A. Lenobel, Inc. v. Senif
252 A.D. 533, 300 N.Y.S. 226, 1937 N.Y. App. Div. LEXIS 5714 (1937)
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Rule of Law:
For a seller of goods with an available market, the measure of damages for a buyer's breach is the difference between the contract price and the market price at the time of breach. A retail dealer's general overhead expenses and fixed prices do not constitute 'special circumstances' justifying a recovery of lost profits.
Facts:
- Plaintiff was the official Plymouth car dealer for Long Island City.
- On May 27, 1936, Senif signed a written contract to purchase a Plymouth car from the dealer for $781.50.
- Senif made a $50 down payment as part of the agreement.
- On June 1, 1936, Senif notified the dealer in writing that he was canceling the contract.
- The dealer refused to accept the cancellation and subsequently resold the exact same car to a different customer for the same price of $781.50.
Procedural Posture:
- The dealer sued Senif in the Municipal Court of the City of New York (a trial court) for breach of contract, seeking its lost gross profit as damages.
- Senif filed a counterclaim for the return of his $50 deposit.
- The trial court dismissed the dealer's complaint and entered judgment for Senif on his counterclaim.
- The dealer appealed to the Appellate Term (an intermediate appellate court).
- The Appellate Term affirmed the trial court's dismissal of the dealer's complaint but reversed the judgment on the counterclaim, ordering a new trial for that part of the case.
- The dealer was granted leave to appeal to the Appellate Division (a higher intermediate appellate court) on the single question of the proper measure of damages.
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Issue:
Does a retail car dealer's overhead, such as advertising and sales commissions, constitute 'special circumstances' under Section 145(3) of the Personal Property Law, allowing the dealer to recover lost profits as damages when a buyer breaches a contract and the dealer resells the specific item for the same price?
Opinions:
Majority - Carswell, J.
No. A retail car dealer's standard overhead costs do not constitute 'special circumstances' under the statute that would permit recovery of lost profits. The proper measure of damages remains the difference between the contract price and the market price. The court reasoned that the statutory rule for damages—contract price minus market price—applies unless 'special circumstances' showing greater damage are present. The dealer's claims that its limited sales area, manufacturer-fixed prices, and general overhead were 'special circumstances' were rejected. The court held these are common elements in commerce and cannot be considered 'special' without a specific agreement. For such circumstances to be considered, the buyer (Senif) would have had to know about them and contract in contemplation of them. The court dismissed the dealer's 'lost sale' argument as 'specious,' noting that the dealer could have protected itself through other means, such as requiring a larger down payment or explicitly stating in the contract that lost profits would be the measure of damages for a breach.
Analysis:
This decision represents the traditional common law approach to damages for a 'lost volume seller,' a seller with a seemingly infinite supply of goods. It strictly applies the contract-market price differential rule, denying lost profits even though the seller effectively lost a sale. This places the burden on sellers to contractually provide for such damages. This legal position was a primary target for reform and was later superseded by the Uniform Commercial Code § 2-708(2), which explicitly allows lost volume sellers to recover lost profits, making this case a key historical counterpoint to modern commercial law.
