Acme Mills & Elevator Co. v. Johnson

Court of Appeals of Kentucky
141 Ky. 718 (1911)

ELI5:

Rule of Law:

The measure of damages for a seller's breach of a contract for the sale of goods is the difference between the contract price and the market price at the time and place specified for delivery.

Facts:

On April 26, 1909, J. C. Johnson contracted to sell 2,000 bushels of wheat to Acme Mills & Elevator Company for $1.03 per bushel.
The contract specified that the wheat was to be delivered from Johnson's thresher after the 1909 harvest.
Acme Mills provided 1,000 sacks to Johnson for the purpose of delivering the wheat.
Around July 14th or 15th, 1909, before his wheat was threshed, Johnson sold his wheat to another company, Liberty Mills, for $1.16 per bushel.
Johnson completed threshing his wheat around July 29th, 1909, which was the time for delivery under the contract.
On July 29th, the market price for the contracted type of wheat had fallen to approximately $1.00 per bushel.
Johnson failed to deliver the 2,000 bushels of wheat to Acme Mills as promised.

Procedural Posture:

Acme Mills & Elevator Company sued J. C. Johnson in a state trial court for damages for breach of contract.
Johnson admitted the breach but denied that Acme Mills suffered any damages, while offering to confess judgment for the value of the sacks provided.
The trial court refused to allow Acme Mills to file an amended reply arguing that Johnson was estopped from denying damages.
A jury trial resulted in a verdict for Acme Mills for $80, the value of the sacks, but awarded no damages for the breach of contract to deliver wheat.
The trial court entered judgment on the jury's verdict.
Acme Mills & Elevator Company (appellant) appealed the judgment to the Court of Appeals of Kentucky (the highest court in the state at the time).

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Issue:

Is the measure of damages for a seller's failure to deliver goods determined by the market price at the time and place of delivery, rather than by the price the seller received by selling the goods to a third party before the delivery date?

Opinions:

Majority - Wm. Rogers Clay

Yes. The measure of damages for failure to deliver goods is the difference between the contract price and the market price at the time and place of delivery. The court reasoned that this is a well-settled principle of contract law. The delivery date was determined to be when Johnson finished threshing, around July 29th. On that date, the market price ($1.00/bushel) was lower than the contract price ($1.03/bushel), meaning Acme Mills suffered no actual damages from the breach and was, in fact, benefited. Johnson's earlier sale to a third party for $1.16/bushel was irrelevant because the contract did not require him to deliver his specific wheat; he could have satisfied the contract by delivering any wheat of like quantity and quality. Therefore, the earlier sale did not establish the market price for the purposes of calculating damages.

Analysis:

This decision reaffirms the traditional 'benefit of the bargain' rule for calculating contract damages in the context of sales of goods. It establishes that the temporal focal point for assessing damages is the moment of performance, not any prior act of anticipatory repudiation. This provides certainty in commercial transactions by fixing a clear and objective measure of loss, preventing damages from fluctuating based on the breaching party's conduct before the delivery date. The ruling clarifies that a seller's profitable sale to a third party before the performance date does not entitle the original buyer to those profits; the buyer is only entitled to be put in the position they would have been in had the contract been performed.

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