C Czarnikow Ltd v Koufos [1969]

Court: House of Lords

Facts: Koufos chartered the ship Heron II from C Czarnikow Ltd to transport sugar to Basra. The delivery was delayed by nine days, during which time the sugar market price fell from £32 10s to £31 2s 9d. Koufos sought compensation for the loss in profit, despite Czarnikow being unaware of Koufos's immediate intent to sell the sugar. However, Czarnikow was aware of the sugar market's existence.

Held: The House of Lords ruled that the loss was not too remote. Lord Reid clarified that, in contract law, the test for remoteness requires the loss to be “not unlikely” to result from a breach of contract, setting a stricter standard than in tort law, where damages can be claimed if they are reasonably foreseeable. The court rejected the broader test from Victoria Laundry v Newman [1949], favouring a higher probability of loss within the parties’ contemplation at the time of the contract.

Key Judicial Statement: Lord Reid remarked, "In contract, damages are recoverable only if the defendant realised the loss was not unlikely to result from the breach, which is a stricter test than mere foreseeability in tort."

💡LevelUpLaw: This case established a more restrictive test for remoteness of damages in contract law, underscoring the importance of the parties' contemplation at the time of the agreement.