Final answer:
The concept that an injured party may recover consequential damages only if those damages were foreseeable by the breaching party was established in Hadley v. Baxendale. This rule is central to the awarding of damages in contract law.
Step-by-step explanation:
The concept that an injured party may recover consequential damages only if the breaching party should have foreseen them was established in c. Hadley v. Baxendale. This case set the precedent for the rule of foreseeability in contract law, which means that for an injured party to recover additional damages beyond the direct consequences of a breach of contract, those damages must have been reasonably foreseeable to the breaching party at the time the contract was made.
A counter example illustrating the importance of foreseeability can be seen in the case of a manufacturer knowingly selling automobiles with defective brakes. The manufacturer's prior knowledge of the defects and their potential to cause harm would make it foreseeable that accidents and injuries could occur, which can result in the manufacturer's liability for consequential damages.