Newsome v. Western Union Telegraph Co.
69 S.E. 10 (1910)
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Rule of Law:
Damages for breach of contract must be the direct, natural, and proximate consequence of the breach and must be certain in their nature; remote and speculative damages, such as lost profits from a complex business venture, are not recoverable.
Facts:
- T. J. Newsome gave a telegram to the defendant telegraph company to order four gallons of corn whiskey.
- The whiskey was intended for Newsome's raft hands, who were hired to construct rafts and transport his timber and rosin to Wilmington during a freshet.
- Newsome had an agreement with his workers that he would provide them with whiskey before they would go into the water.
- The telegraph company incorrectly transcribed the signature on the telegram from 'T. J. Newsome' to 'T. J. Sessons'.
- As a result of the error, the whiskey was not sent.
- Consequently, Newsome's raft hands refused to work, and he was unable to transport and market his timber and rosin, losing the benefit of the freshet.
Procedural Posture:
- T.J. Newsome sued the telegraph company in a North Carolina trial court for damages.
- At trial, the defendant telegraph company requested a jury instruction to limit any potential damages to a nominal amount.
- The trial court refused to give this instruction.
- Following a trial, a judgment was presumably entered in favor of Newsome for substantial damages.
- The defendant telegraph company (appellant) appealed the judgment to the Supreme Court of North Carolina.
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Issue:
Are remote and speculative damages, such as lost profits from a failed business venture, recoverable for a telegraph company's negligent failure to correctly transmit a message, even when the company's agent was informed of the message's general purpose?
Opinions:
Majority - Brown, J.
No. Damages for breach of contract cannot be remote, speculative, or contingent. While the court applies the rule from Hadley v. Baxendale, that rule does not permit the recovery of damages that are not the direct and certain consequence of the breach. The chain of causation between the non-delivery of the whiskey and the alleged lost profits from marketing timber is too attenuated and uncertain. The court reasoned that even if the whiskey had arrived, many other contingencies could have prevented the venture's success: the raft might not have been built, or it could have been lost in transit. Therefore, the claimed damages are purely conjectural and cannot be recovered from a public service corporation compelled to transmit the message. The plaintiff is entitled only to nominal damages.
Analysis:
This case reinforces the principle that consequential damages in contract law must be proven with reasonable certainty. It clarifies that merely putting a party on notice of the general purpose of a contract does not make that party liable for all speculative downstream losses that result from a breach. The decision sets a high bar for recovering lost profits, particularly against public service corporations, requiring a direct and foreseeable causal link between the breach and the loss. This holding limits the application of Hadley v. Baxendale by emphasizing the certainty requirement over mere foreseeability, preventing parties from using contract law as insurance against complex business failures.
