Also known as: foreseeability standards · foreseeability
Written by attorneys · grounded in primary & secondary sources — see below
A limitation on recovery of consequential damages that permits recovery only for losses the breaching party had reason to foresee as a probable result of the breach at the time of contracting.
Frostline Textiles sold a component to a distributor in State X. A consumer later carried the finished product into State Y and was injured there. Frostline had no offices, agents, or advertising in State Y. The injured consumer sued Frostline in State Y. The court dismissed for lack of personal jurisdiction because Frostline's only connection was the foreseeable possibility that the product might reach State Y through a consumer's unilateral action.
Eastern Air Lines contracted with Gulf Oil for jet fuel at a fixed price tied to posted domestic oil prices. When imported oil prices rose sharply, Gulf sought to avoid performance. Eastern sued to enforce the contract. The court required Gulf to perform because the price escalation was a risk Gulf had assumed under the contract terms.
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Transatlantic Financing contracted to carry wheat from the United States to Iran via the Suez Canal. After the canal closed, the carrier completed the voyage around the Cape of Good Hope at much higher cost and sued for extra expenses. The court denied recovery because the contract allocated the risk of route deviation to the carrier.
An attorney drafted a will that failed to comply with the Rule Against Perpetuities. After the testator died, the intended beneficiaries lost their bequests and sued the attorney. The court allowed the beneficiaries to recover because the harm from negligent drafting was a foreseeable consequence of the attorney's undertaking.
East River Steamship purchased turbines for its ships from Transamerica Delaval. The turbines malfunctioned, causing damage to the turbines themselves and lost profits from ship downtime. East River sued in tort. The court held that the economic losses were not recoverable in tort because they arose from disappointed commercial expectations governed by contract.
Aluminum Company of America contracted to supply aluminum to Essex Group at a price indexed to a trade journal's posted domestic oil prices. New federal price controls caused the journal to stop publishing the indexed figure, dramatically raising Alcoa's costs. Alcoa sought relief from the contract. The court examined whether the regulatory change was a risk the parties had allocated at formation.
The standard measures foreseeability at the time the contract was made. Disclosure of special circumstances during negotiations satisfies the requirement because it allows the breaching party to assess and price the risk.
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No. The standard requires only that the party had reason to know the loss was a probable result of breach. Mathematical precision is not required. Reasonable certainty of the fact of loss suffices once foreseeability is shown.
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Foreseeability determines whether a category of loss is recoverable in principle. Certainty then limits the amount that may be awarded. A loss may be foreseeable yet still unrecoverable if the plaintiff cannot prove its amount with reasonable certainty.
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…result of the breach. In a warranty action where the loss is purely economic, the limitation derives from the requirements of foreseeability and of privity, which is still generally enforced for such claims in a commercial setting. In products-liability law, where there is a duty to the public generally, foreseeability is an…