Remoteness of damage is an interesting principle especially when analyzing two specific cases.

They are apparently allocated in different areas of law, functioning in England and Wales. In
first case claimant is Overseas Tankship !"# $td and %rings a suit against &orts 'ock and
Engineering (o $td.
1
The case lays down principles relating to negligence in law of tort, more
precisely remoteness of damage. )econd case *adley v +a,endale
2
is se-uentially leading case
on remoteness of damage in contract law. This principle links these two cases together and also
demonstrates differences %etween them. .ccording to O,ford dictionary of law
3
remoteness of
damage is /the e,tent to which a defendant is lia%le for the conse-uences of his wrongful act or
omission.0 (ases mentioned a%ove will %e presented in light of this significant principle, which
limit the types of loss that are recovera%le.
1irst of all the facts of the cases are relevant to present principles in area of tort and contract
law. The Wagon &ound 2o 3
1
case is a%out the defendant4s vessel, The Wagon &ound. It
discharged furnace oil into )ydney *ar%our. The wind and tide carried the oil %eneath
(laimant4s wharf where on %y (laimant4s employees welding operations were %eing carried.
(laimant4s employees continued their work after %eing advised that they could safely weld.
.fter a%out 55 to 67 hours the original discharge, molten metal set some waste floating in the
oil on fire. The flames -uickly developed into a large fire which spread rapidly causing
destruction of some %oats and the wharf.
$ia%ility turned on the -uestion of whether the damage was foreseea%le, since furnace oil has
such a high %oiling point it is unlikely to catch fire under normal circumstances. .nswer is no
%ecause the defendant could not foresee that the oil discharged would %e ignited when a piece
of molten metal would fall upon a floating piece of cotton. Therefore it was held that defendant
was not lia%le for the fire %ut lia%le for the fouling. $ia%ility is founded on the conse-uences not
the action involved.
4

The decision in this case was relied on the test which is %ased on re-uirement that the damage
11
Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd, The
Wagon Mound (No 1) [1961] Privy Council 1 All ER 404
22
Hadley v Baxendale 1!4 9 Exc" 341
33
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4
must %e of a foreseea%le type. .ccording to *arpwood
!
in negligence claims claimant has to
esta%lish that the defendant owes them a duty of care and is in %reach of that duty. Then he also
needs to demonstrate that the damage caused was not too remote. Originally a defendant was
lia%le for all losses which were a direct conse-uence of the defendant8s %reach of duty.
*arpwood
6
informs that it is called direct conse-uence test. This pro%lem presents following
case9 Re :olemis ; 1urness Withy ; (ompany ltd
-
. The decision was considered unfair when
defendant could %e lia%le for damage which was not foreseea%le and therefore he<she could not
take steps to prevent it. 1or that reason decision was overruled in the Wagon &ound 2o 3 and
replaced with a new test for deciding if damages are too remote. Interesting how courts
followed the reasona%le foreseea%ility test esta%lished in Wagon &ound 2o 3 case. The test was
considered and applied in *ughes v $ord .dvocate.

(ook
9
declares that =the key to the Wagon
&ound test is what is meant %y a kind of damage.0 The defendant is only lia%le for damage that
is of a kind which is reasona%ly foreseea%le. In *ughes v $ord .dvocate the type of damage
which has to %e foreseea%le type was not too remote. The *ouse of $ords ruled that the plaintiff
was a%le to claim damages for negligence. What was the reason> The $ords viewed the type of
harm as the important factor. It did not matter whether the e,plosion was foreseea%le.
(onse-uently, as *arpwood
10
relates9 in essence, that people might suffer %urns was the issue of
Per .ud/e 0i,coun( 1i2ond, in Overseas Tankship (UK) Ltd v Morts Dock and
Engineering Co Ltd, The Wagon Mound (No 1) [1961] Privy Council 1 All ER 404
!!
Har3*ood 0ivienne, 4odern 5or( )a*, 2003, 3a/e 1!3
66
Har3*ood 0ivienne, 4odern 5or( )a*, 2003, 3a/e 1!2
--
Re Pole2i, 6 7urne,, 8i("y 6 Co23any l(d [1921] 3 9B !60

