Liability for consequential losses is not to be entirely open-ended, and some means to limit such liability is found in every system of law. There are a number of possible means, and the courts and the academia in the U.K. and the U.S. have experiment...
Liability for consequential losses is not to be entirely open-ended, and some means to limit such liability is found in every system of law. There are a number of possible means, and the courts and the academia in the U.K. and the U.S. have experimented with several of them, in contract and tort, respectively. In the law of tort, the courts in the U.K. and the U.S. once focused on the concept of causation, and, on other occasions, regarded the matter as turning on the content of the duty itself. Eventually, a test of foreseeability was adopted and applied to solve the problem of over-extended liability for consequential losses. In the law of contract, a foreseeability test to limit liability for damages was notably established in Hadley v. Baxendale, in 1854. The Hadley rule is deemed to have affected the concept of foreseeability as a damages-limiting principle in the Japanese civil law, and also that of the Korean counterpart through the Japanese civil code. From a comparative law perspective, considering especially the respective provisions pertaining to the liability for consequential losses in contract and in tort in the Korean civil code, it is thus worth analyzing the doctrine of foreseeability in Anglo-American law established under Hadley v. Baxendale as applicable in contractual liability and possibly and arguably in tort liability. The Hadley rule was established as and has widely been regarded as part of contract law, and under the current orthodox Anglo-American law, it is generally stated that a more generous rule of remoteness applies in tort than the foreseeability rule in contract. At the same time, however, a respectable line of authority both inside and outside the court in the U.K. and the U.S. has continued to reason that all consequential claims should be subject to a single remoteness rule, whatever their basis, or that the rule with regard to remoteness of damage is precisely the same whether the damages are claimed in actions of contract or of tort. Thus, there exist contending positions and arguments for limiting Hadley to contract on one hand, and, in favor of a common standard in contract and tort in limiting liability for consequential losses, on the other hand, with valuable insight and ramifications to Korea, as the courts and the academia in Korea are challenged to develop clearer and further detailed rules and standards on this issue in contract and tort, respectively. The reasonable foreseeability criterion in Hadley v. Baxendale was, at least in its origin, established as a fairly general rule of limiting damages. Its primary function was to prevent liability for consequential losses from getting out of control, and it was only later that the idea of differentiating tort and contract in this regard was introduced and fortified. Despite the current orthodox view in Anglo-American law of damages, especially from the comparative law perspective for better and further understanding the concept of foreseeability and remoteness in the Korean civil law in an effort to design more specific and coherent rules of limiting liability for consequential losses in the law of contract and tort, it is perhaps more conducive to regard Hadley in a wider context as a general rule applying to all forms of compensation for non-deliberate damage, regardless of the formal or claimed source of the defendant`s liability.