remoteness of damage

In contract, s.73 of the Indian Contract Act, 1872 allows compensation for loss which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from it. It excludes remote and indirect loss. This adopts the two limbs of Hadley v. Baxendale (1854): ordinary loss, and special loss within the parties' contemplation because of communicated circumstances.

In tort the test is different. English law moved from the direct-consequence test of Re Polemis (1921) to the reasonable-foreseeability test of The Wagon Mound (1961): the defendant is liable only for damage of a kind that was reasonably foreseeable. Indian courts generally follow the foreseeability approach. Remoteness is a separate question from causation: a loss may be caused by the breach and still be too remote.

Example

The mill's lost profits were too remote under s.73, since the carrier was not told the mill had no spare shaft.

In Indian law

• Section 73, Indian Contract Act, 1872
• Hadley v. Baxendale (English, Court of Exchequer, 1854)
• Overseas Tankship v. Morts Dock (The Wagon Mound) (Privy Council, 1961)

See also

damages · breach of contract · causa proxima non remota spectatur · novus actus interveniens

Read more in the study notes

• Remedies and remoteness of damage (Law of Torts)
• Damages and remoteness (Contract I)
• Bentham on pleasures and pains: value, kinds and circumstances affecting sensibility (Interpretation of Statutes and Principles of Legislation)
• Liability: theory, conditions, the wrongful act, damnum sine injuria and causation (Jurisprudence)
• Negligence (Law of Torts)
• Duty, obligation and liability, and the sources from which they arise (Legal Concepts)