Hu/"e, v )ord Advoca(e [1963] AC 3-

99
Coo: .o"n, )a* o& 5or(, 200-, 3a/e 1-
foreseea%ility. On the other hand in 'oughty v Turner &anufacturing (ompany
11
the damage
was too remote. It was not foreseea%le that an e,plosion would occur. *arpwood
10
gives
entirely different e,planation of the phenomenon. Whilst it may %e foreseea%le the lid may have
caused a splash resulting in a scold. It was not foreseea%le that an eruption would take place
resulting in %urns. .nother pro%lem is related to confusion as to whether in addition to %eing
damage of a type which is foreseea%le, the damage must occur in a foreseea%le manner. *ughes
v $ord .dvocate case suggests not %ut in Tramain v :ike case
12
circumstances were different. .
herdsman discovered Weil4s disease during his work on the defendant8s farm. The herdsman
sued in negligence. The kind of damage suffered namely infection with a rare disease was seen
as entirely different to what might %e reasona%ly foreseen and that might result from a rat?%ite.
The defendant was not held lia%le %ecause he could not foresee the risk of the initial infection
(ook
13
#. In @e%son v. &inistry of 'efence
14
the (ourt of .ppeal awards damages to a soldier
who, while off duty and drunk, fell from a moving army lorry. *is initial case was dismissed
%ecause his actions were considered not to %e foreseea%le. On appeal his case was upheld, it
was found that he was owed a duty of care, even in his drunken state, and that his actions were
foreseea%le *arpwood
1!
#. The *ouse of $ords in @olley v )utton $ondon +orough (ouncil
16
10 1
Har3*ood 0ivienne, 4odern 5or( )a*, 2003, 3a/e 1!3
11 1
'ou/"(y v 5urner 4anu&ac(urin/ )(d [1964] 1 ;B !1
12 1
5re2ain v Pi:e [1969] 3 All ER 1303
13 1
Coo: .o"n, )a* o& 5or(, 200-, 3a/e 1-
14 1
.e<,on v= 4ini,(ry o& 'e&ence [2000] 1 8)R 20!!
1! 1
Har3*ood 0ivienne, 4odern 5or( )a*, 2003, 3a/e 1!3
16
confirms %oth that a special duty of care is owed to children and that the rules of foreseea%ility
do not re-uire the precise manner of an inAury or its e,tent to %e foreseea%le. The test is9 BWas
the wider risk, which would include within its description the accident which actually
happened, reasona%ly foreseea%le>B
1-

Turning to contract law case? *adley8s
1
(laimant8s# were the owners of a mill where shaft
%roke rendering the mill inopera%le. *adley hired +a,endale defendant# to transport the %roken
mill shaft to engineers of the manufacturer C@oyce ; (ompanyD as a pattern for a new
one. *adley8s servant advised +a,endale8s clerk that the shaft must %e sent immediately and, as
the mill was stopped. +a,endale promised delivery for the ne,t day and was paid E pounds F
shillings. +a,endale did not know that the mill would %e inopera%le until the new shaft arrived.
+a,andale was negligent and failed to perform as promised, causing the mill to remain shut
down for an additional five days. *adley sued for G77 pounds in damages due to lost profits and
wages. +a,endale appealed.
The issue was whether claimant can recover lost profits. The answer is no. If the (laimant had
made it clear that the mill8s operation was dependent upon getting delivery immediately, the
loss of profits would not have %een occurred. (ourt upheld appeal. Indirect and conse-uential
damages are only recovera%le if they are reasona%ly foreseea%le %y %oth of the parties and
arising naturally at the time of the contract. .lthough the fact that the mill was closed was
communicated, it wasn8t made completely clear to the defendant that the mill was closed
%ecause of the %roken shaft and couldn8t re?open again until it was fi,ed. 1or all the defendants
knew, the mill was closed for another reason.
19

. new rule was created in this case. .ccording to O,ford 'ictionary of law
20
under this rule,
the claimant will %e a%le to recover losses arising naturally, according to the usual course of
.olley v 1u((on )ondon Borou/" Council [2000] 3 AER 409
1- 1
Per )ord Ho&&2ann in v 1u((on )ondon Borou/" Council [2000] 3 AER 409
1 1
= Hadley v Baxendale 1!4 9 Exc" 341
19 1
Per Anderlo,n B in Hadley v Baxendale 1!4 9 Exc" 341
20
things. This is the first lim% of a test and second lim% is slightly different. Where the unusual
damage results from special circumstances that may %e reasona%ly supposed to have %een /in
the contemplation of %oth parties0, at the time the contract was made, as a serious possi%ility if
a %reach occurred. 1irst lim% of the test is o%Aective and refers to so?called common damages.
.s a conse-uence of the first lim% of the rule in *adley v +a,endale, the party in %reach is
deemed to e,pect the normal conse-uences of the %reach, whether he actually e,pected them or
not. !nder the second lim% of the rule, the party in %reach can only %e held lia%le for a%normal
conse-uences where he has actual knowledge that the a%normal conse-uences might follow or
where he reasona%ly ought to know that the a%normal conse-uences might follow Taylor
21
#. In
Hictoria $aundry v 2ewman Industries
22
it was held that the ordinary loss of profits fell within
the first lim% and was recovera%le. The e,ceptional profits on government contracts fell within
the second lim% and were not recovera%le as the defendant had no knowledge that the %oiler
was re-uired to fulfil unusually profita%le contracts. $ord .s-uith descri%ed the re-uired degree
of pro%a%ility that the loss would occur as such that Ba reasona%le manB Bcould foreseeB that the
loss was Blikely so to result,B or a Bserious possi%ility,B or Ba real danger,B and the pro%a%ility
was Bon the cardsB
23
. Evolution of test of remoteness in contract law was also noticed in The
*eron
24
case. The plaintiff sued for the difference %etween the amount that would have %een
received if the contract had %een performed and the amount the plaintiff actually got. Issue was
whether the plaintiff shall receive the re-uested damages. *owever the rule was9 If the loss is
foreseea%le, then it may %e compensated. (ourts argued a%out how serious the risk of loss must
appear at the time of contract in order to %e considered foreseea%le.
2!

