Lloyd's Maritime and Commercial Law Quarterly
Contractual remoteness, “scope of duty” and intention
Mark Stiggelbout *
In The Achilleas a number of House of Lords judges boldly reanalysed the rules of contractual remoteness deriving from Hadley v Baxendale. In declaring that these are not external, default rules of law, but mere proxies for the implicit allocation of risks by contracting parties, a foundational rule of contract law has been disturbed. This article criticises the development as misguided. In addition to finding little grounding in the leading cases, the idea is not supported—despite Lord Hoffmann’s suggestions to the contrary—by the ideas underlying the “scope of duty” concept in SAAMCO. Furthermore, the attempt to base contractual remoteness in the parties’ intentions is theoretically dubious, practically unworkable and potentially conducive to injustice.
I. INTRODUCTION
In The Achilleas
1 the House of Lords, spurred on by a recent flurry of academic discourse2 and without the encouragement of counsel,3 resolved to reappraise the foundational authorities on contractual remoteness. In lieu of any formulaic recitation of the time-honoured “limbs” of Hadley v Baxendale,4 three members of the House of Lords delivered speeches which characterised the seminal contract rules as deriving from the implicit risk allocation of the parties, objectively ascertained. Therefore, in addition to the distinction that contractual remoteness rules apply at the date of contracting, rather than breach, this suggests that foreseeability—the very touchstone of remoteness in tort—is not determinative in contract. Contractual remoteness, unlike remoteness in tort, is a matter of implicit intention and not dictated by external, default rules of law.
Whereas this approach may be superficially attractive in explaining the differing bases of tortious and contractual remoteness, it presents numerous difficulties for the latter. First, it appears to be inconsistent with the distinction that emerged as the contractual rules developed, namely that losses would generally be recoverable in contract if foreseeable as
* Barrister. I am grateful to Andrew Burrows and the anonymous referee, who both provided helpful comments on earlier drafts. All errors and opinions are my own.
1. Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2008] UKHL 48; [2009] 1 AC 61; [2008] Bus LR 1395; [2008] 2 Lloyd’s Rep 275.
2. A Kramer, “An Agreement-Centred Approach to Remoteness and Contract Damages”, in N Cohen and E McKendrick (eds), Comparative Remedies for Breach of Contract (Hart, Oxford, 2005); A Tettenborn, “Hadley v Baxendale Foreseeability: a Principle Beyond its Sell-by Date” (2007) 23 JCL 120; A Robertson, “The Basis of the Remoteness Rule in Contract” (2008) 28 LS 172.
3. The Achilleas [2009] 1 AC 61, [93] (“despite the excellence of counsels’ arguments it was not explored before us”) (Baroness Hale of Richmond).
4. Hadley v Baxendale (1854) 9 Ex 341.
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