Egerer v. CSR West, LLC
67 P.3d 1128 (2003)
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Rule of Law:
Under the Uniform Commercial Code, when a seller breaches a contract for the sale of goods and the buyer does not cover, damages are measured by the difference between the contract price and the market price at the time of the breach. If the market price for the exact goods is not readily available, a court has reasonable leeway to use the price of a commercially reasonable substitute good prevailing within a reasonable time after the breach.
Facts:
- Robert Egerer owned a 10-acre parcel of land that he planned to develop, which required a large amount of fill material.
- In May 1997, Egerer contracted with CSR West to purchase all shoulder excavation material from a state highway project for $0.50 per cubic yard.
- The shoulder excavation material was uniquely cheap because it contained asphalt grindings but was suitable as structural fill.
- CSR West delivered fill for only two nights in July 1997 before the Washington State Department of Transportation allowed CSR to use the material for the state's project.
- It was more profitable for CSR West to supply the material to the state, so it breached its contract and stopped delivering to Egerer.
- Egerer did not purchase replacement fill immediately after the breach in July 1997, citing high costs and the end of the seasonal window for placing fill.
- In January and February 1998, Egerer obtained price quotes for "pit run," a commercially reasonable substitute, at a price of $8.25 per cubic yard.
- The type of shoulder excavation material promised by CSR was rarely available on the open market.
Procedural Posture:
- Robert Egerer filed a lawsuit against CSR West in November 2000, alleging breach of contract.
- The case was decided in a bench trial at the trial court level.
- The trial court found CSR West had breached the contract, awarded Egerer damages based on the difference between the contract price and the market price of a substitute, and awarded prejudgment interest.
- The trial court denied Egerer's request for damages to cover sales tax and for consequential damages.
- CSR West (appellant) appealed the trial court's calculation of damages and the award of prejudgment interest to the Court of Appeals of Washington, Division 1.
- Robert Egerer (cross-appellant) appealed the denial of sales tax and consequential damages.
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Issue:
Under RCW 62A.2-713, when calculating damages for a seller's non-delivery where the buyer has not covered, may a court use the market price of a reasonable substitute good, determined within a reasonable time after the breach, if evidence of a price for the exact contract good at the time of breach is unavailable?
Opinions:
Majority - Becker, C.J.
Yes, a court may use the market price of a reasonable substitute good, determined within a reasonable time after the breach, if the price for the specific contract good at the time of breach is unavailable. The Uniform Commercial Code, specifically RCW 62A.2-723(2), provides courts with 'reasonable leeway' in measuring market price. This statute expressly permits using the price of a 'reasonable substitute' prevailing 'within any reasonable time before or after the time described.' In this case, the shoulder excavation material was rarely available, making higher-priced pit run a commercially reasonable substitute. The price quote obtained six months after the breach was within a 'reasonable time,' especially as CSR West offered no evidence that a suitable, cheaper replacement was available when it breached the contract. The court also held that damages were liquidated and thus eligible for prejudgment interest from the date of the breach, as the amount could be calculated with exactness once the market price was determined. Egerer's claims for sales tax and consequential damages were properly denied because he did not actually incur the tax and CSR did not have reason to know of his specific development timeline.
Analysis:
This case clarifies the application of the UCC's 'hypothetical cover' remedy (RCW 62A.2-713) in situations involving unique or thinly-traded goods. The decision establishes that 'market price' is not a rigid concept tied to the exact good at the exact moment of breach, but a flexible standard allowing courts to consider commercially reasonable substitutes and timeframes. This prevents a breaching seller from profiting from their breach simply because an identical replacement good is unavailable on the open market. The ruling reinforces the principle of placing the non-breaching party in the economic position they would have occupied had the contract been performed.
