we're going to jump out of book order for a moment to move on to unit 25 but don't worry we will turn back around to unit 24 shortly but for now let's turn our attention to some limits that the law places on the recovery of damages for breach of contract in fact there are three main limitations that we need to be concerned with and like the quote on your screen says you should think of these limitations not as annoyances but as welcome editors that force you to think creatively in the situation of a contract dispute this is certainly going to be true in developing or defending your case how are we going to maximize our recovery of damages if we're on the plaintiff side what restrictions do we need to get around on the defense side are these restrictions ones that could perhaps prevent recovery of damages if we were the party that breached the contract the three main limitations we will consider in this course are foreseeability avoidability and certainty if any one of these three limitations is not satisfied then damages frequently will not be recoverable we're going to view each of these separately starting with foreseeability our case to illustrate foreseeability is southern illinois riverboat casino cruises inc versus nedak bobo group which we'll refer to as hbg and certainly that's what the court does in its opinion the riverboat casino entity was affiliated with the hera's casino chain and this dispute involved an agreement under which hbg the contractor agreed to design a docking facility for a riverboat casino in metropolis illinois because the existing facility was in poor condition there was a provision in the contract that said prior to the commencement of construction hbg shall provide documentation to heras that in the professional judgment of hbg all plans specifications and drawings conform to all applicable governmental regulations statutes and ordinances and the improvements when built in accordance there with will conform to the applicable regulations this provision is a specific or you might call it an express warranty by the contractor that under the conditions described the building dock will comply with governmental regulations and that's going to be important so what did happen in this case hbg originally designed the dock with four ramps providing access to the riverboat so that there would be four ways of ingress and egress while the riverboat was at the docking facility hbg eventually determined after employing a code consultant that a cheaper two-ramp design would still satisfy the safety codes and regulations thus upon review heras agreed to the two ramp design but when the fire marshal came and inspected the new dock facility in 2001 the fire marshal concluded that it failed to meet code because of ingress and egress problems if there were in fact a fire on the riverboat there would not be sufficient means for people to escape from the boat as a result the fire marshal refused to certify the dock structure and told heras that it had to maintain a fire watch that is there had to be some setup of live employees and positioning where the casino would learn early if there was a fire and could then begin to manage removal of people in an orderly manner that of course was going to be more expensive than not having to maintain these extra employees and these systems for a fire watch heras ultimately decided under threat of an order to close the casino that they wanted to keep the facility open and maintain the fire watch that's what they had to do thus it had to take on the additional cost and that's what heras and southern illinois riverboat the entity ended up suing hbg for damages over in its opinion the court says the issue in this case revolves around the old english case of hadley versus baxendale hbg the contractor had argued summary judgment should be granted on the issue of the fire watch expenses because heras could not recover them under the hadley rule hadley was a famous case involving a flower mill where a part had been ordered by the mill owner it was a shaft and the part was necessary to repair the mill so that it could run again so the mill was completely down while the part was away however there was a breach of the delivery contract and so the part to repair the mill was delivered late the mill owner sued the delivery person in charge alleging damages for lost days of operation in getting the mill fixed the english court in the famous case held that the damages in that instance were not foreseeable and that foreseeability was a legal requirement for recovery of damages the party delivering the mill shaft could not have known that the implication of this particular part was that the factory would completely quit operating for several days and therefore the damages would not be recoverable because the party could the other party the one that was in breach could not have foreseen these particular damages this rule was so famous that you will note in the photo on your screen there's even a plaque posted outside the mill in gloucester england the court in the illinois case a federal court in illinois though it is applying state contract law talks about the hadley rule and describes it in this way which is useful for our purposes where two parties have made a contract which one of them has broken the damages which the other party ought to receive in respect of such breach of contract should be one of two things number one such as may fairly and reasonably be considered either arising naturally that is according to the usual course of things from the breach of contract itself or the second thing if they're not arising naturally such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it so there are two tests are these damages ones that of course naturally would arise or were these potential damages within the contemplation of both parties at the time of the making of the contract either one of those means is a way of proving foreseeability in this case where hbg was seeking summary judgment the contractor wanted the court to rule on this damages issue without going to trial but the evidence did not support summary judgment the