Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350
Facts
A cargo of sugar was carried to Basrah under a charterparty. The voyage was delayed and the vessel arrived nine days late. During the delay the market price of sugar fell, reducing the amount obtainable when the cargo was sold. The carrier did not know of a particular onward sale but knew that there was a sugar market at the destination. The cargo interests claimed damages for the difference caused by the late arrival. The dispute concerned whether that market loss was within the contractual contemplation necessary for recovery.
Legal Issue
Was loss from the fall in the destination sugar market during delayed delivery sufficiently within the parties' contemplation to be recoverable in contract?
Held
The House of Lords held that the loss caused by the fall in the sugar price was not too remote. The carrier knew that sugar was being transported to a port with a sugar market. It did not need knowledge of a particular onward sale to contemplate market loss from delayed delivery. The speeches used different formulations to describe the required degree of likelihood, including loss that was not unlikely. They also distinguished contractual remoteness from the broader reasonable-foreseeability approach applicable in ordinary tort analysis. The result concerned the foreseeable type of commercial loss on the information available at formation, not proof that a price fall was more probable than a rise.
⭐ Legal Principle
Contractual remoteness asks whether the type of loss was sufficiently likely, on the information available at formation, to fall within the parties' reasonable contemplation. The Heron II describes that threshold as loss that was not unlikely and distinguishes it from ordinary tort foreseeability.
Significance
The Heron II refines Hadley v Baxendale without converting remoteness into a simple percentage calculation. The varying judicial expressions should not be presented as a unanimous mathematical formula. It is especially useful for delay affecting goods intended for an ordinary market: knowledge of the market can suffice without disclosure of a special resale contract. Keep contractual contemplation at formation separate from proof that the breach actually caused the claimed market loss and from any special commercial allocation of responsibility.
Common exam questions about this case
Why was knowledge of a particular resale unnecessary?
The carrier knew that the cargo was sugar and that a sugar market existed at the destination. That background made market-related loss from delay sufficiently contemplated without notification of a specific buyer or price. An exceptional onward bargain would raise a different question about special knowledge.
Did the claimant have to show that a price fall was more likely than not?
Not as the remoteness threshold. The speeches addressed whether the kind of loss was sufficiently likely to be contemplated, using formulations such as not unlikely. That is different from requiring a greater-than-even probability of the precise market movement when the contract was made.
Why is ordinary tort foreseeability not the complete contractual test?
Contractual responsibility is assessed against the bargain and information available at formation, when parties can communicate unusual risks. The Heron II treated that context as supporting a more demanding remoteness inquiry than ordinary tort foreseeability. The actual type of loss and contractual setting must therefore be identified.