Significance
Lon L. Fuller and WR Perdue evaluated the idea of reducing contractual remoteness to a foreseeability triumph in this way:
"In its second aspect Hadley v Baxendale may be regarded as giving a grossly simplified answer to the question which its first aspect presents. To the question, how far shall we go in charging to the defaulting promisor the consequences of his breach, it answers with what purports to be a single test, that of foreseeability. The simplicity and comprehensiveness of this test are largely a matter of illusion. In the first place, it is openly branded as inappropriate in certain situations where the line is drawn much more closely in favor of the defaulting promisor than the test of foreseeability as normally understood would draw it.' There are, therefore, exceptions to the test, to say nothing of authorities which reject it altogether as too burdensome to the defaulter. In the second place, it is clear that the test of foreseeability is less a definite test itself than a cover for a developing set of tests. As in the case of all "reasonable man" standards there is an element of circularity about the test of foreseeability. "For what items of damage should the court hold the defaulting promisor? Those which he should as a reasonable man have foreseen. But what should he have foreseen as a reasonable man? Those items of damage for which the court feels he ought to pay." The test of foreseeability is therefore subject to manipulation by the simple device of defining the characteristics of the hypothetical man who is doing the foreseeing. By a gradual process of judicial inclusion and exclusion this "man" acquires a complex personality; we begin to know just what "he" can "foresee" in this and that situation, and we end, not with one test but with a whole set of tests. This has obviously happened in the law of negligence, and it is happening, although less obviously, to the reasonable man postulated by Hadley v. Baxendale."
As early as 1894, the U.S. Supreme Court recognized the influence of Hadley upon American law:
| “ | In Hadley v. Baxendale (1854) 9 Exch. 345, ever since considered a leading case on both sides of the Atlantic, and approved and followed by this court in Telegraph Co. v. Hall, above cited, and in Howard v. Manufacturing Co., 139 U.S. 199, 206, 207 S., 11 Sup. Ct. 500; Baron Alderson laid down . . . the principles by which the jury ought to be guided in estimating the damages arising out of any breach of contract | ” |
In Satef-Huttenes Albertus SpA v Paloma Tercera Shipping Co SA (The Pegase) 1 Lloyd’s Rep 175, Robert Goff J stated,
"Although the principle stated in Hadley v Baxendale remains the fons et origo of the modern law, the principle itself has been analysed and developed, and its application broadened, in the 20th century... The general result of the two cases is that the principle in Hadley v Baxendale is now no longer stated in terms of two rules, but rather in terms of a single principle—though it is recognised that the application of the principle may depend on the degree of relevant knowledge held by the defendant at the time of the contract in the particular case. This approach accords very much to what actually happens in practice; the courts have not been over-ready to pigeon-hole the cases under one or other of the so-called rules in Hadley v Baxendale, but rather to decide each case on the basis of the relevant knowledge of the defendant."
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