Rockingham Cty. v. Luten Bridge Co.
35 F.2d 301 (4th Cir. 1929)Parker, Circuit J.
This was an action at law instituted in the court below by the Luten Bridge Company, as plaintiff, to recover of Rockingham county, North Carolina, an amount alleged to be due under a contract for the construction of a bridge. The county admits the execution and breach of the contract, but contends that notice of cancellation was given the bridge company before the erection of the bridge was commenced, and that it is liable only for the damages which the company would have sustained, if it had abandoned construction at that time. The judge below . . . instructed a verdict for plaintiff for the full amount of its claim. From the judgment on this verdict the county has appealed.
The facts out of which the case arises, as shown by the affidavits and offers of proof appearing in the record, are as follows: On January 7, 1924, the board of commissioners of Rockingham county voted to award to plaintiff a contract for the construction of the bridge in controversy.
. . .
[At a meeting a little over a month later,] a resolution was unanimously adopted declaring that the contract for the building of the bridge was not legal and valid, and directing the clerk of the board to notify plaintiff that it refused to recognize same as a valid contract, and that plaintiff should proceed no further thereunder. This resolution also rescinded action of the board theretofore taken looking to the construction of a hard-surfaced road, in which the bridge was to be a mere connecting link. The clerk duly sent a certified copy of this resolution to plaintiff.. . . At the time of the passage of the first resolution, very little work toward the construction of the bridge had been done, it being estimated that the total cost of labor done and material on the ground was around $1,900; but, notwithstanding the repudiation of the contract by the county, the bridge company continued with the work of construction.
On November 24, 1924, plaintiff instituted this action against Rockingham county . . .
As the county now admits the execution and validity of the contract, and the breach on its part, the ultimate question in the case is one as to the measure of plaintiff's recovery . . .As to the measure of plaintiff's recovery -- we do not think that, after the county had given notice, while the contract was still executory, that it did not desire the bridge built and would not pay for it, plaintiff could proceed to build it and recover the contract price. It is true that the county had no right to rescind the contract, and the notice given plaintiff amounted to a breach on its part; but, after plaintiff had received notice of the breach, it was its duty to do nothing to increase the damages flowing therefrom. If A enters into a binding contract to build a house for B, B, of course, has no right to rescind the contract without A's consent. But if, before the house is built, he decides that he does not want it, and notifies A to that effect, A has no right to proceed with the building and thus pile up damages.
Is it really true that, in all cases, A would have "no right to proceed with the building"? Consider this variant of the court's house building example. A is building a house for B on land A owns. A and B have agreed that B shall purchase both the land and the house once the house has been completed. When construction of the house is half-complete, B informs A that he no longer wants the house and the land and will not pay for either. A continues construction of the house because A decides, after B's announcement, to live in the house himself. It is A's house and land, so A has the right to complete the house.
(a) True
(b) False
His remedy is to treat the contract as broken when he receives the notice, and sue for the recovery of such damages, as he may have sustained from the breach, including any profit which he would have realized upon performance, as well as any other losses which may have resulted to him. In the case at bar, the county decided not to build the road of which the bridge was to be a part, and did not build it. The bridge, built in the midst of the forest, is of no value to the county because of this change of circumstances. When, therefore, the county gave notice to the plaintiff that it would not proceed with the project, plaintiff should have desisted from further work. It had no right thus to pile up damages by proceeding with the erection of a useless bridge.
. . . The American rule and the reasons supporting it are well stated by Prof. Williston as follows:
"There is a line of cases running back to 1845 which holds that, after an absolute repudiation or refusal to perform by one party to a contract, the other party cannot continue to perform and recover damages based on full performance. This rule is only a particular application of the general rule of damages that a plaintiff cannot hold a defendant liable for damages which need not have been incurred; or, as it is often stated, the plaintiff must, so far as he can without loss to himself, mitigate the damages caused by the defendant's wrongful act. The application of this rule to the matter in question is obvious. If a man engages to have work done, and afterwards repudiates his contract before the work has been begun or when it had been only partially done, it is inflicting damage on the defendant without benefit to the plaintiff to allow the latter to insist on proceeding with the contract. The work may be useless to the defendant, and yet he would be forced to pay the full contract price. On the other hand, the plaintiff is interested only in the profit he will make out of the contract. If he receives this it is equally advantageous for him to use his time otherwise.". . .
It follows that there was error in directing a verdict for plaintiff for the full amount of its claim. The measure of plaintiff's damage, upon its appearing that notice was duly given not to build the bridge, is an amount sufficient to compensate plaintiff for labor and materials expended and expense incurred in the part performance of the contract, prior to its repudiation, plus the profit which would have been realized if it had been carried out in accordance with its terms. . . .
Prior to the County's breach, Luten Bridge had spent $1,900 in partially constructing the bridge. Suppose that the contract price for construction of the bridge was $20,000 and that, after the County's breach, Luten Bridge spent an additional $12,100 constructing the bridge. In this case, the court would award Luten bridge only $1,900 plus its profit of $7,000.
(a) True
(b) False
The judgment below will accordingly be reversed, and the case remanded for a new trial.
Reversed.
Notes and Questions
(1) The injured party only recovers those damages that it could not avoid by taking reasonable steps after the breach to reduce the losses caused by the breach. This is called the duty to mitigate damages, or, the doctrine of avoidability. One who takes all reasonable steps to reduce damages is said to properly mitigate damages, or to be a proper mitigator.
(2) The fundamental goal of awarding damages for breach of contract is to put the injured party in as good a position as he or she would have been in if the contract had been performed as promised. Awarding Luten Bridge only the costs it incurred before the county announced that it would not pay for the bridge
(3) Suppose Luten Bridge did stop construction after the county announced that it would not pay for the bridge. Suppose it had construction materials for which it no longer had any use and could sell for $1,000. Selling the materials would
(a) be a reasonable step to reduce the damages after the breach.
(b) would not be a reasonable step to reduce damages after the breach.
(4) Suppose Luten Bridge did stop construction after the county announced that it would not pay for the bridge. It had construction materials for which it no longer had any use. The company had good reason to think that it can sell the materials to another bridge company if it transported the materials to that company's construction site. They spent $100 transporting the materials, but, when they arrived, the other company decided not to buy them.
Which policy would be most consistent with the purpose of providing non-breachers with an incentive to take reasonable steps to reduce damages after a breach?
(a) Awarding Luten Bridge the $100 expense even though it did not in fact sell the materials.
(b) Not awarding Luten Bridge the $100.