Legal Definitions - Hadley v. Baxendale rule

The Hadley v. Baxendale rule is a principle in contract law that states that consequential damages can only be awarded for breach of contract if it was foreseeable at the time of contracting that this type of damage would result from the breach. This means that if a party breaches a contract, they are only responsible for damages that were foreseeable at the time the contract was made.

For example, if a company hires a delivery service to transport a machine to their factory, and the delivery service fails to deliver the machine on time, the company can only recover damages that were foreseeable at the time of contracting. If the company loses money because they were unable to use the machine, this would be a foreseeable consequence of the breach and they could recover damages for this loss. However, if the company loses a major contract because they were unable to use the machine, this may not be a foreseeable consequence of the breach and they may not be able to recover damages for this loss.

The Hadley v. Baxendale rule is important because it limits the amount of damages that can be recovered for breach of contract. It ensures that parties are only responsible for damages that they could have reasonably foreseen at the time of contracting.