Tallis Bakery Ltd orders a new industrial oven from Vane Engineering, which delivers it six weeks late. As a result Tallis loses (1) its normal profit on routine bread orders for those six weeks and (2) an exceptionally lucrative one-off contract to supply a national sporting event, which Tallis never mentioned to Vane. Applying Hadley v Baxendale, which losses can Tallis recover?

Correct answer: C) Loss (1) only

Explanation

Under the first limb of Hadley v Baxendale, losses arising naturally in the usual course of things are recoverable, and lost ordinary profits from a late oven fall within this. Under the second limb, unusual losses are recoverable only if they were in the reasonable contemplation of both parties when the contract was made, which usually means the defendant was told of them. Vane did not know of the event contract, so that loss is too remote (compare Victoria Laundry v Newman Industries).