#2006$ %x&ord 'ic(ionary o& )a*, %x&ord +niver,i(y Pre,,
21 2
5aylor 6 5aylor, Con(rac( )a* 'irec(ion,, 2009, 3a/e 303
22 2
0ic(oria )aundry v >e*2an ?ndu,(rie, [1949] 2 9B !2
23 2
@ie/el .=, 'u//an An("onyA Co22ercial and Con,u2er 5ran,ac(ion,B Ca,e,,
5ex(, and 4a(erial,, 2002, 3a/e 64
24 2
9ou&o, v CCarni:o* #C$ )(d, ("e Heron II #1969$ 1 AC 3!0
2!
(ases presented a%ove are evidences of e,isting differences %etween contract and tort in
remoteness of damage. The most important distinction in my point of view is that a higher
degree of foreseea%ility is re-uired in contract than in tort. In %reach of contract cases the
-uestion was, Iwere the conse-uences of such a kind that a reasona%le man at the time of the
contract %eing made would have contemplated them as %eing su%stantially pro%a%le>8 In tort the
-uestion was, Iwere the conse-uences such that a reasona%le man would foresee them as %eing
pro%a%le> It was suggested that the degree of pro%a%ility in tort was lower than that of contract.
When there is %reach of contract and also the damage is physical, the tort test is applica%le
however the stricter contractual test is applica%le to economic loss.
26
In tort law there is a need
to foresee the type of inAury sustained %y the claimant and not the e,tent and severity of it
*ughes v $ord .dvocateJ @olley v )utton $ondon +orough (ouncil#. (onversely, contract law
does focus upon e,tent and severity Hictoria $aundries case#. .nother, and more comple,
distinction, lies in the BtemporalB re-uirements of each test. 1oreseea%ility in tort law is
important %efore the %reach of duty is committed. 1oreseea%ility in contract law %ecomes
relevant after %reach of contract. In %oth contract and tort there is an o%Aective element in
Audging remoteness. In tort, the standard of foreseea%ility is that of the reasona%le man. In
contract, the imputed contemplation is Audged %y the standard of the reasona%le man.
2-
In %oth
cases, this o%Aective assessment may %e modified %y the particular a%ility of the defendant to
foresee or contemplate the type of loss in the circumstances. In tort, the test takes the reasona%le
man in the circumstances pertaining at the time the tort occurs. In contract, the circumstances
are those within the contemplation of the parties at the time the contract was made.
To conclude the two important cases for remoteness in each %ranch of law are Wagon &ound
2o 3# and *adley v +a,endale for Tort and (ontract respectively. The former case decides that
a defendant will only %e lia%le for damage which is a foreseea%le conse-uence of the %reach of
duty and the latter case decides that a claimant can only recover damages for the conse-uences
of a %reach which were foreseea%le arising naturally# and, more o%viously, for conse-uences
which the defendant knew would occur. To demonstrate the connection %etween tort and
C"e,"ire, 7i&oo( 6 7ur2,(on, )a* o& Con(rac(, 200-, 3a/e -!9
26 2
Per )ord 'ennin/ H= Par,on,#live,(oc:$ l(d= 0 +((ley ?n/"a2 6 Co= )(d= #19-$
2- 2
Harri, '=, Ca23<ell '=, Hal,on R=, Re2edie, in Con(rac( and 5or(, 200!,
3a/e 31!
contract in the area of remoteness of damage I may simply -uote Treitel
2
who says0
'evelopments in England suggest that the tort analogy may have pushed too far, %ut there is no
dou%t of its influence in the development of the foreseea%ility test in contract0.
2 2
D=H 5rei(el, Re2edie, &or <reac" o& Con(rac(E A co23ara(ive Accoun(, 199,
3a/e 1!2E1!3
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