Legal Arguments by Analogy

2. Courts have ruled that, if a company loses profits due to the failure of a contracted party to perform services as expected and in the manner agreed upon, the company is entitled to a reimbursement of lost profits only if the contracted party was negligent in its actions and was aware that its negligence would result in the loss of profits. Zander owns a factory and one of her machines, a drill press, broke down, causing the entire operation to come to a halt. Urgently, she called a repair company and asked how quickly they could repair the machine. The representative for the company said that they could probably have the drill press back in operation within two days, so Zander hired them to fix the machine. Unfortunately, repairing the machine was a more complicated job than originally thought, and there were delays; ultimately, it took ten days for the repairs to be completed. In the meantime, Zander's company lost an additional $7,000 in profits. Since she relied upon the claim from the repair company representative that the drill press would probably be fixed in two days, Zander demanded that the repair company reimburse her for the additional lost profits. When the repair company refused, Zander filed suit against them.

Two cases in this jurisdiction are controlling precedent:

Oakes v. Chandler: Oakes owns a small delivery business consisting of one truck. The piston rings in the engine of the truck became seriously damaged and needed repair. Oakes contacted Chandler, who runs an automotive repair shop that specializes in engines like the one in Oakes's truck. Oakes explained to Chandler that this is her only truck, and that her business would be completely shut down and unable to make any money until the truck was repaired and back in service. Chandler stated that he understood the situation, and he estimated that it would take a total of ten hours of his time, spread out over a few days, to make the repairs. He instructed her to return for the truck in 72 hours. While working on the repairs, however, Chandler spontaneously decided to join his friends for an out-of-town fishing trip and closed up his shop. Chandler was still out of town, and the shop still closed, when Oakes arrived to pick up her truck. By the time Chandler returned home and completed the repairs to Oakes's truck, an additional six days had gone by. Oakes sued Chandler for six days' worth of lost profits. The courts ruled in favor of Oakes.

Hadley v. Baxendale: Hadley operated a mill, and the crankshaft of the mill's steam engine broke, shutting down the mill. Hadley contacted the manufacturer, Joyce and Co., who instructed Hadley to ship the crankshaft to them for repair. Hadley contracted Baxendale, a shipping company, to deliver the crank shaft to the manufacturer. A Baxendale representative had informed Hadley that the delivery to Joyce would probably only take one day; however, due to unexpected severe weather conditions along the delivery route, the delivery ended up taking an extra three days, which resulted in Hadley's mill being shut down longer than anticipated. Hadley sued Baxendale for the recovery of the profits lost during the extra three days of the company's shutdown. The courts ruled in favor of Baxendale.

A. Based on the two precedent cases, who do you think should win the case: Zander or the repair company?

B. Which of the two precedent cases seems more analogous to Zander's case against the repair company? What are the relevant similarities between that precedent case and Zander's case?

C. What are the relevant differences between the other precedent case and Zander's case?