Remoteness in contract: Under revision in the House of Lords too?

Hutchison, Andrew

Remoteness in contract: Under revision in the House of Lords too?

Journal Article

2012-06-01

Journal Title

South African Law Journal

Link to Journal

http://juta.co.za/law/products/3601-south-african-law-journal

Publisher

Juta

Publisher

University of Cape Town

Department

Department of Commercial Law

Faculty

Faculty of Law

Abstract

This note discusses a 2008 House of Lords decision on the proper test for remoteness of contractual damages following a breach of contract. In The Achilleas, Lord Hoffmann set out a test for remoteness which varied slightly from the traditional Hadley v Baxendale test of foreseeability entrenched in Common Law countries world-wide. Lord Hoffmann’s test draws on the broader context of an agreement, including whether there was a tacit assumption of risk by one of the parties, as well as standard norms in the industry in question. Although the Court was not unanimous in The Achilleas, this represents a significant departure from settled law. In South Africa, our Supreme Court of Appeal has favoured a ‘contemplation’ (foreseeability) test over a ‘convention’ (assumption of risk) one. In an important decision in 2001, however, this Court gave an obiter indication that it may also in future revise our foreseeability test in favour of a more flexible one, in line with other branches of the law of obligations. Lord Hoffmann’s decision is thus of relevance in demonstrating comparative trends in development of the law of remoteness of damage.