The Sale of Goods Act (Ont. s. 53; U.K. s. 54) provides:

53. Nothing in this Act shall affect the right of the buyer or the seller to recover interest or special damages in any case where by law interest or special damages may be recoverable, or to recover money paid where the consideration for the payment of it has failed.

Of the so-called two rules in Hadley v. Baxendale, 1854, 9 Exch. 341, 2 Smith L.C., 12th ed. 1915, p. 534, 5 R.C. 502, the first is that "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 . . arising naturally, i.e., according to the usual course of things, from such breach of contract itself." This rule was generally accepted prior to the passing of the Sale of Goods Act, and is expressed in the provision which occurs in various sections already quoted, namely, that the measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of contract. See 82, 83 and 85. The second rule in Hadley v. Baxendale is that the damages should be " 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 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." The words expressing the second rule have been subject to criticism in various cases. The rule was not adopted in the Sale of Goods Act, which leaves at large the right of the buyer or the seller to recover special damages, in any case where by law special damages may be recoverable.

Bostock v. Nicholson [1904] 1 K.B. 725, at pp. 735-6.

Criticism of the second rule in Hadley v. Baxendale is generally directed to the fact that the rule seems to say that the amount of damages depends on the mere knowledge on the part of the defendant of the special circumstances, whereas it would perhaps be more accurate to say that "where the knowledge of the special circumstances forms the basis of the contract, or where from the facts of the case it can be inferred that the parties intended that it should do so, it becomes an implied term of the contract that what may be called the indirect or more remote damages, if any, resulting from such special circumstances, shall be paid for."

See notes to Hadley v. Baxendale in Smith L.C., 12th ed. 1915, pp. 554 ff.; British Columbia, etc., Co. v. Net-tleship, 1868, L.R. 3 C.P. 499; Home v. Midland Ry. Co., 1873, L.R. 8 C.P. 131, 5 R.C. 506.

As to the measure of damages for non-acceptance, see 82. As to the measure of damages for non-delivery of goods where there is no available market, see Elbinger Ac-tien-Gesellschafft v. Armstrong, 1874, L.R. 9 Q.B. 473, 23 R. C. 551; Hydraulic Engineering Co. v. McHaffie, 1878, 4 Q. B.D. 670, 23 R.C. 558; see also 83.

As to damages for breach of warranty, see Smith v. Green, 1875, 1 C.P.D. 92, 23 R.C. 566; Cointat v. Myham, [1913] 2 K.B. 220; Steinacker v. Squire, 1913, 30 O.L.R. 149, 19 D.L.R. 434; Merrill v. Waddell, 1920, 47 O.L.R. 572, 54 D.L.R. 18; see also 85.

In Ontario it is provided by the Judicature Act, R.S.O. 1914, c. 56, as follows:

34. Interest shall be payable in all cases in which it is now payable by law, or in which it has been usual for a jury to allow it.

35 - (1) On the trial of any issue, or on any assessment of damages, upon any debt or sum certain, payable by virtue of a written instrument at a time certain, interest may be allowed from the time when the debt or sum became payable.

(2) If such debt or sum is payable otherwise than by virtue of a written instrument at a time certain, interest may be allowed from the time when a demand of payment was made in writing, informing the debtor that interest would be claimed from the date of the demand.

(3) In actions for the conversion of goods or for trespass de bonis asportatis, the jury may give interest in the nature of damages over and above the value of the goods at the time of the conversion or seizure, and in actions on policies of insurance may give interest over and above the money recoverable thereon.

(4) Unless otherwise ordered by the court, a verdict or judgment shall bear interest from the time of the rendering of the verdict, or of giving the judgment, notwithstanding that the entry of judgment shall have been suspended by any proceeding in the action including an appeal.