Cricket Alley Corp. v. Data Terminal Systems, Inc.

Brief Fact Summary.

Plaintiff sued Defendant for breach of express warranty, seeking incidental and consequential damages when the registers and computer purchased from Defendant did not communicate with each other. The jury awarded damages to Plaintiff. Defendant appealed.

Synopsis of Rule of Law.

Upon a seller’s breach of warranty, a buyer may recover, as consequential damages, any loss resulting from its needs that the seller had reason to know of at the time of contracting.

Facts.

Cricket Alley Corporation (Plaintiff) purchased computerized cash registers from Data Terminal Systems, Inc. (Defendant). Plaintiff had purchased a Wang computer, which was located in its general office, and was told that the DTS registers would be able to communicate with the Wang computer. Plaintiff installed the DTS registers, but they were unable to communicate with the Wang computer. Plaintiff sued Defendant for breach of an express warranty. Plaintiff sought incidental and consequential damages. Plaintiff’s claimed consequential damages represented its increased labor costs attributable to the failure of the DTS registers to communicate with the Wang computer. The jury awarded damages in Plaintiff’s favor. Defendant appealed, arguing that Plaintiff was not entitled to recover consequential damages.

Issue.

Whether a buyer may recover any loss resulting from its needs that a seller had reason to know of at the time of contracting if the seller breaches a warranty.

Held.

Yes. The trial court’s ruling is affirmed. Upon a seller’s breach of warranty, a buyer may recover, as consequential damages, any loss resulting from its needs that the seller had reason to know of at the time of contracting.

Discussion.

Under Kansas law, KSA 84-2-715(2), consequential damages resulting from a seller’s breach of warranty include: (1) any loss resulting from the general or particular requirements and needs of the buyer, of which the seller had reason to know at the time of contracting, which could not reasonably have been prevented and (2) injury to person or property that is proximately caused by the breach. The comments to this statute provide that the particular needs of the buyer must generally be made known to the seller in order to charge the seller with knowledge of those needs, while the general needs of the buyer need not be made known to the seller. Here, the consequential damages claimed by Plaintiff are the increased labor costs attributable to the failure of the DTS registers to communicate with the Wang computer. Defendant argues that it is not liable for these consequential damages, because it did not know the general or particular requirements and needs of Plaintiff’s business at the time the contract was made. However, the DTS registers are expensive and sophisticated, suitable only for more complex retail establishments, such as Plaintiff’s. The submission of data from the registers to a mainline computer is a common feature in these types of registers, and a failure to do that would create foreseeable additional costs for merchants. The consequential damages being sought by Plaintiff in this case are therefore not unique or particular to Plaintiff’s business and were properly included as an element of Plaintiff’s damages. In addition, the Uniform Commercial Code (UCC) recognizes that the objective of damages is to place the aggrieved party in as good a position as if the other party had fully performed. Accordingly, under the UCC, consequential damages need not be proven with any particular degree of certainty; loss may be determined in any manner that is reasonable under the circumstances.