In a leading English case,80 decided in 1854, an extension of the rule governing consequential damages was stated which has been generally adopted. Under this extension (in the language of the court) " If the special circumstances under which the contract was actually made were communicated by the plaintiff to the defendant 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. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his 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." The same principle has been expressed by Mr. Justice Holmes, as follows: " It is true that as people when contracting contemplate performance, not breach, they commonly say little or nothing as to what shall happen in the latter event, and the common rules have been worked out by common sense, which has established what the parties probably would have said if they had spoken about the matter. But a man never can be absolutely certain of performing any contract when the time of performance arrives, and in many cases he obviously is taking the risk of an event which is wholly or to an appreciable extent beyond his control. The extent of liability in such cases is likely to be within his contemplation, and whether it is or not, should be worked out on terms which it fairly may be presumed he would have assented to if they had been presented to his mind."81 The result of the rule in Hadley v. Baxendale is to increase the possibility of consequential damages since not only is the defendant liable for natural and proximate consequences of the breach; but also, if notice is given of special circumstances, for damages which those circumstances make probable, though apart from such circumstances they would be unusual.
Heisk. 100. Cf. Eten v. Lunyster, 60 N. Y. 252.
78 Ashe v. De Roesett, 5 Jones L. 299,72 Am. Dec. 562. See also McRae v. Hill, 126 111. App. 349. Cf. LiUey v. Doubleday, 7 Q. B. D. 510.
79 Boutin v. Rudd, 82 Fed. 686, 27 C. C. A. 526; Mott v. Chew, 137 Fed. 197.
80 Hadley v. Baxendale, 9 Ex. 341.
If it were true that the extent of the defendant's damages was based on his assumption in the contract of a greater or less degree of risk, it would follow that where consequential damages were in question it might be asked with great force "whether the mere fact of such consequences being communicated to the other party will be sufficient, without going on to show that he was told that he would be answerable for them, and consented to undertake such a liability."82 No doubt notice subsequent to the formation of the contract though prior to the breach is insufficient. A suggestion was indeed made by Baron Bramwell,83 that perhaps notice after the contract was made, and before breach, would be enough. This, however, has been rejected by later cases.84 The result thus reached does not necv. N'ettfeship, LR.3C. P. 499, 608,
81 Globe Refining Co. v. Landa Cotton Ofl Co., 190 U. S. 540, 543, 47 L EA1171, 23 Sup. Ct. 754.
82 Majne on Damages (2d ed.) 10, qwted with approval by Blackburn,
J, in Elbinger Actien-GeseUachafft v.
Armstrong, L. R. 9 Q. B. 473, 478.
So in British Columbia Saw-Mill Co.
Willles, J., said: "Though he knew from cial circumstances is important is because just as a court of equity under circumstances of hardship arising after the formation of a contract may deny specific performance, so a court of law may deny damages for unusual consequences where the defendant was not aware when he entered into the contract how serious damage would flow from its breach.
& stoppers the use they intended to make of the articles, it could not be wotended that the mere fact of knowledge, without more, would be a reason to imposing upon him a greater degree of lability than would otherwise have been cast upon him." And in Globe Refining Co. 9. Landa Cotton Oil Co.,
190 U. S. 540, 545, 47 L. Ed. 1171, 23 Sup. Ct. 754, Holmes, J., said: "It may be said with safety that mere notice to a seller of some interest or probable action of the buyer is not enough necessarily and as a matter of law to charge the seller with special damage on that account if he fails to deliver the goods."
83 Gee v. Lancashire, etc., Ry. Co., 6 H. k N. 211, 218.
84 Smeed v. Foord, 1 E. & E. 602, 606; British Columbia, etc., Co. v. Nettleship, L. R. 3 C. P. 499, 509; Globe Refining Co. v. Landa Cotton Oil Co., 190 U. S. 540, 545, 47 L. Ed. 1171, 23 Sup. Ct. 754; Pusey k Jones Co. v. Combined Locks Paper Co., essarily involve the conclusion that an agreement to pay the higher measure of damages is a prerequisite to their recovery. It seems generally held that notice prior to the formation of the contract is sufficient to charge the defendant with the damages which might naturally be foreseen as a consequence of the breach by one having such notice, without other evidence of a promise to assume liability for unusual consequences.85 If it were necessary to establish a contract by the defendant to assume liability for such consequences, it would also be true that oral notice would not be effectual if the contract were in writing, for the oral notice cannot form part of the contract; yet an oral notice has been held sufficient.86 To assert then, as is sometimes done expressly or impliedly, that the measure of damages for breach of a contract is based on the terms of the contract is to assert a fiction which obscures the truth and invites misapprehension which may lead to error. One who on borrowing money agrees to pay it the following month does not stipulate for the alternative right to keep the money at legal interest until the lender can get judgment and levy execution, though this is the only remedy the law can enforce. Nor can it be supposed that a seller contracts to be liable for the difference between the contract and the market price, or for consequential damages according as he does or does not know certain facts. Parties generally have their minds addressed to the performance of contracts - not to their breach or the consequences which will follow a breach. The fiction here criticised is a manifestation of the broader fiction that parties contract for whatever obligations or consequences the law may impose upon them.87 The true reason why notice to the defendant of the plaintiff's spe-
255 Fed. 700; Dickenon v. Finley, 158 Ala. 149, 48 So. 548; Booth v. Spuyten Duyil, etc., Co., 60 N. Y. 487; McMee-kin v. Southern Ry., 82 S. C. 468, 64 S. E. 413; Missouri, etc., Ry. v. Belcher, 89 Tex. 428, 35 S. W. 6; Bradley v. Chicago, etc., Ry. Co., 94 Wis. 44, 68 N. W. 410. But see Virginia-Carolina Peanut, etc., Co. v. Atlantic Coast Line R. Co., 155 N. C. 148, 71 S. E. 71; Bourland v. Choctaw, etc., Ry. Co., 99 Tex. 407, 90 S. W.
483, 3 L. R. A. (N. S.) 1111, 122 Am. St. Rep. 649. And see cases cited supra, Sec. 1344.
85 See cases cited infra, JSec. 1390, 1393.
86 Hydraulic Engineering Co. v. Mo-Haffie, 4 Q. B. Div. 670; American Bridge Co. v. American Dist. Steam Co., 107 Minn. 140, 119 N. W. 783; Messmore v. New York Ac. Co., 40 N. Y. 422.
87 See supra, Sec. 615.