testimony of their code consultant boyle the court said made it certainly appear that fire watch damages were foreseeable because of course that would be the remedy that the fire marshal would impose the court noted that heras could potentially have mitigated such damages by taking actions itself but that the issue of mitigation had not been developed at this point in the case in addition the fact that we might naturally foresee these damages the court noted means that even if the parties did not contemplate the need for a fire watch this did not mean naturally that it was not foreseeable and if it were foreseeable then whether or not it was in specific contemplation of the parties was not especially relevant so here we have fact issues on both prongs of foreseeability whether or not these damages arose naturally or whether it was possible that the parties contemplated these particular damages when they made the contract as a result the only thing the court could do was deny the motion for partial summary judgment what that means for our purposes is that the lawsuit would continue on the question of foreseeability because hbg could not prove that these kind of damages were not foreseeable and that would have been their burden at trial of course the burden would then shift to heras to put on evidence to prove that the damages were foreseeable either anybody could know these damages were coming or else these specific parties perhaps by their discussions and negotiations had contemplated these damages at the time so let's think about foreseeability and how it might play out in other instances remember the test damages need to be either one or the other are the damages ones that arise naturally from the breach or were damages in contemplation of both parties at the time they made the contract a couple of factual scenarios will help you see i hope how this could play out if there is a delay in delivering a machine for one then we don't necessarily know much depends on whether the party doing the delivery knows or should know what the machine machine was for that may not be something that would arise naturally from the breach and damages may not be in contemplation of both parties those effectively were the facts of hadley versus baxendale what about this one a cab to the airport what kind of damages might arise naturally we would expect naturally that if the cab were late or didn't show up the party who had requested the cab might suffer the damages of having to get a replacement taxi or maybe having a change fee charged by the airlines for being late to the airport but what if the airport trip was to get on a plane to go to a job interview where the person was possibly going to get a million dollars being hired as an executive of a major company that certainly is not something that would naturally arise from any cab's late arrival it is also unlikely that the cab driver had any idea what was going on when he was late how about this one a new tire on a car here the damages you might expect would be replacement of the tire we might even go so far as to expect that there could be an accident as tires are quite important to the functioning of a car safety could possibly be in the contemplation of both parties and in a serious accident where a person is injured or killed those could possibly be the correct damages in real life incidentally there are going to tend to be limitations on such damages that are expressly stated in the contract to purchase the tires but from a foreseeability standpoint a faulty tire could have some significant damages how about this one providing a loan this is an interesting one because suppose the lender has lots of documentation and knows what the other party is going to do with the money that would greatly increase the amount that damages could be foreseeable based on the specific knowledge of the parties because we have a file where we could show exactly what was in contemplation of both parties without that information it's unlikely that there would be many damages other than perhaps an additional loan origination fee or such that would arise naturally from the breach and it would automatically attach itself now we saw a case earlier a lobby versus dhl involving an overnight delivery here we talk about a late fedex envelope it's going to be really hard to show that whatever damages arise either naturally or that both parties have contemplated because although there's some disclosure about the material it's typically somewhat private as to what is being shipped in the fedex envelope and it's unlikely that fedex is going to know much of what's happening with the particular transaction how about delay in selling a house there are some damages we might expect perhaps the cost of having to rent a place to live uh for the buyer or for the seller there might be additional interest that's owed on the purchase price suppose that during the delay however the house burns down that is not the sort of thing that is going to be in contemplation of the parties as a result of breaching the contract just because the damages happen doesn't mean the damages are foreseeable then finally how about goods for resale a wholesaler would expect that the retail party needs to have these goods to be able to meet demand at a proper time imagine the retailer being a a big box store like target or walmart we could have extreme forms of these damages where it turns out the goods are maybe a hot toy for the holiday season but the parties didn't really know that it was going to be as popular as that so i would expect there would be quite a few arguments about foreseeability in this fact pattern the point i want you to take away from these examples is again that foreseeability can occur under one of two different prongs either the damages arise naturally from this kind of breach or both parties specifically contemplated the possible damages at the time of the making of the contract that concludes this lesson on foreseeability as a limit on recovery of damages for breach of contract our next lesson will cover the limit of avoidability sometimes also known as the duty to mitigate you