Cannon v. Yankee Products Co., Inc.

Massachusetts Appellate Division
59 Mass. App. Dec. 169 (1977) (1977)

ELI5:

Rule of Law:

Lost profits are not recoverable as consequential damages for a breach of warranty if the loss is not a natural, primary, and probable consequence of the breach, but rather results from an intervening cause such as a customer's public reaction to a food defect that caused no physical harm.

Facts:

A restaurant owner regularly purchased a specific brand of canned sweet peas, packed by Oconomowoc Canning Co. (Oco), from his supplier, Yankee Products Co., Inc. (Yankee).
Yankee's salesman had told the plaintiff that the peas were a wholesome, high-quality product that would please his customers and increase business.
On January 23, 1970, the plaintiff opened, prepared, and served some of these peas to his customers as part of a daily special.
A customer discovered a 1.3-inch dead green worm in the peas on his plate.
The customer complained loudly in the presence of approximately fifty-five other patrons, causing a scene.
As a result of the incident and the customer's reaction, about thirty patrons immediately walked out of the restaurant.
Following this event, the restaurant suffered a significant and sustained decline in customers and gross sales, which ultimately led the plaintiff to sell the business a year later.

Procedural Posture:

The plaintiff restaurant owner sued Yankee Products Co., Inc. (the seller) in a trial court for breach of express and implied warranty.
The plaintiff subsequently added a negligence complaint against Oconomowoc Canning Co. (the canner).
The defendants filed requests for rulings that the evidence did not warrant findings against them on the issues of warranty, negligence, notice, or damages.
The trial court judge denied the defendants' requests, made findings of fact in favor of the plaintiff, and entered a judgment for the plaintiff against both defendants for $7,622.80 in lost profits.
The defendants appealed the trial court's judgment and its denial of their requested rulings to this appellate court.

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Issue:

Does the discovery of a worm in a can of peas, which caused a customer's public complaint and a subsequent loss of restaurant patronage, constitute a breach of warranty for which the restaurant can recover lost profits as consequential damages from the seller and canner?

Opinions:

Majority - Walsh, J.

No. Lost profits are not recoverable as consequential damages in this case because the loss was not a natural and probable consequence of the breach of warranty. The court reasoned that the loss of patronage was caused as much by the vocal reaction of the customer who found the worm as by the presence of the worm itself. Unlike cases where unwholesome food causes physical illness, no one was actually harmed here, making the connection between the breach and the lost profits too remote and speculative. Furthermore, the court found the plaintiff's proof of damages insufficient, as he demonstrated a decline in gross receipts but failed to provide evidence of how that translated into a specific amount of lost profit. Therefore, the loss of business was not a foreseeable consequence within the contemplation of the parties, and this was not a 'proper case' for consequential damages under the Uniform Commercial Code.

Analysis:

This decision refines the standard for recovering lost profits as consequential damages under the Uniform Commercial Code for breach of warranty. It establishes that an intervening cause, such as a customer's public outburst, can break the chain of causation, rendering the resulting loss of business too remote. The case underscores the distinction between a product defect causing direct harm (like illness) and one that causes reputational damage through a third party's reaction. It also serves as a strong reminder to plaintiffs of the evidentiary burden to prove not just lost revenue, but the specific amount of lost profit with reasonable certainty.

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