Ever break a crankshaft? It's not the easiest thing to do and it will cost you quite a bit to repair. But that's nothing compared to the cost of Hadley's crankshaft. That one affected future generations, to the tune of billions of dollars.

In the 1850s a man named Hadley was operating a steam-powered mill in Gloucester, England. I'm told that town name is only two-syllables when spoken aloud despite how it appears in print. One day, the crankshaft in Hadley's steam engine broke and needed to be shipped to Greenwich – short "e", silent "w" they tell me – something which he could hire a local "carrier" to do. A company run by a man named Baxendale agreed to run the old crankshaft over to Greenwich and then, when the new one had been made to match, run it back to Gloucester. Timed just right, Hadley's mill would only be out of commission temporarily. Baxendale charged Hadley just a bit over two pounds Sterling for the expedition.

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For some reason which Hadley believed was Baxendale's fault, the new crankshaft was delayed in its return to the mill. All the while, Hadley sat glaring at his disabled steam engine. He was losing money. When he finally got the new crankshaft, he got his mill up and running and he sued Baxendale. He wanted to be compensated for the lost profits for the time his mill was down during the delay in shipping the new crankshaft.

The mathematical issues raised by inflation can make these matters confusing but Hadley won 25 pounds from a jury – around ten times what he had paid Baxendale to ship the crankshaft. Baxendale appealed. He had no way of knowing this would result in an article being written about him on the internet more than 160 years later. It's funny how odd little cases can have huge ramifications later.

The Court of Exchequer Chamber reversed the trial court and disallowed Hadley's claim for lost profits. The court famously wrote that in a breach of contract case, the harmed party could only recover damages which were foreseeable – "in the contemplation of both parties, at the time they made the contract."

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If Hadley had only told Baxendale, "Dude, I need this crankshaft yesterday. Every day I don't have it, I lose ten pounds – and I don't mean the fatty 'pounds' those obese Americans are always whining about." Then, he might have been able to recover his lost profits.

This case became a landmark and was soon in textbooks on both sides of the Atlantic and being cited by the highest courts in the English-speaking world. It also affected how contracts are written and legal threats are made. In contracts, drafters often include language about what damages may or may not be recovered – usually leaning toward, "We screw up, you get nothing." As for legal threats, attorneys love to send hate mail describing what damages will be sought in a future lawsuit – "You are on notice that my client is being harmed in the amount of $1,000,000,000,000 (One Trillion Dollars) daily and those damages will be sought in any future suit, along with our court costs and parking fees."

It has also meant that countless people have been told by judges and attorneys that "No, you cannot be compensated for your lost profits because your [widget broke, service failed, etc]." You missed work because your car sat at the dealer while they were waiting for parts? Don't even think about asking for the wages you lost.

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And it all goes back to Mr. Hadley, down at the mill. I blame it on Hadley, not sending Lassie. If Lassie had been sent with the crankshaft he would certainly have brought it back in time to save the mill. And it would have made a great movie in the process.

Follow me on Twitter: @stevelehto

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Steve Lehto has been practicing law for 23 years, almost exclusively in consumer protection and Michigan lemon law. He wrote The Lemon Law Bible and Chrysler's Turbine Car: The Rise and Fall of Detroit's Coolest Creation.

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