

- Mill owners operated a steam-driven mill in Gloucester that could not run after a crank shaft broke.
- A new shaft was to be made by an engineer in Greenwich, but the broken shaft first had to be shipped to serve as a pattern.
- The mill owners contracted with common carriers (Pickford & Co.) to deliver the broken shaft from Gloucester to Greenwich by a specified time, for reward.
- Delivery was delayed several days due to the carriers’ neglect.
- The mill remained shut during the delay, and the owners claimed lost profits as damages.
- The carriers were not told that the mill was stopped or that timely delivery was necessary to resume operations; they were only told they were carrying a broken shaft for millers.

## Issues

1. Whether a shipper may recover lost profits from a mill shutdown caused by delayed delivery when the carrier lacked notice that delay would keep the mill inoperable.
2. Whether such lost profits are too remote because they do not arise in the usual course of things from late delivery and were not within both parties’ contemplation at contracting.

## Decision

- The Court of Exchequer ordered a new trial.
- The court held the mill owners could not recover lost profits on the record because the shutdown losses depended on special circumstances not communicated to the carriers.
- The jury at the new trial was instructed not to include loss of profits when estimating damages.

## Legal Principles

- Contract damages are limited to losses that (1) arise naturally in the usual course of things from the breach, or (2) were reasonably contemplated by both parties at the time of contracting as a probable result of breach.
- Consequential losses arising from special circumstances are recoverable only if those circumstances were communicated to, and thus known by, the breaching party when the contract was made.
- A party seeking recovery for unusual losses bears the burden of giving notice so the other party can price, allocate, or decline the added risk.

## Conclusion

The court limited contract damages for late delivery to foreseeable losses, excluding lost profits tied to undisclosed special circumstances; because the carrier lacked notice that delay would shut the mill, the claimed profits were too remote.


Hadley v. Baxendale, 9 Exch. 341 (Exch. 1854)