10.3.12.2 Notes - The Heron II (Kaufos v. C. Czarnikow, Ltd.) | Kessler, Gilmore & Kronman | October 31, 2012

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10.3.12.2 Notes - The Heron II (Kaufos v. C. Czarnikow, Ltd.)

NOTE

1. The Victoria Laundry case involved events that took place in England shortly after the end of World War II. The Laundry wished to expand its operation since there was, at the time, an "insatiable" demand for laundry services. In order to expand, it had to acquire a boiler of much greater capacity than the one it had. Boilers, like laundry services, were in short supply in England in 1946. Newman Industries (which did not manufacture boilers) advertised two second-hand boilers for sale. The Laundry, on April 26, entered into a contract to buy one of them for £2150. Under the contract Newman was responsible for having the boiler dismantled at its then location and the Laundry was to take delivery on June 5. In the course of negotiations for the contract the Laundry had explained their intention to put the boiler into use "in the shortest possible space of time." Newman knew, obviously, that the Laundry was a laundry, but had no other information about the Laundry's purpose in buying the boiler. Newman employed a firm of contractors to dismantle the boiler; in the course of that operation the boiler fell on its side and was damaged. Consequently, delivery of the boiler to the Laundry was delayed from June 5 until November 8. The trial court held that, under Hadley v. Baxendale, the Laundry was not entitled to recover anything for its lost profits during the five months and three days delay. The Court of Appeal reversed, in an opinion by Asquith, L.J.; the award of damages the Court of Appeal thought proper is sufficiently stated in Lord Reid's opinion in the principal case.

2. Do you think that Lord Reid and his colleagues in The Heron II were disapproving the holding in Victoria Laundry or merely the exuberance of Asquith's rhetoric? Further on Victoria Laundry: do you think that Newman, having been required to reimburse the Laundry for its lost profits (or some of them), could then recover from the contractors, whose carelessness had caused the damage to the boiler in the first place? Would the criteria applicable in the action by the Laundry against Newman be the same as those that would be applicable in Newman's hypothetical action against the contractors?

3. In the last paragraph of his opinion, Lord Reid suggests, somewhat cryptically, that the damage rule applicable to contracts for the sale of goods is not necessarily the rule applicable to cases like The Heron II (charterer vs. shipowner). Do you think he meant that the sales rule is (or might be) more expansive than the general rule? Or more restrictive? Was not Victoria Laundry a "sale of goods" case?

4. Under the rule of Hadley v. Baxendale, as restated in The Heron II, what decision in Globe Refining Co. v. Landa Cotton Oil Co., supra p. 11447 In the British Columbia Saw-Mill case, discussed by Holmes in his opinion in Globe Refining as well as in The Common Law (see Note 3 following Globe Refining)? In the Kerr Steamship Co. case, supra p. 1152?

5. On the effect of "deviation" of a carrying ship under maritime law, see G. Gilmore & C. Black, The Law of Admiralty §§3-40 to 3-42 (2d ed. 1975). The learned authors pay great attention to the provisions of the Carriage of Goods by Sea Act (COGSA), which is the American version of an international convention that has been ratified by most of the carrying nations of the world, including both the United States and England. There is no reference to the English version of COGSA in any of the opinions delivered in The Heron II.

6. Suppose that instead of arriving nine days late, the ship had been five days early, reaching Basrah at a time when the market price of sugar was £1 per ton lower than it was on the scheduled delivery date. Could the plaintiff have sued the shipowner for the loss caused by premature delivery of the cargo? Is this loss any less foreseeable, or less likely, than the one that actually resulted from the ship's delay? In Hadley v. Baxendale, of course, an early delivery would have been all to the good so far as the Hadleys were concerned; only a late delivery could cause them harm. Does this suggest a basis for distinguishing the two cases?

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June 11, 2013

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