1. Harris, D, Campbell, D and Halson, R Remedies in Contract and Tort (Cambridge: Cambridge University Pres, 2nd edn, 2005) p 90.Google Scholar

2. Beale, H (ed) Chitty on Contracts (London: Sweet & Maxwell, 29th edn, 2004) p 1449 Google Scholar, para [26-044].

3. Collins, H The Law of Contract (London: LexisNexis UK, 4th edn, 2003) p 413.Google Scholar

4. Cartwright, J Remoteness of damage in contract and tort: a reconsideration’ (1996) 55 CLJ 488 CrossRefGoogle Scholar at 505.

5. Dawson, F Reflections on certain aspects of the law of damages for breach of contract’ (1995) 9 J Contract L 125 Google Scholar at 125.

6. Kramer, A An agreement-centred approach to remoteness and contract damages’ in McKendrick, E and Cohen, N (eds) Comparative Remedies for Breach of Contract (Oxford: Hart, 2005) p 249 Google Scholar at p 250.

7. Ibid.

8. Campbell, D and Collins, H Discovering the implicit dimensions of contracts’ in Campbell, D, Collins, H and Wightman, J (eds) Implicit Dimensions of Contract: Discrete, Relational and Network Contracts (Oxford: Hart, 2003) p 25 Google Scholar at p 45.

9. Ibid.

10. The literature is reviewed in Robertson, A, ‘The limits of voluntariness in contract’ (2005) 29 Melb Univ L Rev 179 Google Scholar at 202–216.

11. Barnett, R The sound of silence: default rules and contractual consent’ (1992) 78 Virginia L Rev 821.CrossRefGoogle Scholar

12. Langille, B and Ripstein, A “Strictly speaking – it went without saying”’ (1996) 2 Legal Theory 63 CrossRefGoogle Scholar; ;

13. [1969] 1 AC 350 (Koufos v Czarnikow).

14. Ibid, at 385 (emphasis added). This statement is routinely applied in the remoteness cases and has been accepted as authoritative many times, eg Jackson v Royal Bank of Scotland [2005] UKHL 3, [2005] 1 WLR 377 at [47] per Lord Walker of Gestingthorpe, with whom Lord Nicholls of Birkenhead and Lord Brown of Eaton-Under-Heywood agreed; Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 at 667 (Wilson, Deane and Dawson JJ).

15. (1854) 9 Ex 341 at 355.

16. See also Koufos v Czarnikow, above n 13, at 399–400 per Lord Morris.

17. [1978] QB 791.

18. Ibid, at 807. See also National Australia Bank v Nemur Varity Pty Ltd (2002) 4 VR 252 at 270; Chitty on Contracts, above n 2, p 1450, para [26-047], quoted with approval in Brown v KMR Services Ltd [1995] 4 All ER 598 at 621; Satef-Huttenes Albertus SpA v Paloma Tercera Shipping Co SA (The ‘Pegase’) [1981] 1 Lloyd's Rep 175 at 183.

19. R&H Hall Ltd v WH Pim (Junior) & Co Ltd (1928) 33 Com Cas 324 at 333; K Swinton ‘Foreseeability: where should the award of contract damages cease?’ in B Reiter and J Swan Studies in Contract Law (Toronto: Butterworths, 1980) p 61 at p 65; Kienzle v Stringer (1981) 35 OR (2d) 85 at 90; Fraser Shipyard and Industrial Centre Ltd v Expedient Maritime Co Ltd (The ‘Atlantis Two’) (1999) 89 ACWS (3d) 642 at para 178; Bemar Construction v Mississauga (2004) 133 ACWS (3d) 71, 30 CLR (3d) 169 at para 423.

20. Eisenberg, M The limits of cognition and the limits of contract’ (1995) 47 Stanford L Rev 211 CrossRefGoogle Scholar at 216.

21. Mann, R “Contracting” for credit’ (2006) 104 Michigan L Rev 899 Google Scholar at 912. See also at 800–801.

22. (1998) 192 CLR 603. Some of the issues in this case not relevant to the present discussion were considered more recently by the High Court in CGU Insurance Limited v AMP Financial Planning Pty Ltd [2007] HCA 36.

23. The issue was the extent to which the insurer was entitled to reduce its liability under the Insurance Contracts Act 1984, s 28(3). The broker claimed (ibid, at 612) ‘that the insured was entitled to a full indemnity less the amount of the additional premium which a reasonable insurer would require by reason of the insured's claims history’.

