CONTRACT LAW ā Damages ā Remoteness and Foreseeability of Unusual Loss
Principle Statement
Damages for breach of contract are such as may fairly and reasonably be considered arising naturally from the breach itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time of contract as the probable result of breach.
Ratio Decidendi (Source)
Per Oguntade, JSC, in G. Chitex Industries Ltd v. Oceanic Bank Int'l (Nig.) Ltd (2005) NLC-1922000(SC) at p. 17; Paras CāD. (Citing P.Z. v. Ogedengbe (1972) 3 SC 98.)
"The law with respect to the measure of damages had not changed ever since the famous dictum of Alderson, B., in Hadley v. Baxendale (1854) 9 Exch. 741 where ā¦ he observed as follows:- 'Where two parties have made a contract which one of them has broken, the damages in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.'"
Explanation / Scope
The Hadley v. Baxendale rule governs remoteness of contract damages. Two limbs: natural arising damages and contemplated special damages. The principle applies to contract law. The rule limits recovery to foreseeable losses. Unusual or extraordinary losses must have been in parties’ contemplation at contract time. Special circumstances must be communicated to be recoverable.
