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Is the answer to this hypo correct?

A sends a package to C via the B Shipping Company. B charges $10 for the service and promises that the package “will absolutely, positively get there overnight.” The package does not arrive on time. As a direct result, A loses a contract that would have earned him $10,000 in profits. What can A recover from B? The answer, of course, is $10 (under Hadley).

$10 seems like restitution to me and A is not entitled to restitution here, are they?

Are they not just entitled to expectation damages, which would be close to zero here using the following formula: K price - market price + incidental damages + consequential damages?

Assume that the market price of delivery was $10. Wouldn't A be awarded nominal damages only?

I am wondering if $10 would be the appropriate damages award here however because the breach was material so the nonbreaching party may be entitled to restitution....

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    What is in the contract between A and B? Is there any waiver of liability? Any guarantees, insurance, etc, etc? Without that, it's impossible to answer. Since B is not an official mail carrier (postal service, under the UPU). This question needs more details. Commented 2 days ago
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    All: this is fairly standard hypothetical asking how the common law would apply to the terms described in the question, ignoring potential effects of other non-mentioned elements of a broader contract. It is possible to answer assuming only the stated facts. Unrealistic facts can be part of the hypo. If an answer assesses effects of additional or different terms, they should clarify they are making additional or different assumptions, but should not "criticize a question for containing unrealistic or far-fetched facts." Commented 2 days ago
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    You say the market value of the delivery is $10. But is that the market value of an overnight delivery, or of a 2-day delivery (or whatever the actual time was)? You'd expect them to be different. Commented 2 days ago

4 Answers 4

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This answer accepts the hypothetical and assumes nothing more in the contract than what is stated in the question. Therefore, it ignores the possibility of limitations clauses, liquidated damages, etc. This answer also ignore the effects of any statutory frameworks and is based purely in common law.

Expectation damages are the usual measure of damages for breach of contract — they aim to award value to the plaintiff based on the position the plaintiff would be in had the contract been performed (Bank of America Canada v. Mutual Trust Co., 2002 SCC 43, para. 25).

The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.

Robinson v. Harman (1848), 1 Ex. 850, p. 855; 154 E.R. 363

Under Hadley v. Baxendale (1854), 146 E.R. 145, if the shipper B had special knowledge from which B ought to be able to deduce that there will be special loss to A should the delivery be late, then $10,000 would be included in the expectation damages:

if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, 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 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.

Such a special circumstance arose in Cornwall Gravel Co. Ltd. v. Purolator Courier Ltd. (1978), 83 D.L.R. (3d) 267 (Ont. H. Ct.), affirmed on appeal in 115 D.L.R. (3d) 511 (Ont. C.A.), and affirmed by the Supreme Court of Canada in [1980] 2 S.C.R. 118. As summarized in M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619:

Cornwall Gravel was awarded damages for breach of contract against Purolator owing to the late delivery of a tender prepared by the plaintiff. It was admitted that had the tender been delivered in time, Cornwall Gravel would have been awarded a contract for which it would have realized a profit of $70,000. ... since Purolator knew that it was delivering a tender which had to be delivered by a particular time, it “must have realized that if delivered late the tender would be worthless and a contract could well be lost” (emphasis added). The lost profits on the contract therefore fell within the rule laid out in Hadley v. Baxendale.

If that special knowledge isn't present, expectation damages is likely zero or close to zero.

Nominal damages, however, are always available for breach of contract, even if other measures of damage are zero (Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, paras. 67 (Brown J., for the majority) and 105 (Karakatsanis J., dissenting, but not on this point)).

The circumstance you describe is almost certainly a material breach, so this would alternatively entitle A to rescission. Then, A could get restitution for what would otherwise be unjust enrichment ($10).

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  • Comments have been moved to chat; please do not continue the discussion here. Before posting a comment below this one, please review the purposes of comments. Comments that do not request clarification or suggest improvements usually belong as an answer, on Law Meta, or in Law Chat. Comments continuing discussion may be removed. Commented yesterday
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Postal deliveries don't generally work on claims such as "absolutely, positively get there overnight". Guaranteed delivery promises are normally backed by specific compensation offers.

To pick an example that's local to me, Royal Mail's guaranteed delivery service allows users to purchase insurance for consequential loss due to delay; without such insurance, compensation will not be paid for such losses.

This of course is about terms of contract, not about tort or damages.

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  • Comments have been moved to chat; please do not continue the discussion here. Before posting a comment below this one, please review the purposes of comments. Comments that do not request clarification or suggest improvements usually belong as an answer, on Law Meta, or in Law Chat. Comments continuing discussion may be removed. Commented yesterday
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Postal service ToS are well tested

Let me assume you use a standard delivery company, such as FedEx, DHL, UPS or even USPS. If you send a parcel via one of those postal services/couriers, you agree to about 2 to 4 pages of terms and conditions of carriage. Without dissecting all of those, there are three very relevant ones that appear in almost all of them in some fashion or another:

  • The courier is liable for damages to the contents of the parcel only up to a specified amount, such as 500 USD.
  • The liable damages for late delivery are capped at the delivery fees.
  • The postal service is not liable for your errors.

The second point is what is the nail in your case: Hadley can't be applied, because the sender agreed to the stipulation that late delivery only has at worst the delivery fee. So, by the contract, it is 10 bucks in damages and 0 for consequential damages, in case the delivery is late. No cent more.

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  • Comments have been moved to chat; please do not continue the discussion here. Before posting a comment below this one, please review the purposes of comments. Comments that do not request clarification or suggest improvements usually belong as an answer, on Law Meta, or in Law Chat. Comments continuing discussion may be removed. Commented yesterday
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$10 is a refund, not restitution

B owes A $10 because B didn’t perform the service they were contracted to perform: deliver the package overnight. Of course, this is only true if there has been a total failure of consideration, i.e. where B didn’t deliver the package at all; if they delivered it late, A is entitled to damages, but not a refund.

Time is not usually a fundamental part of a contract, so failing to meet a deadline is not a total failure, just a breach. The parties are free to agree that time is essential and the term of art for this is time is of the essence.

Other answers are overly focusing on the example, not the principle

The principle being that indirect or consequential loss, such as A’s lost contract, are only recoverable under Hadley if it satisfies two limbs:

  1. The loss flowed naturally from the breach, which it did, and
  2. It “could be supposed to have been in the contemplation of both parties, at the time of entering the contract, as the probable result of a breach”, which, on the facts stated, it wasn’t.

Put out of your mind that the example is for a delivery and (unwisely) uses the tagline of a major global logistics company. That brings to mind well drafted and comprehensive contracts limiting liability. But, these are not in the evidence here. Think of it as an agreement between two acquaintances, one of whom owns a truck.

Or, get rid of the delivery entirely - B contracts to fix A’s car’s tail light by tomorrow. It doesn’t happen and A loses a sale to a third party as a result. Or the car gets impounded as unroadworthy. In the first instance B is not liable for the lost sale. But in the second, the impounding of the car was arguably in the contemplation of both parties.

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