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Hadley v Baxendale

The plaintiff, who was a mill owner, contracted with the defendant carrier to take a broken mill-shaft to the makers as a pattern for a new one. Owing to the carrier's neglect, there was a delay in the transport of the broken mill-shaft, which resulted in considerable losses for the mill owner because no spare shaft was available. Applying the above two stage test, the court held that in most cases of a breach of this kind, no such losses would have followed (as a spare shaft would be available) so that it could not be said that the losses followed naturally from the breach. Nor were the defendants aware, at the time of the contract, of the circumstances, which meant that the mill would not be able to function at all without this particular shaft and so the loss could not 'reasonably be supposed to have been in the contemplation of both parties'. Therefore the losses were not recoverable.