remoteness of damage

1. in contract law, the concept that protects the contract-breaker from having to pay for all the consequences of his breach. Since one of the principal aims of the law of contract is certainty, the rules are well settled. The leading case is Hadley v . Bax-endale (1854) 23 LJ Ex 179, in which it is generally accepted that two rules were laid down (although many prefer, with justification, to describe the case as having set out two branches of a single rule). Alderson, B., stated the law as follows: 'where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be, either, such as may fairly and reasonably be considered 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'. Following this case and the fuller restatement in Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd [1949] 1 All ER 997, cases can be split into those where the contract-breaker knew no more than any other person in his position and those where he was possessed of (or could be held to have been possessed of) special knowledge. A recent authoritative restatement is that 'the crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation': Koufos v . Czarnikow Ltd [1967 3 All ER 686. The position is the same in Scotland, although it has been argued that there is an independent line of Scottish authority supporting the same rules. For the USA, see Krauss v . Greenbarg 137 F 2d 569 (3rd Cir. 1943).

2. in tort or delict different rules apply because the obligation is imposed by the law and not by the consent of the parties. English law has settled on a test of reasonable foreseeability: Overseas Tank-ship (UK) Ltd v . Morts Dock & Engineering Co. (known as the Wagon Mound No. 1) [1961] AC 388, rejecting the test of direct and natural consequences laid down in the earlier case in Re Polemis [1921] 3 KB 560. The law of Scotland is not authoritatively settled: McKillen v. Barclay Curle & Co. Ltd 1967 SLT 41.