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contractdefendantdamagesarbitrationliabilitycorporation
defendantdamagesliabilitywillcorporation

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Evra Corp. v. Swiss Bank Corp., 673 F.2d 951, 1982 A.M.C. 2665, 33 Fed.R.Serv.2d 1666, 34 UCC Rep.Serv. 227

Facts

Hyman-Michaels Company entered into a charter agreement for the ship Pandora to transport steel scrap to Brazil. The charter required timely payments to the ship's owner, which were typically made via wire transfer through Continental Illinois National Bank. After a series of events, including a late payment due to a mailed check instead of a wire transfer, the ship's owner canceled the charter. Hyman-Michaels later attempted to make a payment via wire transfer, but Swiss Bank failed to process the transfer, leading to further complications and arbitration. Ultimately, Hyman-Michaels sought damages from Swiss Bank for the losses incurred due to the cancellation of the charter.

Hyman-Michaels Company entered into a charter agreement for the ship Pandora to transport steel scrap to Brazil. The charter required timely payments to the ship's owner, which were typically made via wire transfer through Continental Illinois National Bank.

Issue

The main legal issue was the extent of a bank's liability for failing to make a requested transfer of funds when the bank was not notified of the special circumstances that would lead to consequential damages.

The question-one of first impression-in this diversity case is the extent of a bank's liability for failure to make a transfer of funds when requested by wire to do so.

Rule

Under Illinois law, consequential damages are not recoverable unless the defendant was put on notice of the special circumstances giving rise to those damages, as established in Hadley v. Baxendale.

The rule of Hadley v. Baxendale-that consequential damages will not be awarded unless the defendant was put on notice of the special circumstances giving rise to them-has been applied in many Illinois cases, and Hadley cited approvingly.

Analysis

The court analyzed whether Swiss Bank had sufficient notice of the potential consequences of failing to process the wire transfer. It concluded that while Swiss Bank had some knowledge of Hyman-Michaels' business dealings, it did not have enough information to foresee the significant financial losses that would result from the failure to transfer the funds. The court emphasized that the lack of a contractual relationship and the imprudence of Hyman-Michaels in handling the payment process contributed to the outcome.

The present case is similar, though Swiss Bank knew more than Western Union knew in Siegel; it knew or should have known, from Continental Bank's previous telexes, that Hyman-Michaels was paying the Pandora Shipping Company for the hire of a motor vessel named Pandora.

Conclusion

The court ruled that Hyman-Michaels was not entitled to recover consequential damages from Swiss Bank due to the lack of notice regarding the special circumstances. Consequently, the claims against Swiss Bank were dismissed.

The undisputed facts, recited in this opinion, show as a matter of law that Hyman-Michaels is not entitled to recover consequential damages from Swiss Bank.

Who won?

Swiss Bank Corporation prevailed in the case because the court found that it was not liable for the consequential damages claimed by Hyman-Michaels, as it had not been notified of the special circumstances that would lead to such damages.

Swiss Bank Corporation prevailed in the case because the court found that it was not liable for the consequential damages claimed by Hyman-Michaels, as it had not been notified of the special circumstances that would lead to such damages.

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