S.J. Groves & Sons Co. v. Warner Co.
576 F.2d 524 (1978)
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Rule of Law:
Under the UCC, the duty to mitigate damages does not require an injured party to choose the best available option in hindsight, nor does it apply when the breaching party had an equal opportunity to reduce damages and failed to do so.
Facts:
- S.J. Groves & Sons Company (Groves) was awarded a subcontract for the concrete work on the Girard Point Bridge in Philadelphia.
- In March 1970, Groves contracted with Warner Co. (Warner) to supply ready-mixed concrete at specified times and rates.
- Beginning in July 1970, Warner frequently failed to make deliveries on time, causing Groves' work to extend into the evenings and resulting in significant overtime labor costs.
- As early as 1971, Groves considered alternative suppliers but found none to be practical; the only other local supplier, Trap Rock Company, was not state-certified and was more expensive.
- On June 21, 1972, the state halted construction due to Warner's poor performance, but work resumed after Warner gave renewed assurances of improvement.
- On July 11, 1972, Trap Rock became state-certified to supply concrete for the project.
- On July 12, 1972, Trap Rock agreed to match Warner's price, making it a viable alternative or supplemental supplier.
- Despite the new availability of Trap Rock, Groves chose to continue with Warner as its sole supplier, fearing that coordinating two suppliers could create more severe problems.
Procedural Posture:
- S.J. Groves & Sons Company (Groves) sued Warner Co. (Warner) in federal district court for damages resulting from breach of contract.
- After a non-jury trial, the district court judge found that Warner had breached the contract in bad faith.
- The trial court concluded that as of July 12, 1972, Groves had a duty to mitigate damages by hiring Trap Rock as a supplemental supplier.
- The court awarded Groves damages, but limited the recovery of 'delay damages' to those incurred only before July 12, 1972.
- Groves, the plaintiff, appealed the district court's limitation on its damages to the United States Court of Appeals for the Third Circuit.
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Issue:
Does a buyer, whose seller has breached an installment contract by providing consistently erratic deliveries, have an absolute duty as a matter of law to mitigate damages by hiring a supplemental supplier once one becomes available, in order to continue recovering consequential damages?
Opinions:
Majority - Weis, Circuit Judge
No. A buyer's duty to cover or mitigate damages is not an absolute, unyielding requirement to take a specific action, but is instead governed by a test of reasonableness under the circumstances. The trial court erred in concluding that Groves had an absolute duty to hire a supplemental supplier as a matter of law. The court's reasoning is twofold. First, when an injured party is forced to choose between several reasonable, albeit imperfect, courses of action, the breaching party cannot later complain that a different choice would have been more advantageous to them. Groves' decision to stay with Warner to avoid the potential chaos of coordinating two suppliers was a reasonable business choice among difficult alternatives. Second, the duty to mitigate does not apply where the breaching party had an equal opportunity and knowledge to perform the mitigating act itself. Warner could have subcontracted with Trap Rock to supplement its own deliveries to meet its contractual obligations, something it had done on other projects. Since Warner could have taken the same step to reduce damages, it is in no position to contend that Groves failed to mitigate.
Analysis:
This decision refines the application of the UCC's mitigation of damages and "cover" provisions, particularly in ongoing, complex installment contracts. It establishes that the injured party's choice of how to mitigate is protected by a reasonableness standard, shielding it from hindsight-based criticism by the breaching party. Crucially, the court introduces an "equal opportunity" principle, holding that a defendant cannot invoke the mitigation defense if they could have just as easily taken the mitigating step themselves. This precedent provides greater flexibility for non-breaching parties and places a higher burden on breaching parties to proactively resolve their own performance failures before shifting responsibility to the injured party.
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