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They are apparently allocated in different areas of law, functioning in England and Wales. In
first case claimant is Overseas Tankship !"# $td and %rings a suit against &orts 'ock and
Engineering (o $td.
1
The case lays down principles relating to negligence in law of tort, more
precisely remoteness of damage. )econd case *adley v +a,endale
2
is se-uentially leading case
on remoteness of damage in contract law. This principle links these two cases together and also
demonstrates differences %etween them. .ccording to O,ford dictionary of law
3
remoteness of
damage is /the e,tent to which a defendant is lia%le for the conse-uences of his wrongful act or
omission.0 (ases mentioned a%ove will %e presented in light of this significant principle, which
limit the types of loss that are recovera%le.
1irst of all the facts of the cases are relevant to present principles in area of tort and contract
law. The Wagon &ound 2o 3
1
case is a%out the defendant4s vessel, The Wagon &ound. It
discharged furnace oil into )ydney *ar%our. The wind and tide carried the oil %eneath
(laimant4s wharf where on %y (laimant4s employees welding operations were %eing carried.
(laimant4s employees continued their work after %eing advised that they could safely weld.
.fter a%out 55 to 67 hours the original discharge, molten metal set some waste floating in the
oil on fire. The flames -uickly developed into a large fire which spread rapidly causing
destruction of some %oats and the wharf.
$ia%ility turned on the -uestion of whether the damage was foreseea%le, since furnace oil has
such a high %oiling point it is unlikely to catch fire under normal circumstances. .nswer is no
%ecause the defendant could not foresee that the oil discharged would %e ignited when a piece
of molten metal would fall upon a floating piece of cotton. Therefore it was held that defendant
was not lia%le for the fire %ut lia%le for the fouling. $ia%ility is founded on the conse-uences not
the action involved.
4
The decision in this case was relied on the test which is %ased on re-uirement that the damage
11
Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd, The
Wagon Mound (No 1) [1961] Privy Council 1 All ER 404
22
Hadley v Baxendale 1!4 9 Exc" 341
33
#2006$ %x&ord 'ic(ionary o& )a*, %x&ord +niver,i(y Pre,,,
4
must %e of a foreseea%le type. .ccording to *arpwood
!
in negligence claims claimant has to
esta%lish that the defendant owes them a duty of care and is in %reach of that duty. Then he also
needs to demonstrate that the damage caused was not too remote. Originally a defendant was
lia%le for all losses which were a direct conse-uence of the defendant8s %reach of duty.
*arpwood
6
informs that it is called direct conse-uence test. This pro%lem presents following
case9 Re :olemis ; 1urness Withy ; (ompany ltd
-
. The decision was considered unfair when
defendant could %e lia%le for damage which was not foreseea%le and therefore he<she could not
take steps to prevent it. 1or that reason decision was overruled in the Wagon &ound 2o 3 and
replaced with a new test for deciding if damages are too remote. Interesting how courts
followed the reasona%le foreseea%ility test esta%lished in Wagon &ound 2o 3 case. The test was
considered and applied in *ughes v $ord .dvocate.
(ook
9
declares that =the key to the Wagon
&ound test is what is meant %y a kind of damage.0 The defendant is only lia%le for damage that
is of a kind which is reasona%ly foreseea%le. In *ughes v $ord .dvocate the type of damage
which has to %e foreseea%le type was not too remote. The *ouse of $ords ruled that the plaintiff
was a%le to claim damages for negligence. What was the reason> The $ords viewed the type of
harm as the important factor. It did not matter whether the e,plosion was foreseea%le.
(onse-uently, as *arpwood
10
relates9 in essence, that people might suffer %urns was the issue of
Per .ud/e 0i,coun( 1i2ond, in Overseas Tankship (UK) Ltd v Morts Dock and
Engineering Co Ltd, The Wagon Mound (No 1) [1961] Privy Council 1 All ER 404
!!
Har3*ood 0ivienne, 4odern 5or( )a*, 2003, 3a/e 1!3
66
Har3*ood 0ivienne, 4odern 5or( )a*, 2003, 3a/e 1!2
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Re Pole2i, 6 7urne,, 8i("y 6 Co23any l(d [1921] 3 9B !60