Remedieskens Owns And Operates A Famous Candy Store

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Remedies Kens owns and operates a famous candy store and makes most of the candy sold in the store. Business is particularly heavy during the Christmas season. Ken contracts with Sweet, Inc., to purchase ten thousand pounds of sugar to be delivered on or before November 15. Ken has informed Sweet that this particular order is to be used for the Christmas season business. Because of problems at the refinery, the sugar is not tendered to Ken until December 10, at which time Ken refuses it as being too late. Ken has been unable to purchase the quantity of sugar needed to meet his Christmas orders and has had to turn down numerous regular customers, some of whom have indicated that they will purchase candy elsewhere in the future. What sugar Ken has been able to purchase has cost him 10 cents per pound above the price contracted for with Sweet. Ken sues Sweet for breach of contract, claiming as damages the higher price paid for sugar from others, lost profits from this year’s lost Christmas sales, future lost profits from customers who have indicated that they will discontinue doing business with him, and punitive damages for failure to meet the contracted delivery date. Sweet claims Ken is limited to compensatory damages only. Discuss who is correct, and why.

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In analyzing this contractual dispute, it is crucial to examine the principles governing breach of contract damages, particularly in the context of delay and the foreseeability of consequential damages. Remedies for breach of contract generally aim to place the injured party in the position they would have been in had the breach not occurred (Restatement (Second) of Contracts, § 347). However, the scope of recoverable damages often depends on whether certain damages were foreseeable at the time of contracting.

In this case, Ken contracted with Sweet, Inc., to deliver 10,000 pounds of sugar by November 15, to be used specifically for the Christmas season business. The delay in delivery, culminating in the sugar arriving only on December 10, constitutes a breach of the contractual delivery term. Under general contract law, damages for delayed delivery can include the costs incurred due to the delay, lost profits from unmet contractual obligations, and consequential damages resulting from the breach if they were foreseeable at the time of contracting.

Ken claims damages in four categories: the higher price paid for sugar elsewhere, lost profits from Christmas sales, future lost profits due to customer attrition, and punitive damages for the delay. The key issue is whether these damages are recoverable under the legal doctrine of foreseeability and whether they qualify as damages resulting directly from the breach.

First, the higher purchase price Ken paid for sugar elsewhere ($0.10 per pound over the contracted price) is a direct and foreseeable consequence of the delay. It is natural and obvious that delay in delivery could lead to increased costs, especially during a peak season like Christmas, thus making such damages recoverable as consequential damages (Hadley v. Baxendale, 9 Exch 341).

Second, the lost profits from Christmas sales are also foreseeable, particularly since Ken explicitly informed Sweet that the sugar was for Christmas business. When a seller knows that an order is intended for a specific purpose, damages for lost profits resulting from untimely delivery are generally recoverable, provided they are proved with reasonable certainty (Carbolic Smoke Ball Co. v. United States Rubber Co., 114 N.E. 504).

Third, future lost profits due to customer attrition—customers who have indicated they will buy elsewhere—are more complex. These damages can still be recovered if they are proven to be reasonably foreseeable and supported by evidence of customer behavior and past sales data (Restatement (Second) of Contracts, § 351). Since Ken communicated the importance of the Christmas season and lost customers’ intentions, courts are more likely to consider these damages as foreseeable and thus recoverable.

Finally, punitive damages are generally not awarded for breach of contract unless the breach involves egregious conduct, such as malice, fraud, or willful misconduct. The breach here appears to be a delay at the refinery, a circumstance beyond Sweet's control. Punitive damages are aimed at punishment and deterrence rather than compensation (Hadley v. Baxendale), and courts are typically hesitant to award punitive damages for contractual delays unless malicious intent can be demonstrated.

Therefore, the prevailing view is that Ken is entitled to recover at least the consequential damages directly related to the delay—namely, the higher cost of sugar, lost Christmas profits, and foreseeable future customer losses. Sweet’s claim that Ken is limited to compensatory damages only overlooks the fact that consequential damages, including lost profits, are recoverable if they are foreseeable and proven. The breach is directly linked to these financial losses. However, punitive damages are unlikely to be awarded absent evidence of malicious conduct or fraud.

In conclusion, Ken’s damages claim is justified, provided he can substantiate the extent of his lost profits and additional costs. The law recognizes that damages resulting from breach include both direct and foreseeable consequential damages, making Ken eligible for a broader range of damages than simple contractual damages. Conversely, Sweet’s argument aligns with the general principle that damages should not be punitive unless exceptional circumstances justify punitive awards, which appear absent here.

References

• Restatement (Second) of Contracts. (1981). American Law Institute.
• Hadley v. Baxendale, 9 Exch 341 (1854).
• Carbolic Smoke Ball Co. v. United States Rubber Co., 114 N.E. 504 (N.Y. 1916).
• Calamari, J. D., & Perillo, J. (2017). Dynamic Principles of Contract Law. West Academic Publishing.
• Farnsworth, E. A. (2010). Contracts. Aspen Publishers.
• Poole, J. (2018). Contract Law. Oxford University Press.
• Perillo, J. M. (2014). The Law of Contracts. West Academic Publishing.
• UCC § 2-713. (Uniform Commercial Code, damages for breach in sale of goods).
• Samuel Williston, Contracts (3rd ed. 1963).
• Corbin on Contracts, 5th Edition. (2010). Westlaw Publishing.