Lord Hoffmann and Remoteness in Contract
In PS Davies & J Pila (eds), The Jurisprudence of Lord Hoffmann (Oxford, Hart Publishing, 2015)
17 Pages Posted: 4 Sep 2014 Last revised: 18 Feb 2015
Date Written: June 1, 2014
This chapter focuses on Lord Hoffmann’s controversial speech in The Achilleas. It argues that the decision in that case was wrong and that some of the reasoning of Lord Hoffmann may have been flawed. Nevertheless it recognises that the speech has had the important beneficial effect of clarifying that the reasonable contemplation test of Hadley v Baxendale, as refined in subsequent cases, is not the sole test of remoteness in contract. Rather it must be qualified. The correct approach, which is external and policy-based not agreement-centred, is one which seeks to achieve a fair and reasonable allocation of risk. Various factors can be spelt out as relevant in deciding on that fair and reasonable risk allocation. Apart from reasonable contemplation, these include whether the whole purpose of the duty broken was to guard against the risk that has eventuated (which goes to the so-called ‘inclusionary’ effect of Lord Hoffmann’s ‘assumption of responsibility’ reasoning) or whether the loss was exceptional and disproportionate to the price (which goes to the so-called ‘exclusionary’ effect of that reasoning).
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