Birkel v. Hassebrook Farm Service, Inc.
1985 Neb. LEXIS 920, 363 N.W.2d 148, 219 Neb. 286 (1985)
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Rule of Law:
A party injured by a breach of contract is entitled to recover all reasonably certain damages that naturally follow the breach, including foreseeable consequential damages such as the cost of obtaining a substitute performance.
Facts:
- In 1978, Jerry Birkel, a farmer, contracted with Hassebrook Farm Service, Inc. to purchase and install a new grain storage and drying system.
- The contract explicitly required that the installation be performed in a "workmanlike manner."
- Hassebrook completed the installation of the new system in 1978.
- In the spring of 1980, after nearly two years of use, Birkel discovered spoiled grain in his storage bins.
- The spoilage was allegedly caused by Hassebrook's failure to properly rivet part of the dryer to the concrete floor, which was characterized as "bad workmanship."
- Due to the equipment's failure, Birkel lost 600 bushels of grain and had to hire additional labor to salvage the remainder.
- Birkel required an alternative grain-drying facility to continue his farming operations while the system provided by Hassebrook was inoperative.
Procedural Posture:
- Jerry Birkel sued Hassebrook Farm Service, Inc. in the district court for Butler County (a trial court) for breach of contract.
- At trial, the court sustained Hassebrook's objection and refused to admit Birkel's evidence concerning the costs of obtaining an alternative grain-drying facility.
- The court also refused Birkel’s tendered jury instruction on incidental and consequential damages.
- The jury returned a verdict in favor of Birkel for $15,940, covering damages to buildings, equipment, and grain, but not for the excluded costs.
- Birkel (as appellant) appealed the judgment, arguing the trial court erred in excluding the evidence of his consequential damages.
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Issue:
Does a party wronged by a breach of contract have a right to recover, as consequential damages, the reasonably foreseeable costs incurred in obtaining a substitute for the failed performance?
Opinions:
Majority - Shanahan, J.
Yes. A party wronged by a breach of contract may recover damages for costs incurred in obtaining a substitute performance when those costs were a foreseeable result of the breach. The court reasoned that under established contract principles, an injured party can recover damages that are reasonably certain and naturally expected to follow a breach. Citing the Restatement (Second) of Contracts and the foreseeability rule from Hadley v. Baxendale, the court found that Hassebrook had reason to know at the time of contracting that if its system failed, Birkel would have to find an alternative. Therefore, the costs of obtaining such a substitute facility are a natural and foreseeable consequence of the breach. The court also noted that expenses incurred in reasonable efforts to minimize damages (mitigation) are recoverable, making the evidence of these substitute costs relevant and admissible.
Analysis:
This decision reaffirms the foundational contract law principle of foreseeability in calculating consequential damages, as established in Hadley v. Baxendale. It clarifies that the cost of 'cover'—obtaining a substitute for a failed performance—is a classic example of foreseeable damage, especially when the contract involves essential business equipment. The ruling provides trial courts with clear guidance that evidence of such costs is relevant and should be admitted, ensuring that the non-breaching party can be made whole. This strengthens the position of injured parties by allowing them to recover for reasonable, proactive steps taken to mitigate the impact of a breach.
