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injunction was to make whichever branch of the alternative claim was proceeded with fruitful.
In other words, the fallacy which, it is suggested, lies at the root of the argument urged against Rice v. Reed is that it, without justification, treats election as being always a question of law, whereas in a case where the cause of action is undischarged, or the act not entirely unambiguous, it is really one of fact.
Thirdly. There is another and simpler ground upon which the decision in Rice v. Reed can be justified. It is that where C bribes A's servant, B, to sell to him (C), A's goods at an undervalue (which is what happened in this case), A can recover the amount of the bribe from B in an action for money had and received, and then recover from C, in an independent action, the whole amount of the damage he has sustained, by reason of his having entered into the contract, without deducting from such amount the money recovered from B. (See Salford v. Lever  1 Q. B. 168.)
J. F. W. GALBRAITH.
THE RULE IN HADLEY v. BAXENDALE.
T sometimes happens under exceptional circumstances that the breach of a contract occasions to the party damnified losses connected with the breach in a mode which the most imaginative person could not have anticipated unless his attention had been directed to the peculiarity of circumstance. Against liability for such damage the party in fault is protected by familiar rules. It is proposed in this article to consider how far this immunity extends and in particular how far it may be modified by a disclosure of the exceptional conditions connecting the damages with the breach. How far, in other words, can 4 by informing B of special circumstances connected with a contract between them recover from B, if the latter break it, compensation for damages, the probable occurrence of which without such disclosure B could not have foreseen but with it should not have overlooked?
It is of course assumed that given a knowledge of the special circumstances the damages are connected with the breach proximately enough to create liability consistently with the ordinary standard. As Cockburn C.J. expressed it: You must have something immediately flowing out of the breach of contract complained of, something immediately connected with it and not merely connected with it through a series of causes intervening between the immediate consequence of the breach of contract and the damage or injury complained of1.'
The leading case in point is Hadley v. Baxendale 2, and it will be convenient to set out in full certain portions of the judgment which Alderson B. delivered on behalf of the Court:
'We think,' it runs, the proper rule in such a case as the present is this: When 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 which the contract was naturally made were communicated by the plaintiff to the defendant and thus known to both parties 29 Ex. 341.
'Hobbs v. L. & S. W. R. Co., L. R. 10 Q. B. 111.
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 those 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. For had the special circumstances been known the parties might have specially provided for the breach of contract by special terms as to the damages in that case: and of this advantage it would be very unjust to deprive them.'
Of the rule thus laid down Lord Esher M.R. in Hammond v. Bussey1 said:
'It may be that the rule was not necessary for the purpose of deciding that case, but it is far too late to question it. The rule, though frequently commented upon, has been over and over again adopted by the Court and must now be considered to be the law on the subject.'
It becomes, therefore, necessary to examine the scope and effect of the rules laid down by Alderson B. He was believed to have stated three rules for estimating the damages springing from breach of contract. The learned author of Mayne on Damages 2 summarizes these supposed rules as follows:
1. Damages which may fairly and reasonably be considered as naturally arising from a breach of contract. . . are always recoverable.
2. Damages which would not arise in the usual course of things from a breach of contract but which do arise from circumstances peculiar to the special case are not recoverable unless the special circumstances are known to the person who has broken the contract.
3. Where the special circumstances are known to have been communicated to the person who breaks the contract, and where the damage complained of flows naturally from the breach of contract under those special circumstances, then such special damage must be supposed to have been contemplated by the parties to the contract, and is recoverable.'
A simpler statement of the effect of the judgment might perhaps be made in the following way :—
When two parties make a contract and one of them breaks it, he is liable to pay to the other such damages as may be considered either
(a) to arise naturally, i. e. according to the usual course of things from such breach of contract itself, or
(b) to have been in the contemplation of the parties at the time they made the contract as the probable result of its breach.
