Rockingham
County contracted with a Luten to build a bridge.
There
was come controversy as to whether they really wanted the bridge to be
built, and a commissioner resigned.
They
decided not to build the bridge and told Luten to stop work.
Luten
already had completed $1,900 worth of work
Luten
knew the contract was in breach, but completed the bridge anyway.Then demanded the full contract price
($18k) as damages for breach of contract.
Luten
claimed that they didn't know the contract was in breach, but the court
said that was baloney.
Trial
Court decided that the facts were not in doubt and gave a summary judgment
ruling in favor of Rockingham for the full $18k.
Appellate
Court felt that the issue was not cut and dried and required a jury
trial.
Appellate
Court also stated that Luten knew the contract was in breach, and that
they had a duty to not further increase the damages.
"When
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 to pile up damages by
proceeding with the erection of a useless bridge."
Rockinham
County therefore is only liable for $1,900 which is the amount 'out of
pocket' Luten spent, plus the entirety of the profit (not specified by
number in the ruling).
In
theory, Luten should get $18k, since that is the benefit of the bargain.However the court felt that they didn't act in good faith by
continuing work after the breach.
This
case shows the principle of mitigation
of damages.You cannot recover
damages that could reasonably have been mitigated by the non-breaching
party. Contract law is not a
game.You cannot pile on
damages.Remember, contract law
doesn't attempt to punish.
This
is a 'very fundamental' principle of contract law, and is intimately
linked to the idea of strict liability.
It
is not technically accurate that you have a duty to mitigate in the sense that you will be punished.It's just that you won't recover for
damages that result for failure to mitigate.
