Brief Fact Summary.
Defendant and Plaintiff entered into a delivery contract in which Defendant agreed to delivery flour to Plaintiff on a specified date. Plaintiff paid Defendant a cash advance. Defendant failed to deliver the flour. The parties disputed the proper measure of damages.
Synopsis of Rule of Law.
When a non-breaching party pays an advance under a delivery contract, the price of goods at the time of delivery is not the proper measure of damages; instead, a refund of the advance is the proper measure of damages.
Canfield (Defendant) and Norton & Bush (Plaintiff), a partnership, agreed that Defendant would deliver flour to Plaintiff. According to their contract, the price of flour would be $7 per barrel at the time of delivery. Plaintiff paid Defendant in advance $5,000 for the flour and agreed to pay the rest later. After Defendant failed to deliver the flour, Plaintiff brought suit for damages. At trial, evidence showed that the price for flour was $5.50 per barrel at the time they entered into a contract. The trial court instructed jury to calculate damages as the amount Plaintiff paid in advance plus interest if the jury found in favor of Plaintiff. After the jury returned a verdict for $6,771, Defendant petitioned for a new trial to the Supreme Court of Errors.
When a non-breaching party pays an advance under a delivery contract, is the price of goods at the time of delivery the proper measure of damages?
No. When parties enter into a contract for the delivery of goods, the proper measure of damages to the non-breaching party is the value of the goods on the day of delivery plus interest for any delay. In cases in which non-breaching parties pay an advance, there is no authority for calculating damages. It would be unfair for Defendant to have Plaintiff receive a reduced price from their contract as a result of his breach. Under the facts of this case, the fairest outcome is to require Defendant to return the cash advance. Therefore, Defendant’s petition for a new trial is denied.
(Hosmer, J.): Plaintiff sued for damages for breach of contract. Plaintiff did not sue for the return of the cash advance. As such, Plaintiff should recover damages calculated by referring to the value of the flour on the day it should have been delivered. Returning the cash advance goes against the contract principle that a non-breaching party is entitled to compensation for the injuries it suffers as a result of a breach. Since there is no authority to support the return of a cash advance, a new trial should be granted. Judges should only enforce contracts, not rewrite them.
(Peters, J.): Awarding damages is meant to indemnify the non-breaching party for the actions of the breaching party. Plaintiff did not attempt to purchase the flour after the breach, and instead immediately filed suit. If a ruling does not result in an injustice or if it is obvious that the non-breaching party made no effort to mitigate his loss, then a new trial should not be granted.
(Trumbull, J.): Justice is served by making Defendant give back the cash advance to Plaintiff. Plaintiff performed its obligation under the contract by giving an advance to Defendant, while Defendant failed to perform under the contract completely. Plaintiff would only be entitled to nominal damages if Plaintiff had not performed under the contract at all. Recovery of the cash advance represents the damages suffered from Defendant’s breach
The proper measure of damages to a non-breaching party for breach of a delivery contract is as follows: If the price of goods increases, then the non-breaching party should be entitled to the increase in price. However, if the price of goods decreases, then the non-breaching party is only entitled to nominal damages. Since there is no authority when a non-breaching party pays an advance, the court determined what would be deemed a fair amount of damages. As such, a return of the cash advance is fair in this case.