23 K.L.J. 1 (2012)

handle is hein.journals/kingsclj23 and id is 1 raw text is: (2012) 23 KLJ 1-27

The Remoteness Rules in Contract: Holmes,
Hoffmann, and Ships that Pass in the Night
KW Lawson'
. INTRODUCTION
There is now a major debate amongst English lawyers about the nature, purpose and
content of the rules governing the remoteness of damages in contract.
Until recently, many would have considered it to be a rule written in stone and
etched into the mind of every law student that, if A suffered loss as a result of B's breach
of contract, then A would be entitled to recover damages in respect of those losses that
were 'foreseeable' when A and B entered into their agreement.' To be precise, A would
be entitled to compensation in respect of those losses of a kind or type which the parties
would have reasonably contemplated as a 'not unlikely' result of a breach of contract'.
This was thought to be the effect of the famous decision of Alderson B in Hadley v
Baxendale, as later refined by the House of Lords in the'The Heron II'.
Forty years on, the decision in Transfield ShippingInc v Mercator ShippingInc4 (hence-
forth'TheAchilleas') may have unsettled this orthodoxy. Lord Hoffmann appeared to set
out a bold 'new approach' for the limitation of contractual damages by virtue of which
the foreseeability or unforeseeability of A's losses would not necessarily be determinative
of his or her ability recover damages from B. Instead, he suggested that the real question
Student barrister, Lincoln's Inn, London, UK. An earlier version of this paper was submitted as part of my
LLM degree at the Harvard Law School. I am grateful to Professor John Goldberg for his supervision of
that paper and to Messrs Nick McBride and Adam Kramer for their suggestions and comments on earlier
drafts of this article. Any remaining errors and omissions are my own.
'The rules that were identified in Hadley v Baxendale ... are very familiar to every student of contract law.
Most would claim to be able to recite them by heart. Jackson v Royal Bank of Scotland plc [2005] UKHL
3, [2005] 1 WLR 377, [25] (Lord Hope of Craighead); 'Hadley v Baxendale is probably the one case that
every common-law lawyer may be assumed to have read.' Larry Garvin, 'Disproportionality and the Law of
Consequential Damages: Default Theory and Cognitive Reality' (1998) 59 Ohio State Lawn Journal 339, 339.
2  Hadley v Baxendle (1854) 9 Ex 341.
3  C Czarniko  td ' vKoufos ('The Heron II') [ 1969] 1 AC 350 (HL).
4  Transfield Shi ping Inc v Mercator Shipping Inc ('The Achillcas') [2008] UKHL 48, [2009] 1 AC 61.

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