The term remoteness refers to the legal test of causation which is used when determining the types of loss caused by a breach of contract or duty which may be compensated by a damages award. Legal causation is different from factual causation which raises the question whether the damage resulted from the breach of contract or duty. Accordingly, once factual causation is established, it is necessary to ask whether the law is prepared to attribute the damage to the particular breach, notwithstanding the factual connection. Damage which is too remote is not recoverable even if there is a factual link between the breach of contract or duty and the loss.

Contract: In contract, the traditional test of remoteness is set out in Hadley v Baxendale ([1854] 9 Ex 341). The test is in essence a test of foreseeability. That is, the loss will only be recoverable if it was in the contemplation of the parties. The loss must be foreseeable not merely as being possible, but as being not unlikely.

The knowledge that is taken into account when assessing what is in the contemplation of the parties comes under two limbs: First, is the knowledge of what happens "in the ordinary course of things", which is imputed to the parties whether or not they knew it. Second, is actual knowledge of special circumstances outside the ordinary course of things but that was communicated to the defendant or otherwise known by the parties.

Following the decision in Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48 (The Achilleas) the remoteness test is about identifying the scope of an implied assumption of responsibility by the defendant in the contract. It, therefore, requires an assessment of the common expectation as to the scope of the defendant's liability.

Tort: In relation to some types of torts (in particular negligence and nuisance) the test for remoteness of damage is whether the kind of damage suffered was reasonably foreseeable by the defendant at the time of the breach of duty (Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd (The Wagon Mound No 1) [1961] AC 388). The defendant will be liable for any type of damage which is reasonably foreseeable as liable to happen even in the most unusual case unless the risk is so small that a reasonable person would in the whole circumstances feel justified in neglecting it (Heron II [1969] 1 AC 350).

Provided that the kind of damage is reasonably foreseeable, it does not matter that the manner of infliction or its extent was unforeseeable (Hugues v Lord Advocate [1963] AC 837 and Vacwell Engineering Co Ltd v BDH Chemicals Ltd [1971] 1 QB 88). Following the decision of the House of Lords in South Australia Asset Management Corporation v York Montague Ltd [1996] UKHL 10 (SAAMCO), as restated by Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20 and Khan v Meadows [2021] UKSC 21, it would appear that traditional principles of causation and remoteness have been supplemented by a need to determine whether the damage lies within the scope of the duty of care assumed by the defendant.