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  • Read the given passage very carefully and answer the question. The term ‘remoteness of damages’ refers to the legal test used for deciding which type of loss

Read the given passage very carefully and answer the question.

The term ‘remoteness of damages’ refers to the legal test used for deciding which type of loss caused by the breach of contract may be compensated by an award of damages. It has been distinguished from the term measure of damages or quantification which refers to the method of assessing in money the compensation for a particular consequence or loss which has been held to be not too remote.

The rules on the remoteness of damage in the contract are found in the Court of Exchequer’s judgment in Hadley v Baxendale, as interpreted in later cases. In Hadley v Baxendale, the plaintiff’s mill had come to a standstill due to its crankshaft breakage. The defendant carrier failed to deliver the broken crankshaft to the manufacturer within the specified time. There has been a delay in restarting the mill. The plaintiff sued to recover the profits they would have made if the mill was started without delay. The court rejected the claim on the ground that the mill’s profits must be stopped by an unreasonable delay in the carrier’s delivery of the broken shaft to the third person. That rule, expressly and carefully framed, to be guided to judges in directing juries, was as follows:

Where two parties have entered into a contract which one of them has broken, the damages which the other party should be entitled to receive in respect of such breach of contract should either be deemed to have arisen naturally, fairly, and reasonably, i.e. according to the usual course of things, from such breach of contract itself or as might reasonably have been deemed to have arisen in the contemplation of the contract. Now, in the particular circumstances under which the contract was actually concluded were communicated by the plaintiff to the defendant and thus known to both parties, the damages resulting from such a breach of contract that they would reasonably contemplate would be the amount of injury that would normally result from a breach of the contract, under these special circumstances were wholly unknown to the party breaking the contract, he could, at most, only have had in his contemplation the amount of injury that would generally arise from such a breach of the contract and in the great multitude of cases not affected by any special circumstances.

Question

Praveen (plaintiff) purchased iron in Belgaon from Roshan and sold it to Akhil (defendant), in Kollam at a higher price. A Chennai-based firm, at the instance of the buyers, was to supply the finance for purchasing from Roshan. Though the credit was never opened, and Akhil repudiated the contract. An action is brought by Praveen against Akhil for defaulting and loss of profit. Here-

 

Option: 1

 The sellers were entitled to loss of profit

 


Option: 2

 The sellers were entitled to damages 

 


Option: 3

The sellers were entitled to loss of profit as well as damages for defaulting

 


Option: 4

 The sellers were entitled to loss of profit but not damages for defaulting

 


Answers (1)

best_answer

When there is an absence of specific communication, a particular type of loss will fairly and reasonably be regarded as having been in the contemplation of the parties for the purpose of the general principle if there is a serious possibility or real danger or grave risk or grave danger of its occurrence. A loss may seem to be recoverable where the probability of its occurrence is less than an even chance but is nevertheless not very unusual and easily foreseeable.

In the present case buyers being aware that the sellers could not obtain the goods unless the letter of credit was provided, the sellers were entitled to loss of profit but not any damages as it was a special loss, not within the contemplation of parties.

 

 

Posted by

jitender.kumar

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