The concept that an injured party may recover consequential damages only if the breaching party should have foreseen them was established in Hadley v. Baxendale case.
What is Hadley v. Baxendale case?
The famous English case of Hadley & Anor v. Baxendale & Ors concerns contracts. It establishes the fundamental principle for calculating consequential damages resulting from a breach of contract: a party in breach is responsible for all losses that the contractual parties should have anticipated. The party who violated the agreement is solely responsible for the losses he could have predicted based on the information at his disposal, even if the other party has particular knowledge that the party in breach does not. The appeal in this case posed the question of whether a defendant in a breach of contract lawsuit might be held accountable for damages for which the defendant was unaware that the contract would be broken.
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