Legal Systems in Business

HADLEY V BAXENDALE

Hadley v Baxendale, Rule in Definition: A rule of contract law which limits the defendant defendant of a breach of contract case to damages which can reasonably be anticipated to flow from the breach. In Hadley , there had been a delay in a carriage (transportation) contract. The mill owner sued for damages but the defendant was held not liable for profits lost due to his failure to deliver a mill shaft promptly. The court found that he could not be taken to have known of the special  circumstance that circumstance  that until the shaft was delivered, the mill could not operate:

"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 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. "Now, if the special

circumstances  under circumstances under

which

the

contract

was

actually

made

were

communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. communicated. "But, on the other hand, if those special circumstances were circumstances  were wholly unknown to the party  breaking the contract, he, at the most, could only be supposed to have had in his contemplation contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract."

SUPERVENING IMPOSSIBILITY

Supervening impossibility is the impossibility arising after the formation of a contract. However, this arises at the time when the promisor's performance is due. Such impossibility usually arises due to facts that the promisor had no reason to anticipate and did not contribute to the occurrence of. If contracting parties were allowed to plead supervening impossibility, it would make the whole basis of contract insecure. Therefore, the risk involved in supervening impossibility could be deliberately excluded by stipulations in the contract.

DOCTRINE OF CAVEAT EMPTOR :-

It means that buyer should be very careful in a contract of sale. While purchasing the goods the buyer should check the goods carefully. If a buyer purchases the goods and after it he comes to know that these are defective. In this case seller will not be responsible for this defect. The object of this principle is to make the buyer more careful in purchasing. It is his duty that he should check the quality and fitness of the commodity which he needs.  This law is framed to save the buyer from the expected loss in future. Example :- Mr. Krishna went to market and purchased a bike to take a part in Bike race competition. But he did not tell the seller that for which purpose he is buying. When he reached home, he came to know that this bike is not suitable for bike race competition. Due to the principal of Caveat Emptor Mr. Krishna can neither reject the bike nor can claim for compensation. 1. Practical Purpose Known To Seller :If the buyer informs and explains to the seller that the required goods are needed for such particular purpose. He relies on the seller's skill and his judgement. In this situation seller is responsible to supply the goods, fit for that particular purpose. 2. Purchase By Description :If a buyer enters into sale contract by description with the seller, it is an implied condition that good will be supplied according the same quality. Example :- Mr. Ghumun sells the butter to Mr. Rakha saying that it is a pure butter and there is no any mixing in it. When Mr. Rakha uses it, he comes to know that there is adulteration in it. Now Mr. Ghumun will be held responsible.

In this case two conditions are compulsory, "Purchase by description and seller deal in good as of that description." 3. Misrepresentation By Seller : The seller will be liable for compensation if he sells goods to buyer by making misrepresentation. 4. Concealment By Seller :If a seller does not disclose the defects of the goods to the buyer which could not be discovered after a proper examination this principal does not apply. 5. Bulk According to Sample : The principal of Caveat Emptor does not apply the bulk of the goods does not correspond with the sample. 6. Merchantable Quality :Where goods are purchased by description from the seller who deals such goods are not of  merchantable quality the principal does not apply. 7. Sample and Description : The buyer is entitled to reject the goods if the goods are bought by sample as well as description and the bulk does not correspond with both.