Wed, 9 Feb 2005 13:33:31 -0500
guess I am partial to the Pothier view (as described by Robert)
since I see contract as an agreed upon transfer of one's entitlement
to another. Since it is a consensual two-sided exchange one has
to examine the terms of the agreement made between the parties.
What H v B seems to say is that one is entitled to the
thing promised and the ordinary use of the thing since knowledge
of these are shared between the parties and must form the basis
of the exchange. In my mind, therefore, the rule is not so much
a bargaining over damages but rather over shared use. If you have
a use that is subjective and not shared then it is not really part
of the exchange and therefore not compensable. In order to make
it part of the two-sided exchange, the information of the special
use must be communicated and accepted by the other side. Thus, a
collateral benefit is that the rule encourages disclosure of the
risk of harm but this is not its purpose -- rather its purpose is
to make concrete the two-sided exchange nature of contract.
the ordinary/special aspect and the timing aspect of the contract
remoteness rule are taken into account, I am not sure that there
is much difference between the reasonably foreseeable requirement
of tort and the reasonable contemplation requirement of contract
(despite the views of Lord Reid, who I do not really think understood
the reasonable part of reasonable foreseeability).
HL decision in Jackson
v RBS that Jason mentioned yesterday does not take the
law on remoteness very much further. However, it has made me think
again about remoteness in contract damages.
the tort of negligence, it is possible to justify a rule which
says that only reasonably foreseeable harm is recoverable as required
by the fault principle. The defendant is only at fault in relation
to the loss which was a reasonably foreseeable consequence of
his actions (cf Wagon Mound (No 1)).
a (strict) contractual obligation is breached, requiring the loss
to be within the reasonable contemplation of the defendant as
a serious possibility at the time of contracting, cannot be justified
by appealing to the fault principle. The duty breached is strict.
As between the party in breach of contract and the innocent party
who should bear the unforeseeable loss? Stating that it is 'fair'
that the innocent party does so doesn't provide an explanation.
may be that the remoteness rule in contract serves the useful
aim of encouraging disclosure of the risk of harm ("I should warn
you that I don't have a spare shaft for my mill and you mustn't
be late"). But this cannot be a sufficient justification for the
rule as it applies where the claimant doesn't know of the unusual
loss he might suffer (ie where he has nothing to disclose). Disallowing
the recovery of loss which could not be foreseen by either party
cannot be justified by a policy in favour of disclosure.
could be argued that the remoteness rule encourages people to
contract as they know they are not entering into open-ended obligations
to pay unlimited damages. On the other hand, it could be said
to discourage bargaining as you may be forced to bear a large
loss due to the deliberate breach of the counter-party. There
is no such thing as a free lunch - someone has to bear the loss.
explanation comes from Pothier (whose formulation of the rule
was indirectly the source for the formulation in Hadley v
Baxendale). He said that only losses within the defendant's
reasonable contemplation could be recovered as it was only those
which the defendant could be considered to have consented to be
liable for. However, is it sensible to speak of the defendant
only having accepted the risk of having to pay for foreseeable
damages? The parties bargain for performance, not damages and
it is no longer usual to attempt to justify contractual damages
as being what the parties bargained for (cf Holmes). Does the
fact that I know you might suffer a particular loss as a result
of my breach of contract mean that I am consenting to make good
that loss if I breach the contract?
the justifications for the remoteness rules in contract and the
tort of negligence are different this may help us to explain why
the content of those rules differ and how they inter-relate where
liability is concurrent. Certainly the justification for the rule
in WM (no 1) doesn't seem to apply to Hadley v Baxendale,
I am just not sure what the appropriate justification for H
v B is. Further which justification, if any, tells us the
degree of probability with which the risk of harm must be reasonably
contemplated? Not unlikely? Probable? Serious possibility?
January Term Director
Assistant Professor of Law
Faculty of Law
University of Western Ontario
(519) 661-2111 x. 88435
Previous Message ~ Index ~ Next