24. Ibid, at 618.

25. Ibid, at 613 per McHugh J. See, to similar effect, Brennan J at 607 and Hayne J at 650.

26. Ibid, at 627 and 644.

27. Ibid, at 627. On the problem of hindsight in the imputation of knowledge, see also Balfour Beatty Construction (Scotland) Ltd v Scottish Power plc (1994) SC (HL) 20 at 32 per Lord Jauncey of Tullichettle.

28. Ibid, at 615–616. See, to similar effect, P&O Developments Ltd v The Guy's and St Thomas' National Health Service Trust [1999] BLR 3 at para 22.

29. Alexander v Cambridge Credit Corporation Ltd [1987] 9 NSWLR 310 at 365 per McHugh JA. See also Koufos v Czarnikow, above n 13, at 388 per Lord Reid.

30. See Robertson, above n 10, at 206–207.

31. See also Langille and Ripstein, above n 12, esp at 69–72.

32. L Fuller and R Braucher Basic Contract Law (1964) at 155, quoted by Barnett, above n 11, at 877.

33. Ibid.

34. Kramer, above n 12, at 390.

35. We also make certain assumptions about the behaviour of others. One can confidently drive on an undivided road assuming, without thinking about it, that oncoming drivers will stay on their side of the road.

36. Although there are occasionally significant discrepancies between the parties' intentions and the court's interpretation of the contract (see, eg, Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, discussed in Robertson, above n 10, at 206–207), these cases are sufficiently rare that they can be set to one side.

37. Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 at 227.

38. A rare exception is Telecommander Corp Ltd v United Parcel Services Canada Ltd (1996) 21 OTC 190.

39. Unless one adopts the view that contracting parties meaningfully consent to the default rules of contract by failing to contract around them. See Barnett, above n 11. On the problems with this view, see Robertson, above n 10, at 207–216.

40. This is reflected in the statement that the various formulations of the remoteness rule in contract are concerned ‘to ensure that before entering into a contractual relationship the parties are entitled to have within their actual or imputed knowledge the extent to which they may be held liable, or to put it more conventionally, what damages will not be too remote’: Motor Accident Mutual Insurance Pty Ltd v Kelly (unreported) 10 September 1998 (Supreme Court of New South Wales Court of Appeal, Stein JA, Fitzgerald and Rolfe AJJA).

41. (1854) 9 Ex 341 at 356.

42. Castle Constructions Pty Ltd v Fekala Pty Ltd [2006] NSWCA 133 at para 39, quoting Seven Seas Properties Ltd v Al-Essa (No 2) [1993] 3 All ER 577 at 582 (emphasis added). See also Koufos v Czarnikow, above n 13, at 422 per Lord Upjohn.

43. [1949] 2 KB 528 at 538.

44. (1868) LR 3 CP 409.

45. This statement was supported by Diplock LJ in Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 at 1449, who went on to say that, where the defendant acquired the knowledge from the plaintiff, the undertaking to bear the loss can be implied from ‘the defendant's conduct in entering into the contract without disclaiming liability for the enhanced loss which he can foresee’. Diplock LJ also held that the undertaking can be express. See also Stuart Pty Ltd v Condor Commercial Insulation Pty Limited [2006] NSWCA 334.

46. GKN Centrax Gears Ltd v Matbro Ltd [1976] 2 Lloyd's Rep 555 at 574 and 580.

47. Above n 13, at 422. In The Pegase, above n 18, at 182–183, Robert Goff J observed that: ‘The decided cases appear to support the opinion so expressed by Lord Upjohn’. See also Transfield Shipping Inc v Mercator Shipping Inc [2006] EWHC 3030 (Comm), [2007] 1 All ER (Comm) 379 at [63].

48. Above n 13, at 422: ‘If parties enter into the contract with knowledge of some special circumstances, and it is reasonable to infer a particular loss as a result of those circumstances that is something which both must contemplate as a result of the breach. It is quite unnecessary that it should be a term of the contract’. H McGregor, McGregor on Damages (London: Sweet & Maxwell, 17th edn, 2003) p 208, notes that ‘in no case has a defendant with actual knowledge of special circumstances been held not liable for damage, which was not unlikely to result on the basis of that notice, on the ground that the notice had not been made part of the contract’.

