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Asking AI To Summarize Hadley v Baxendale

I am curious about the difference between Chat GPT-3.5 and Chat GPT-4 in regard to synthesizing legal rules from jurisprudence, so I decided to check the difference between the two models when asked to summarize a famous legal rule, the holding in Hadley v. Baxendale.

Hadley v Baxendale is “more often cited as authority than any other case in the law of damages” and “Hadley v. Baxendale is still, and presumably always will be, a fixed star in the jurisprudential firmament” (source).

I think this is a valuable exercise because older cases like Hadley v Baxendale are difficult to read and synthesize a rule from because the language is so archaic and full of ancient legalese, being about 170 years old. Reading and interpreting such old case law takes longer than it should, and anything that speeds that up is great.

Before we see what Chat GPT says about Hadley v Baxendale, lets see what a human says. Melvin A. Eisenberg is the Jesse H. Choper Professor of law at the University of California, Berkeley. He wrote a textbook called Foundational Principles of Contract Law. In that textbook, Eisenberg summarized the rule of Hadley v Baxendale as follows:

Under [the Hadley v Baxendale] principle, a promisee injured by a breach of contract can recover only those damages that either should “reasonably be considered . . . as arising naturally, i.e., according to the usual course of things” from the breach, or might “reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.” On the basis of Hadley v. Baxendale contract law has conventionally distinguished between general and consequential damages. General damages are damages that flow from a given type of breach without regard to the buyer’s particular circumstances. Consequential damages are damages that flow from the buyer’s particular circumstance. They can be recovered only if at the time the contract was made it was reasonably foreseeable that the damages would probably result from the breach. A better alternative to Hadley v. Baxendale, which is more in keeping with general law, has three elements: contractual allocation of losses resulting from the breach, the principle of proximate cause, and limits on disproportionate damages.

Eisenberg, Melvin A., ‘The Principle of Hadley v. Baxendale‘, Foundational Principles of Contract Law (New York
, 2018; online edn, Oxford Academic, 18 Oct. 2018), https://doi.org/10.1093/oso/9780199731404.003.0019, accessed 28 Mar. 2023.

Prompt

I used the exact same prompt for Chat GPT-3.5 and 4. It was a simple prompt that I assume any lawyer or law student just learning AI would think to use: “Summarize the rule in the case Hadley v Baxendale, located here: https://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html”.

Chat GPT-3.5

Chat GPT-3.5 had this to say about the rule in Hadley v. Baxendale:

Hadley v Baxendale is a landmark case in the area of contract law. The case involves a contract for the delivery of a broken steam engine to the defendant’s works for the purpose of repairing it. The plaintiffs claimed damages against the defendants for loss of profits resulting from the delay in delivery of the repaired engine.

The court established a general rule that in assessing damages for a breach of contract, the damages must be of such a nature that they would arise naturally, i.e., according to the usual course of things, from the breach itself or must have been communicated to the defendant as a special circumstance at the time the contract was made. These are known as the “first limb” and “second limb” of the rule respectively.

In other words, if the defendant was aware or ought to have been aware of the special circumstances at the time the contract was made, then the plaintiff may recover damages that arise from the breach of those special circumstances. If, however, the special circumstances were not communicated to the defendant, then the plaintiff may only recover damages that arise naturally from the breach.

In the case of Hadley v Baxendale, the plaintiffs had not communicated the special circumstances of the loss of profits to the defendants at the time the contract was made. As a result, the plaintiffs could only recover damages that naturally flowed from the breach, which in this case was the cost of obtaining a replacement engine. The plaintiffs were therefore not entitled to recover the loss of profits resulting from the delay in delivery of the repaired engine.

Chat GPT 3.5, accessed March 23, 2023

I thought this was not great. I would have loved to have seen just the rule and an emphasis on the explicit issue of “foreseeability”. I didn’t need to know facts of the case and I shouldn’t have been given the extra more complicated rules about “first and second limbs”. I just wanted the rule that Eisenberg summarized, in that “a promise injured by a breach of contract can recover only those damages that either should “reasonably be considered . . . as arising naturally, i.e., according to the usual course of things” from the breach”.

Admittedly, I could have prompted the AI better to only include the central rule of the case, not the facts or any other additional sub-rules that weren’t relevant to my research.

Lets see if Chat GPT-4 can do a better job with my prompt.

Chat GPT-4

Chat GPT-4 had this to say about the rule in Hadley v. Baxendale:

Hadley v Baxendale (1854) is a foundational English contract law case that established the principle of foreseeability as a key determinant for the award of consequential damages in breach of contract cases.

In this case, the plaintiffs (Hadley) owned a mill, and a crankshaft in their steam engine broke. They contracted with the defendants (Baxendale) to deliver the broken crankshaft to the manufacturers so that a replacement could be made. However, the defendants delayed the delivery, resulting in the mill being inoperative for a longer period of time. The plaintiffs sued the defendants for the loss of profits due to the delay.

The court held that the defendants were not liable for the lost profits, as they were not aware of the potential consequences of the delay. The court established a rule that consequential damages can only be awarded if they are reasonably foreseeable by both parties at the time the contract is made. In other words, a breaching party is only liable for losses that they either knew or should have known would result from their breach.

In summary, Hadley v Baxendale established the rule that consequential damages for breach of contract can only be recovered if they were reasonably foreseeable by both parties at the time the contract was made.

Chat GPT 4, accessed March 23, 2023

Chat GPT-4 did a much better job. It started with the rule right off the bat (unlike GPT-3.5, which got into the facts first) and synthesized the rule to make it very easy to understand. Indeed, with all due respect, the rule in this output was easier to wrap my brain around than the professor’s. I was particularly pleased with the conclusion in that it basically summarized the importance of the case and the rule and the key issue (foreseeability) in just one short sentence.

Although, again, I did not need to know anything about the facts. All I asked for was the rule.

Conclusion

If I were to make a legal tech application model to try and output caselaw rules from AI, I would train the prompt to only provide what was essentially the last paragraph (the summary) of what Chat GPT-4 did here. That’s all I wanted when I went about running this experiment, and that last paragraph summary was really well done.

My AI prompt