Hadley v Baxendale [1854] & Laxmi Engineering Work’s vs P.S.G.
Amrit Mohanty
Facts of The Case — Hardley the plaintiff was proprietors of a steam mill in Glousester. One day a crankshaft of steam engine was broken down and as a turn it halted the meal operation and Hardley contacted W. Joyce & Co which was situated in Greenwich. But before delivering the new one W. Joyce & Co required the old broken one so for that Hardley contacted a shipping company Pickford & Co owned by Baxendale, the defendant and got a confirmation order for shipment. On next day Hardley delivered the broken crankshaft to Pickford and did full payment with a condition that it needs to be delivered by next day. Baxendale delayed the shipping for which delivery of new crankshaft also get delayed. During this period mill remain closed which caused a loss to Hardley. Then Hardley sued against Baxendale and jury awarded for loss profit of £25 (present value about £2500). Baxendale appealed that he was not aware about consequence of late delivery.
Judgment by Court — The Court of Exchequer, led by Baron Sir Edward Hall Alderson disallow Hardley to recover the loss due to delay holding Baxendale only held responsible for the losses if it was foreseeable or if Hardley made the exception in advance or at the time of contract.
Principle of Law Dealt — Damages or loss will be rewarded to the plaintiff for breach of contract when it is foreseeable and mentioned at the time of contract that such kinds of damages would occur if such kinds of breach are committed. Two basic rules derived from this case.
è The injured party may recover damages for loss which arises naturally according to the usual course things from such breach of contract itself.
è The injured party may recover damages for loss which arises on account of unnatural circumstances-to recovery what come to known as ‘consequential damages’.
Consequential damages will not be recovered unless it has bought to the knowledge of defendant at the time of contract and need to mention in the contract.
Impact of the case on business world — Here the rule was designed to protect business enterprises for damages during period of contract. Those parties who enter into a contract should have a contemplation of damages so that losses could be recovered. It encourages entering in to a contact without any fear of loss for consequential damages. This rule encourages pre-contract and post-contract, pre-breach precautions by the plaintiff. This rule is not limited in the case where plaintiff is a natural person and defendant is a business entity means it is similar to the contact rule which is applied between two persons. As a result it increases efficiency of business world.
Synopsis Hardley informed Baxendale to deliver crankshaft but Baxendale delayed subsequently Hardley faced a loss and sued and jury awarded him for loss. Then Baxendale appealed and declined by the court suggesting that losses are not foreseeable and Hardley should mentioned special circumstances well in advance at the time of contract formation.
Laxmi Engineering Works vs P.S.G. Industrial Institute (1995)
Facts of The Case — Laxmi Engineering Works a proprietary the appellant, had placed an order of 450 CNC Universal Turing Central Machine with P.S.G. industrial institute, the respondent. The appellant filed a case against respondent that not only it delivered machine late but also supplied a defective one. Appellant filed this case in Maharashtra State Commission with a claiming amount of Rs.4,00,000/. Then MSC had awarded 2.48 Lakh suggesting that it’s consumer since it bought machine from P.S.G Industrial institute. Then respondent made an appeal in National Commission on the act that appellant was not a consumer. Then National Commission set aside the MSC order by saying that appellant should move to a civil court because it has not come under consumer protection act since it involved in the business of manufacturing machine part on a large scale basis and earning profit also it dealt with the machinery whose per piece cost is around 21 Lakh. Then Laxmi Engineering Works made an appeal in Supreme Court then Supreme Court verdicts that if a person buys or uses commercial goods for his livelihood should be treated as a consumer.
Principle of Law Dealt — The principle of judgment suggests that a person if buys and uses commercial goods for his livelihood purpose then he must be a consumer under consumer protection act. By following this Apex court again made a verdict that if a person working on a type writer or driving a taxi or truck to earn for his livelihood then he/she must comes under CPA. In lieu to the value of good, it is held by the apex court that it is not the value of good that matters but for the purpose to which goods bought matters a lot. Basically this case enlarges the scope of Consumer Protection Act
Impact of the case on business world — This law was designed to mitigate the issue persist for a self employed person who purchases and uses commercial goods for survival of his livelihood. It encouraged people to become self sufficient and It has an enhancement impact on start up. It helps to reduce unemployment rate. It facilitates the production and distribution pattern for consumers. It encourages high level of ethics conduct to those who involved in the practice of production and distribution of goods. It facilitates for the development of independent consumer groups. It enhances market condition to provide consumer a greater choice with lower price.
Special Focus — If a person buys goods uses it for its self employment then he/she will come under CPA. But if the same is used for others then the person would not be treated as a consumer.
Synopsis — Laxmi Engg Works orders CNC Machine from P.S.G. industrial institute but it founds defective then appellant made an appeal in MSC and awarded 2.48 Lakh then matter goes to NSC and it suggests moving to civil court as it is not coming under CPA. Then appellant made a case in Supreme Court and it verdicts that person buys or uses commercial goods for his livelihood should be treated as a consumer.
