AI A Thumbnail Sketch of Damages

Al. A THUMBNAIL SKETCH OF DAMAGES

Al.l Breach of Contract Cases

A. Damages Generally

1. Damages are given as compensation for the injury sustained as a result of the breach of a contract. O.C.G.A. § 13-6-1.

2. To recover for a breach of contract, damages:

(a) Must arise naturally and normally from the breach; and

(b) According to the usual course of things from such breach; and

(c) Such as the parties contemplated, when the contract was made, as the probable result of its breach.

O.C.G.A. § 13-6-2.

“The cardinal rule in assessing the damages for a breach of contract is to attempt to place the non-breaching party, in so far as possible, in the same position it would have been if the contract had not been breached.” Eastgate Assocs., Ltd. v. Piggly Wiggly Southern, Inc., 200 Ga. App. 872, 874–75, 410 S.E.2d 129, 132 (1991)(citing, Georgia Power, etc., Co. v. Fruit Growers, etc., Co., 55 Ga.App. 520, 190 S.E. 669).

B. Measures of Damages

1. “The object of giving damages to the plaintiff is to put him in as good a position as if the defendant had fully performed the contract.” PMS Const. Co., Inc. v. DeKalb -County, 243 Ga. 870, 872, 257 S.E.2d 285, 288 (1979). See, also, Crankshaw v. Stanley Homes, Inc., 131 Ga.App. 840, 207 S.E.2d 241 (1974).

2. “The measure of damages for breach of contract is the amount which will compensate the injured person for a loss which a fulfillment of the contract would have prevented or the breach of it entailed. That is, the injured person is, so far as it is possible to do so by a monetary award, to be placed in the position he would have been if the contract had been fully performed.” Accent Walls, Inc. v. Parker, 162 Ga. App. 633, 633, 292 S.E.2d 509, 510 (1982).

3. “Damages are given as compensation for the injury sustained and ‘(a)n injured party can not be placed in a better position than he would have been in if the contract had not been breached.’” Gainesville Glass Co. v. Don Hammond, Inc., 157 Ga. App. 640, 644, 278 S.E.2d 182, 185–86 (1981) (quoting, Lastinger v. City of Adel, 69 Ga.App. 535, 536, 26 S.E.2d 158, 159 (1943).

4. “Only actual (i.e., compensatory) or nominal damages are recoverable in a breach of contract case. (Cits. omitted.) Punitive damages or damages for “aggravation” are not allowed.” Ginsberg v. Termotto, 175 Ga. App. 265, 268, 333 S.E.2d 120, 123–24 (1985).

5. Where contract is anticipatorily breached, the non-breaching party may recover both cost of partial performance and expected profits, but the total may not exceed the contract price. Murray v. Americare-Medical Designs, Inc., 123 Ga. App. 557, 559, 181 S.E.2d 871, 873 (1971) See L. Campbell & Co. v. Mion Bros., 6 Ga.App. 134, 64 S.E. 571 (1909).

Construction Contracts

6. In construction contracts where work is incomplete or defective:

a. “Generally, the proper measure of damages for defective workmanship would be the cost of repair of the defect. [Cits.]” Paul Davis Sys. of Savannah, Inc. v. Peth, 201 Ga. App. 734, 736, 412 S.E.2d 279, 281 (1991)(quoting, Adamson Co. v. Owens-Illinois Devevelopment Corp., 168 Ga.App. 654, 657, 309 S.E.2d 313 (1983)). See, also, Hortman v. Cantrell et al., 173 Ga.App. 429, 326 S.E.2d 779 (1985); Gregory v. Townsend Roofing Co., 163 Ga.App. 836, 296 S.E.2d 154 (1982).

b. Alternate recent formulation: damages for defective construction are determined by "measuring the cost of repairing or restoring the damage, unless the cost of repair is disproportionate to the property's probable loss of value." Pollman v. Swan, 289 Ga. 767, 769(2), 716 S.E.2d 191 (2011).

c. Where the defect cannot be remedied at reasonable cost, “the true measure of damage, and one which would not be unjust in its application to either party, would be the difference between the value of the [improvement] as finished and the [improvement] as it ought to have been finished.” Ideal Pool Corp. v. Hipp, 187 Ga. App. 273, 275, 370 S.E.2d 32, 34 (1988). “Proof of the cost of repair because of the defective construction is illustrative of the difference in value claimed as damages, and is more likely to represent the true damage suffered from the failure of the seller to complete his contract than would the opinion of an expert in real estate as to the difference in values, though such proof would also have been permissible.” Rose Mill Homes, Inc. v. Michel, 155 Ga. App. 808, 808, 273 S.E.2d 211, 212 (1980). See, also, Boggs v. Shadburn, 65 Ga.App. 683, 16 S.E.2d 234 (1941).

