1. As Bishop notes, the foreseeability doctrine in contracts has little to do with the possible occurrence of low-probability events. It concerns the ability of the parties to control the magnitude of the damages that actually occur. Bishop emphasizes one device for doing so: providing notice of the special circumstances. An alternative, which he does not consider, is for the parties to arrange their affairs so that the magnitude of the damages would not be so great if the other party failed to perform. That is, in Hadley v. Baxendale the shipper could have reduced the expected cost of a breach by informing the carrier of the consequences of a failure to deliver or by carrying a greater inventory of shafts so that the plant would not have to remain idle in the event of a delay (breach) by the carrier.

The possibility that Hadley could have held a larger inventory of shafts (an input) has been widely recognized. Less attention has been given to other ways in which the costs of the failure could have been limited by timely effort on the part of Hadley. Hadley could have held a larger inventory of flour (the output). After the shaft was delivered and the mill again operating, Hadley could have made up for some of the lost output by running at a higher level of output than he otherwise would have. (In effect, that entails having a larger inventory of productive capacity – another input – than Hadley might otherwise carry.)