What is the ratio in Hadley v Baxendale?

Damages for breach of contract are only recoverable if they arise naturally from the breach or were reasonably in the contemplation of both parties at the time of contract formation.

What did the court decide in Hadley v Baxendale?

The court held that lost profits were too remote and not recoverable because the defendant was unaware the mill would be inoperative.

Why is Hadley v Baxendale important for contract law?

It established the fundamental test for remoteness of damage that limits liability while ensuring fair compensation, preventing unlimited liability for breach.

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