49. Beale, above n 2, p 1295.

50. Treitel, G The Law of Contract (London: Sweet & Maxwell, 11th edn, 2003) p 969 Google Scholar. Treitel interprets the cases as requiring not an express undertaking to bear the unusual loss, nor an undertaking implied in fact, but an undertaking implied in law.

51. McGregor, above n 48, p 209, para [6-176]. Harris, Campbell and Halson, above n 1, p 97 suggest that: ‘The test is whether the reasonable man in D's position would have realised that, by making the promise in these special circumstances, he was assuming responsibility for the risk of causing this unusual type of loss’.

52. [2003] EWCA Civ 1112 at [25].

53. Ibid, at [26].

54. Ibid, at [33].

55. The Pegase, above n 18.

56. [1997] AC 191.

57. [1994] 1 WLR 1360.

58. As Kramer suggests, above n 6, p 272.

59. Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 at 368 per McHugh JA; A-G (Canada) v DW Matheson & Sons Contracting Ltd (2000) 187 NSR (2d) 62, 585 APR 62; National Australia Bank Ltd v Nemur Varity Pty Ltd (2002) 4 VR 252 at 274; Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 at 627 per Gummow J.

60. Robophone Facilities Ltd v Blank [1966] 3 All ER 128 at 143 per Diplock LJ. See also Jackson v Royal Bank of Scotland [2005] 1 WLR 377 at [26] per Lord Hope of Craighead; Weld-Blundell v Stephens [1920] AC 956 at 979–980; GKN Centrax Gears Ltd v Matbro Ltd [1976] 2 Lloyd's Rep 555 at 580; Transfield Shipping v Mercator, above n 47, at [65].

61. (1994) 122 Nfld & PEIR 280; 379 APR 280.

62. Ibid, para 32.

63. Ibid.

64. Ibid, para 29.

65. Ibid.

66. Harris, Campbell and Halson, above n 1, p 91.

67. Beale, above n 2.

68. Campbell and Collins, above n 8, p 45.

69. Harris, Campbell and Halson, above n 1, p 97.

70. (1854) 9 Ex 341.

71. Kempling v Hearthstone Manor Corp (1996) 137 DLR (4th) 12.

72. Ibid, at 37.

73. (1999) 181 Sask R 19.

74. Ibid, paras 68–71.

75. (1999) 19 BCTC 286.

76. Ibid, para 28.

77. Ibid, para 39.

78. (1999) 89 ACWS (3d) 642.

79. Ibid, para 182.

80. [1996] 2 Lloyd's Rep 171.

81. (Unreported) 31 October 1997 (Federal Court of Australia, Carr J).

82. It was said that a localised storm would occur somewhere in the region approximately once a year.

83. Monarch Steamship Co Ltd v Karlshamns Oljefabriker A/B [1949] AC 196 at 232; Wenham v Ella (1972) 127 CLR 454 at 466–467; Oxley County Council v Macdonald [1999] NSWCA 126 at para 71; National Australia Bank v Nemur Varity Pty Ltd (2002) 4 VR 252 at 274; Grencol v Viscount Agricultural Developments [2004] VSC 204 at paras 114 and 104; Kienzle v Stringer, above n 19, at 90; Bemar Construction v Mississauga, above n 19; McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39 at 44 per Cooke P and 45 per Hardie Boys J.

84. Restatement of Contracts (2d), s 351(3) (1981).

85. Kienzle v Stringer, above n 19, at 90, citing Swinton, above n 19, whose views were clearly influential. See also Bemar Construction v Mississauga, above n 19, para 423.

86. [1949] AC 196

87. Ibid, at 232.

88. Oxley County Council v Macdonald, above n 83, para 71; National Australia Bank v Nemur Varity, above n 83, at 274.

89. McElroy Milne v Commercial Electronics, above n 83, at 44 and 45; Grencol v Viscount Agricultural Developments, above n 83 (discussed below); Wenham v Ella, above n 83, at 466–467.

90. Wenham v Ella, above n 83, at 466–467; Oxley County Council v Macdonald, above n 83, para 71; National Australia Bank v Nemur Varity, above n 83, at 270.

91. Campbell and Collins, above n 8, p 46.

92. Ibid.

93. Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 132–133. Cf Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 at 654 per Hayne J: ‘Reasonableness informs much of the law of contract and, in particular, the assessment of damages for breach’ (footnote omitted).

94. [2002] 1 Lloyd's Rep 157.

