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Pertinent Legal Findings 



Measuring Damages Under Broken Contracts 



The reports of the appellate courts contain almost innumerable 

 decisions on questions relating to the amount which may be recov- 

 ered for breach of a contract to sell and deliver lumber or other 

 products of timber. A correspondent has looked over many of these 

 as a basis for submitting the following observations for the inter- 

 est of readers of Hakdwood Kecord: 



Broadly stated, the buyer's rights in such a case are restricted to 

 such damages as have resulted to him as a direct and natural conse- 

 quence of the seller's default. But, as a general rule, no recovery 

 can be had for loss to the buyer which would not have been foreseen 

 by the seller at the time the agreement for sale was entered into. 

 Another cardinal principle which governs these cases is that the buyer 

 must use a reasonable degree of diligence to minimize any loss result- 

 ing to him from the seller 's breach. For instance, if a hardwood lum- 

 ber company contracts to deliver a quantity of certain described 

 material to a furniture manufacturing company, and fails to fulfill 

 the agreement, the buying concern has no riglit to claim substantial 

 damages against the seller, if it appears that, when the contract was 

 broken, the buyer could have readily purchased the lumber elsewhere 

 at a price which would have protected it against actual loss. This 

 rule is based upon the well settled principle that mere invasion of 

 a legal right does not give a riglit of action for substantial damages, 

 unless there has been an unavoidable substantial loss to the party 

 aggrieved. 



It follows tliat, as a general rule, the damages which can be recov- 

 ered for such a breach of agreement are to be measured by the 

 excess of the market value of lumber contracted to be sold, at the 

 agreed time and place for delivery, above the contract price. If, on 

 snch a breach of contract, the buyer can make a ready purchase in 

 the same, or a nearby, market at the same cost as the contract price, 

 including transportation cliarges, he will not be permitted to recover 

 more than nominal damages. Sometimes, of course, the buyer finds 

 it impossible to jirocure the same grade of lumber elsewhere that he 

 has contracted for. In such case, it has Vjeen held that, if he is com- 

 pelled to buy a better grade by inability to obtain the grade con- 

 tracted for, he can recover the excess of the enhanced price paid on 

 his actual purchase above the price at which the defaulting seller 

 ageed to sell. (91 Northwestern Reporter 137.) 



When a company, in making a contract to sell, is advised that the 

 buyer is purchasing for some s[)ecific purpose, such as resale or use 

 in a particular Iniilding, the buyer, on breach of the agreement, may 

 recover the loss sustained by liim as a direct consequence of being 

 prevented from devoting the materials to such use, if he could not 

 obtain hunber to fill his needs elsewhere. In such cases, the seller 

 may become liable for the amount of profits lost by the buyer through 

 non-fulfillment of the contract on the seller's part. 



Since damages are computed with reference to the date when the 

 breach occurs, if a contract of sale called for deliveries in install- 

 ments at different times, the damages must be assessed with regard 

 to the market value; of the lumber at those various times. (Minne- 

 sota supreme court, .37 Northwestern Reporter 129.) 



If the seller makes delivery within the stipulated time, but the 

 shipment proves to be of inferior quality, the buyer, on choosing to 

 retain the lumber and use it, instead of exercising his alternative 

 right to reject the delivery, may enforce a claim for the excess of the 

 market value of the lumber called for by the contract over the value 

 of the lumber delivered. If the buyer rejects the delivery on account 

 of inferiority in grade, his damages are measurable, of course, on the 

 same basis as if there had been no delivery. 



And when there is no total failure to make delivery, but merely 

 a delay, the usual standard for recovery is the difference between the 

 value of the lumber when actually delivered and its value when it 

 should have been delivered, subject to application of the rule concern- 

 ing special damages above mentioned. 



In an eastern case it was agreed that logs should be delivered at a 

 certain boom at prevailing market prices. On breach of the agree- 



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ment on the part of the seller, it appeared that there had been no 

 sales of logs at that place, and that, therefore, there was no market 

 price there. In this situation it was held by a court that the damages 

 should be assessed with reference to the market value of logs at the 

 nearest neighboring boom, plus the cost of transportation to the 

 particular boom. (53 Atlantic Reporter 1110.) 



Applying the rule above stated that a person aggrieved through 

 breach of an agreement must take reasonable steps to purchase else- 

 where to minimize his damage, it has been judicially declared that 

 where there was a shortage in standing timber contracted to be sold, 

 the buyer could not recover substantial damages without showing 

 that he was unable to buy other timber to take the place of the short- 

 age in the same neighborhood at an equally favorable price. 



To meet the common case where an agreement of sale gives the 

 seller latitude in the matter of selecting grades or quantities to be 

 shipped, it has been decided by a southwestern court that damages 

 assessed for his failure to make any delivery must be based upon the 

 smallest (Juantity of lumber which he could tender in performance of 

 the contract, of the grade on which the loss sustained by the buyer 

 would be the least. That is, it must be presumed that the seller 

 would have chosen to make delivery of grades and quantities which 

 would have been most favorable to himself. 



In a southern lawsuit, it appeared that when defendant agreed to 

 sell logs to a sawmill company, knowing that they were to be sawed 

 into lumber for sale on the market, and that the company would 

 thereby derive a certain profit. In this situation it was decided that 

 the seller, on failing to make the agreed deliveries, was liable to the 

 company for consequent loss of profits. But, of course, there could be 

 no such recovery, if the sawmill company could have readily sup- 

 plied itself with logs from another source. 



A builder who has relieil upon an agreement for delivery of lumber 

 for use by him in constructing a certain building, and, on breach 

 of the agreement by the seller, is delayed in procuring substitute 

 materials elsewhere, can recover, as an element of his damage, for 

 loss through his employes being idle awaiting delivery, and other 

 items of damage naturally flowing from the breach on the seller's 

 part. 



Reclaiming Lumber on Buyer's Insolvency 



According to the decision of the United States circuit court of 

 appeals for the second circuit, handed down in the bankruptcy case 

 of K. Marks & Co., 218 Federal Reporter 453, when a person pur- 

 chases lumber on credit the seller is entitled to reclaim the lumber on 

 discovering that the buyer was insolvent when he ordered the lumber, 

 fraudulently concealed the fact of insolvency, and did not intend to 

 pay the agreed price. 



The Kentucky Compensation Act 



The recent decision of the court of appeals of Kentucky holding 

 that certain features of the workmen 's compensation act are uncon- 

 stitutional having created some misapprehension as to the effect of 

 the decision, the court has just handed down a supplemental opinion 

 making the decision more explicit (State Journal Company vs. Work- 

 men's Compensation Board, 172 Southwestern Reporter 674). The 

 court adheres to its decision that the law is invalid so far as it pur- 

 ports to limit the amount which may be recovered by an employe who 

 has not expressly elected to be governed by the terms of the act, and 

 so far as it provides for the payment into the compensation fund of 

 awards for death of men who leave no dependent relatives. The sup- 

 ]demental ojiinion says: 



' ' First, the provisions of the present compensation act, as far as 

 they affect the employer, are unobjectionable, as they do not conflict 

 with any provisions of the constitution. Second, any employe coming 

 within the provisions of the act may voluntarily agree to accept its 

 provisions fixing and limiting his recovery in case of injury. Third, 

 he may likewise voluntarily accept the provisions of the act fixing the 

 amount that shall be recovered in the event of his death, and said sum 

 should be paid to his dependents, if he leaves any, and, if not, to 

 his personal representatives. " 



