Rockingham County v. Luten Bridge Co.
35 F.2d 301 (4th Cir. 1929)
Rockingham County contracted
with a Luten to build a bridge.
There was come controversy
as to whether the county really needed the bridge to be built, and a
Rockingham 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
Rockingham paid the bill, and
then turned around and sued to get the money back.
Rockingham argued that the
contract was void as soon as they told Luten to stop working, so they
were not liable for any charges after that time.
The Trial Court found for
Rockingham in summary judgment.
The Appellate Court reversed.
The Appellate Court found
that as soon as Luten knew the contract was in breach, 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
The Court found that
Rockinham was only liable for $1,900.
That's the amount 'out of
pocket' Luten spent, plus the entirety of the profit they would have
received if the contract went to completion.
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
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.