95. Ibid, at 179.

96. Ibid, at 186.

97. See, eg, Gordley, J Responsibility in crime, tort, and contract for the unforeseen consequences of an intentional wrong’ in Cane, P and Stapleton, J (eds) The Law of Obligations: Essays in Celebration of John Fleming (Oxford: Clarendon Press, 1998) p 175 Google Scholar at pp 199–200. The agreement considered by the Court of Appeal in Mulvenna v Royal Bank of Scotland plc[2003] EWCA Civ 1112 (discussed above, text accompanying nn 52–54) was also a hypothetical one: its existence was denied by the bank and, because the case involved an appeal from a summary dismissal application, was never established.

98. (Unreported) 31 October 1997 (Federal Court of Australia, Carr J). The focus on reasonable contemplation is also to be seen in the extensive discussion of practices in the alpaca breeding industry in Grencol v Viscount Agricultural Developments, above n 83, paras 105–113, discussed below, text accompanying nn 109–113,

99. (1999) 181 Sask R 19 at paras 68–69.

100. [1996] 2 Lloyd's Rep 171 at 203.

101. The Atlantis Two, above n 19, para 182.

102. See Fuller, L and Perdue, W The reliance interest in contract damages: 1’ (1936) 46 Yale L J 52 CrossRefGoogle Scholar at 85–86; at p 20.

103. As noted above, such an approach has received support in a number of Australian cases, such as Wenham v Ella, above n 83, at 466–467; Oxley County Council v Macdonald, above n 83, para 71; National Australia Bank v Nemur Varity, above n 83, at 270.

104. Gordley, above n 97, esp p 200. See also Ipp, D Problems and progress in remoteness of damage’ in Finn, P (ed) Essays on Damages (Sydney: Law Book Co, 1992) p 14 Google Scholar at p 35 (‘Oddly, it appears that it does lie in the mouth of the deliberate contract breaker to say that he is only liable for damages that could reasonably have been contemplated’).

105. McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39 at 43 (‘Factors including...the degree of the defendant's culpability, are not necessarily to be ignored in seeking to establish a just balance between the parties’).

106. Cooke, R Remoteness of damages and judicial discretion’ (1978) 37 CLJ 288 CrossRefGoogle Scholar at 298.

107. See also Swinton, above n 19, p 78.

108. Lando, O and Beale, H (eds) Principles of European Contract Law Parts I & II (The Hague: Kluwer, 2000) p 441 Google Scholar. The code appears in broad terms to reflect the position in French law, with Italian law also holding the defendant liable for unforeseeable loss where the breach was intentional: Lando and Beale, ibid, p 443; Gordley, above n 97, pp 202–203.

109. Grencol v Viscount Agricultural Developments, above n 83.

110. Ibid, para 14.

111. Ibid, para 109.

112. Ibid, para 113.

113. Ibid, paras 114 and 104, quoting National Australia Bank v Nemur Varity, above n 83, at 274.

114. Restatement of Contracts, above n 84, s 351(3), comment f (1981).

115. Ibid; The Pegase, above n 18, at 184; Kramer, above n 6, pp 269–270; Harris, Campbell and Halson, above n 1, p 97.

116. See also Stuart Pty Ltd v Condor Commercial Insulation Pty Limited [2006] NSWCA 334 at para 97, where Beazley JA held that the degree of disproportion between the contract price and the risk meant that the risk was not within the reasonable contemplation of the parties.

117. [2003] EWCA Civ 1112, discussed above, text accompanying nn 52–54.

118. Above n 8, p 46.

119. 743 F Supp 250 (1990).

120. The plaintiff had engaged the defendant to perform similar services on 200–400 prior occasions. The agreement was made orally and confirmed by a short telex.

121. International Ore & Fertilizer Corp v SGS Control Services Inc, above n 119, at 257–258.

122. Ibid, at 257 (emphasis added). Note again here the use of fairness and intention as alternative justifications.

123. It should be noted that the plaintiff in International Ore & Fertilizer Corp v SGS Control Services Inc, ibid, was not left entirely without a remedy. The defendant was ultimately held liable for 50% of the loss on the basis of negligent misrepresentation.

124. Restatement of Contracts, above n 84, s 351(3), comment f (1981).

125. Ibid.

126. Cooke, above n 106, at 298.

127. Kramer, above n 6, p 250.

128. Campbell and Collins, above n 8, p 45.