EXAMPLES - A building built in the wrong location or not according to specifications might cost nearly as much to make conform as to build in the first place. As completed, the structure may be of substantial value. The Plaintiff would have to prove the fair market value difference between the conforming and non-conforming constructions.

On the other hand, the fact that the defective performance rendered is already more valuable than the contract price does not prevent a suit for damages for non-compliance with the contract since the buyer is entitled to the benefit of the bargain , A.W. Easter Const. Co., Inc. v. White, 137 Ga.App. 465, 224 S.E.2d 112 (1976)(the market value increase between completion of construction and date of trial two years later was not relevant in calculating damages).

7. “When a construction contract is wrongfully breached, the basic component of damages is the net profit the contractor would have received had full performance been permitted. That figure is calculated by subtracting from the contract price the amount full performance would have cost the contractor. Amounts spent on materials that the contractor could subsequently use on future projects must be accounted for as would any other expenditures affecting profit. Where… both parties have partially performed, the amount must be adjusted to reflect their various payments.” (Cit’s omitted.) Dill v. Chastain, 234 Ga. App. 770, 771, 507 S.E.2d 872, 873 (1998).

Sale of Goods

8. Buyer's remedies:

Buyer has a choice:

a. Goods not delivered or rightfully rejected: Buyer may "cover" by purchasing in good faith and without unreasonable delay goods in substitution, and recover the difference in the cost of cover plus any incidental or consequential damages but less any expenses saved in consequence of seller's breach. O.C.G.A. § 11-2-712. Or,

b. Goods not delivered or repudiated by the Seller: Buyer may recover the difference between the market price at the time when buyer learned of the breach and the contract price plus consequential expenses but less expenses saved. O.C.G.A. § 11-2-713. Or,

c. Goods are accepted: Buyer may recover the difference in value at the time of acceptance and value they would have had if conforming to contract. O.C.G.A. § 11-2-714.

d. On rightful rejection or justifiable revocation of acceptance a buyer has a security interest in goods in his possession or control for any payments made on their price and any expenses reasonably incurred in their inspection, receipt, transportation, care, and custody and may hold such goods and resell them in like manner as an aggrieved seller. O.C.G.A. § 11-2-711(3).

Seller’s Remedies

9. Upon Buyer’s wrongful rejection or revocation of acceptance of goods, or failure to make payment before delivery, Seller may (O.C.G.A. § 11-2-703):

a. Withhold delivery of the goods;

b. Stop delivery by any bailee. O.C.G.A. § 11-2-705);

c. Resell the goods and recover damages. O.C.G.A. § 11-2-706;

d. Recover damages for nonacceptance O.C.G.A. § 11-2-708 or the price of the goods O.C.G.A. § 11-2-709.

e. In some cases Seller may identify goods to contract, and dispose of them (even selling for scrap and sue for contract price). O.C.G.A. § 11-2-704.

f. Cancel the contract.

10. Damages to leased premises: “[F]or breach-of-contract actions involving injury to real property, the general rule is that the measure of damages ‘is the diminution of the fair market value of the property and/or the cost of repair or restoration, but limited by the fair market value at the time of the breach or tort.’” Goody Prod., Inc. v. Dev. Auth. of City of Manchester, 320 Ga. App. 530, 539, 740 S.E.2d 261, 270 (2013)(quoting Robert E. Canty Bldg. Contractors v. Garrett Machine & Construction, Inc., 270 Ga.App. 871, 608 S.E.2d 280 (2004).

11. Lost Profits (O.C.G.A. § 13-6-2):

Generally, plaintiff must be able to prove he lost profits directly due to defendant’s breach.

a. Breach of Contract: “[T]he actual damages the plaintiff was entitled to recover, in such a case, embraced the difference between the cost of doing the work and the price to be paid for it; that the measure of damages for the breach or refusal to carry out such contract should be computed by ascertaining the profits of the enterprise, after deducting the legitimate and actual costs of its execution.” Rice v. Caudle, 71 Ga. 605, 607 (1883)(quoting, Wallace v. Tumlin, 42 Ga. 463 (1871). Rice contracted with Caudle for the exclusive right to sell guano at a given price in a given territory. Caudle placed other agents in the territory, interfering with Rice’s exclusive right to sell. Rice was entitled to the additional profit he would have made had his exclusive right been honored.

b. Damages cannot be speculative: “As a general rule anticipated profits prevented by the breach are not recoverable in the way of damages as usually they are too dependent upon uncertain and changing contingencies and are not as a matter of course the direct and immediate result of the non-fulfillment of the contract. But it is equally well settled that profits which would have been realized had the contract been performed may be recovered as damages where the profits are not open to the objection of uncertainty or remoteness or where under the expressed or implied terms of the contract itself or the special situations under which it was made, it may be reasonably assumed that they were within the intent and mutual understanding of both parties at the time it was entered...