t are reasonably foreseeable.1 Similarly, the rule regarding damages remoteness in contract law is that a defendants liability is limited to any consequences that flow reasonably from the breach, or are contemplated by the parties.2 Two cases that demonstrate this interconnectedness between the two bodies of law are Overseas Tankship Ltd v Morts Dock & Engineering Co Ltd,3 a tort case that established the tort rule regarding remoteness of damages, and Hadley v Baxendale,4 which is the contract counterpart to Overseas.
Hadley v. Baxendale involved millers whose crank shaft had broken, and they called upon the defendants to deliver a crankshaft to repair. The defendants delayed sending the crankshaft to plaintiffs for seven days, when it was only supposed to take two. The plaintiffs milling operation ceased during the period this seven day period. Therefore, the plaintiffs sued for profits lost during the five extra days that the crankshaft was not delivered. The court ruled that the plaintiffs could not recover such loss, as it could not fairly and reasonably be considered to arise naturally from the breach.5 Hadley established the basic rule for how to determine the scope of consequential damages arising from a breach of contract, and this rule is that parties should only be liable for all losses that ought to have been contemplated by the contracting parties, and those that arise naturally, in the ordinary course, from the breach.
Hadleys basic rule regarding damages was modified to the composite test of 途easonably foreseeable as liable to resultin Victoria Laundry (Windsor) Ltd v Newman Industries Ltd (1949).6 Victoria Laundry regarded a laundry which ordered a boiler from Newman Industries. Newman Industries delivered the boiler five months late. During this period of time, Victoria Laundry had to forego a lucrative contract with the ministry of supply, due to the Victoria Laundrys limited laundry cleaning capacity, which was a result of not having the