Section 9 Damages Within the Contemplation of the Parties

• Library: Damages 2012

The party that is wronged may recover lost profits even if those profits are not the natural and probable consequence of the breach if the loss was reasonably within the contemplation of the parties at the time of the contracting. Brion v. Vigilant Ins. Co., 651 S.W.2d 183, 184–85 (Mo. App. E.D. 1983); Restatement (Second) of Contracts § 347 (1981).

This rule was also set down long ago in Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854), discussed in §14.8 above. The purpose of the rule, like the natural consequence rule, is to limit the extent of the damages to those that are foreseeable, i.e., those that the parties knew or should have known. But the test of foreseeability of the damages that were within the contemplation of the parties is a question of fact, not a question of law. The issue is whether the parties either actually foresaw that the damage would result from the breach or reasonably should have understood that the damage would flow from the breach.

Sometimes, the courts refer to damages that are not “natural consequence” damages as “special damages.” That was the term used in the old but often-cited case of Morrow v. Missouri Pac.
Ry. Co., 123 S.W. 1034 (Mo. App. S.D. 1909). Because under the contemplation rule the question is whether the parties knew of additional facts beyond those normally associated with contracts of that type, the question is whether the parties knew of the “special” circumstances involved.

It is important to note that actual notice of the special circumstances is sufficient evidence, but it is not required. If
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