The basis of the remoteness rule in contract

Abstract

There is increasing support in the contract literature for the view that the remoteness rule is essentially concerned with identifying an implicit allocation of risk made by the contracting parties. This paper argues that the remoteness doctrine is more accurately seen as a method by which the courts allocate risks which the contracting parties have failed to allocate, rather than an interpretative rule. Through analysis of the principles and their application in the recent case-law in England, Canada and Australia, the paper shows that the identification of an implicit allocation of risk does not and cannot determine remoteness cases in contract. The justice of the remoteness rule is not based on the notion that the defendant undertook responsibility for the risk in question, but on a concern that the defendant should have a reasonable opportunity to consider the risks that might arise from breach and take action to avoid them.

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