Also known as: foreseeability doctrine · foreseeability
Written by attorneys · grounded in primary & secondary sources — see below
A limitation on compensatory damages in contract and tort that shields a wrongdoer from liability for losses that were not reasonably foreseeable at the time of the wrongful act or breach. The doctrine operates as a fairness principle by holding parties accountable only for risks they had reason to anticipate when acting or contracting. It applies to both ordinary and special circumstances known to the defendant.
Doris Duffy purchased a vehicle from a dealership in State X operated by Drake Logistics. The dealership had no offices, advertising, or sales efforts in State Y. Doris drove the vehicle to State Y for a family visit, where it malfunctioned and injured her. When she sued Drake Logistics in State Y, the court declined jurisdiction because the company's only link was the possibility that a buyer might transport the product there.
Eastern Air Lines contracted with Gulf Oil for jet fuel at a fixed price tied to posted domestic oil rates. Gulf later faced sharply higher costs due to imported oil price spikes and regulatory changes. Eastern sued for breach when Gulf sought to escape the deal. The court held Gulf to the contract after determining that the cost increases were within the risks the parties had allocated at formation.
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Consolidated Rail operated tracks near People Express Airlines' terminal. A derailment released chemicals that forced the airline to shut down operations for several days. People Express sued for lost profits. The court allowed recovery only for those business losses that Consolidated Rail could reasonably have anticipated from a spill at that location.
Spur Industries operated a cattle feedlot in an undeveloped area. Del E. Webb later developed a retirement community nearby and sued to enjoin the feedlot as a nuisance. The court ordered Spur to relocate but required Webb to pay relocation costs because the feedlot's presence had been lawful when established and the harm became foreseeable only after the community was built.
Paynesville Farmers Union Cooperative sprayed pesticides on neighboring fields. Wind carried the chemicals onto Johnson family farmland, damaging organic crops and requiring certification testing. The Johnsons sued for trespass and nuisance. The court limited recovery to harms that the cooperative could reasonably have foreseen from aerial application near certified organic operations.
Shareholders of Parklane Hosiery sued the company and its officers for misleading proxy statements. A prior SEC action had already established the falsity of the statements. The court permitted the shareholders to use offensive collateral estoppel on the falsity issue but only after confirming that the defendants had foreseen the possibility of private follow-on litigation when they litigated the SEC case.
Foreseeability asks whether the breaching party had reason to know the loss would probably result at the time of contracting. Certainty concerns whether the amount of that loss can be established with enough evidence to avoid speculation. A loss may be foreseeable yet still unrecoverable if its amount cannot be proved with reasonable certainty.
Yes. When a buyer explains during contract talks that timely performance is needed to secure a particular opportunity, the seller has reason to know that loss of that opportunity is a probable result of breach. The disclosure need not quantify the exact amount of potential loss.
The doctrine limits compensatory damages in both contract and tort. In tort it prevents liability for harms too remote from the defendant's conduct. In contract it prevents recovery for losses the breaching party did not have reason to anticipate when the contract was made.
…in this case. First, in light of the serious allegations made in the SEC's complaint against the petitioners, as well as the foreseeability of subsequent private suits that typically follow a successful Government judgment, the petitioners had every incentive to litigate the SEC lawsuit fully and vigorously.[^maj-18] Second,…