Yale law professor Ian Ayres covers Hadley v. Baxendale, the foundational contract law case on consequential damages, drawn from his American Contract Law course. The case involves a mill owner whose broken crank shaft was shipped late by a carrier, causing lost profits while the mill sat idle. Ayres walks through why the court refused to award those lost profits, establishing the rule that damages must be foreseeable at the time of contracting to be recoverable. The lecture situates the case within a broader unit on remedies and breach by the seller, explaining how foreseeability limits liability and why parties who want protection for unusual losses must communicate those risks in advance. Ayres works through the reasoning judge by judge, connecting the doctrine to modern default rules on damages in commercial transactions.