An intervening act of a 3rd party which itself causes the loss to the plaintiff, or aggravates the loss, caused by the defendant's breach, will not absolve the defendant from liability if the intervening act was reasonably foreseeable
P were a firm of millers who contracted with carriers D to take a broken mill-shaft to a foundry for repair.
The shaft was delayed in transit through the D's negligence and the mill lost 5 days' production.
P claimed damages for their lost profits.
Damages allowable is for damage that
is fairly and reasonably be considered to arise naturally from
the breach of contract, or
2) Such as might reasonably be in the contemplation of both parties at the time of the contract as a probable result of the breach.
In this case, the total stoppage of production was NOT a natural consequence of delay - the mill might have a spare shaft in stock – and it is not reasonable to expect the carriers to be aware of the special circumstances.
The defendant's knowledge does not mean mere knowing (“reasonable contemplation”)
There must be knowledge and acceptance by the defendant of the purpose and intention of the plaintiff.
Horne v Midland Railway (1873)
Simpson v L & N Railway (1876)
Heron II (1969)
Damages were awarded to cover losses arising from the late delivery of sugar to Basra. It was foreseeable that the price of sugar in Basra might fluctuate. For a loss to be foreseeable, there must be :
‘ a real danger’/ ‘a serious possibility’ or
th e loss was ‘ not unlikely’/ ‘liable to result’.
It is the duty of every plaintiff to mitigate his loss, that is, to do his best not to increase the amount of damage done.
The plaintiff must minimize the loss resulting from the breach by taking all reasonable steps available to him. The plaintiff cannot recover for loss which he could have avoided by taking reasonable steps.
Payzu v Saunders 
(ii) The plaintiff cannot recover for any loss he has actually avoided, even though he took more steps than were necessary in compliance with the above rule.
(iii) the plaintiff is not expected to take risks in order to mitigate losses caused by the defendant's breach. The plaintiff may recover loss incurred in taking reasonable steps to mitigate his loss, even though he did not succeed.
A coal company took a mining lease of farmland, covenanting to store the land to its original state at the end of the lease. The work at the end of the lease would have cost $29,000, while the result of not doing it would reduce the value of the land by only $300. It was held that damages for the company's failure to do the work should be assessed at $300.
The plaintiff argued that the purchase of a Rolls Royce had been the culmination of a lifelong ambition, and that when the garage concerned had not repaired it properly or quickly enough he had suffered distress and inconvenience.
The Court of Appeal, while accepting that there was a breach of contract to repair, were not prepared to award damages for the plaintiff's 'emotional anguish' while his Rolls Royce was being repaired.
If the plaintiff's loss is the chance of doing something or benefiting from doing something, and this contingency is outside the control of the parties, then he is entitled to damages if the defendant's breach of contract denies him this chance.
The use of the words 'penalty' or 'liquidated damages' may be prima facie evidence, yet the expression used is not conclusive.
The essence of a penalty is a payment of money as in terrorem of the offending party;
The essence of liquidated damages is a genuine covenanted pre-estimate of damage.
3. Whether a sum stipulated is penalty or liquidated damages is a questions of construction to be decided upon the terms and inherent circumstances of each particular contract, judged as of the time of making the contract, not as at the time of breach.
The defendant agreed to build a chemical plant for the plaintiff in 18 weeks. If it took longer than this, they agreed to pay 'by way of penalty £20 per working week'. The defendant completed 30 weeks late, and the plaintiff lost £5,850 as a result of the delay.
The defendant argued that they were only liable for £600 damages. The plaintiff was held only to be able to recover £600.
The clause was not a penalty clause although it was described as such, because its object was not to act in terrorem.
The parties must have known that the actual loss would be more than £20 per week, and the clause would, therefore, appear to have been an attempt to limit liability.