The division of damages headed (6) clearly adds something to that headed (a), for circumstances may entitle or oblige the parties to apprehend consequences unnatural without special knowledge, natural with it. To illustrate this possibility the judgment proceeds:―
If the special circumstances under which the contract was actually made were communicated by the plaintiff to the defendant, 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 communicated.'
It is, however, by no means equally clear that the division headed (a) adds anything to that headed (6). If Alderson B. is right in adopting the knowledge of the parties as the criterion, a still further simplification becomes possible. It is no longer necessary to distinguish between damages which flow naturally from the breach and those which the parties contemplate or ought to contemplate as its probable result; the attempt to do so is inept, for persons do or ought to contemplate as the probable result of a breach the damages which naturally flow from it. The practical identity of the rules was recognized by Selden J. in a leading American decision, Griffin v. Colver 1. The learned judge observed :
'The damages must be such as may fairly be supposed to have entered into the contemplation of the parties when they made the contract, that is, must be such as might naturally be expected to follow its violation.'
So in Smith v. Green 2, Grove J. took exception to the expression 'natural' consequences and observed :
'Normal or likely or probable of occurrence in the ordinary course of things would perhaps be the more correct expression.'
That persons may be 'reasonably supposed to have contemplated damages which are 'normal or likely or probable of occurrence' is a proposition which need not be supported at length. Hadley v. Baxendale then lays down one positive rule, and one only. The damages for breach of contract are such damages as a reasonable man sharing the knowledge of both contracting parties would have apprehended at the time the contract was made as likely to spring proximately from its breach. Mr. Mayne hardly appears to do justice to the explicitness of the dictum; thus he speaks of the 'supposed' rules and their 'supposed' effect. The truth is that Hadley v. Baxendale, the general authority of which has been equally 116 N. Y. 489.
21 C. P. D. 92.
recognized in this country and in the United States, clearly though obiter bases the liability to pay damages for breach of contract on the knowledge, actual or constructive, which the party making default had of the probable consequences of his breach. The principle is unreservedly laid down, and it is far too late to question it.'
A man who breaks his contract with his eyes open is liable for the damages which a prudent man with the same information would have foreseen as likely to follow. Thus A breaks his contract with B: normally the damages proximately occasioned would not exceed £100, but in this particular case, owing to special circumstances which have been communicated to A, they will amount to £1,000. Hadley v. Baxendale lays it down that B can recover £1,000 from A. When the circumstances are normal, as in the first case, a prudent man will contemplate and be liable for damages to the amount of £100; when they are peculiar, and he is affected with knowledge of their peculiarity, he will contemplate and be liable for damages to the greater amount. It is interesting to notice that the Code Napoléon lays down rules as the measure of damages which were cited in Hadley v. Baxendale by Parke B.1 and which may have suggested some phrases in the judgment. The material sections in the code are as follow 2:
'Les dommages et intérêts dus aux créanciers sont, en général, de la perte qu'il a faite et du gain dont il a été privé, sauf les exceptions et modifications ci-après.
'Le débiteur n'est tenu que des dommages et intérêts qui ont été prévus ou qu'on a pu prévoir lors du contrat, lorsque ce n'est point par son dol que l'obligation n'est point exécutée.
'Dans les cas même où l'inexécution de la convention résulte du dol du débiteur, les dommages et intérêts ne doivent comprendre à l'égard de la perte éprouvée par le créancier et du gain dont il a été privé, que ce qui est une suite immédiate et directe de l'inexécution de la convention' 3.
The clause dealing with the 'dommages. . . qui ont été prévus ou qu'on a pu prévoir lors du contrat,' and the reservation as to proximity, state exactly the principles on which the English law is believed to proceed.
It is proposed shortly to consider one or two leading English decisions in which the points here discussed have arisen. Attempts have sometimes been made in argument to exhibit what may be called the doctrine of notice' in an extreme and ridiculous form: to meet them it is usually sufficient to repeat that here, as elsewhere, non remota causa spectatur.
1 Ex. at p. 346.