Schiavi Mobile Homes, Inc. v. Gironda
463 A.2d 722 (1983)
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Rule of Law:
When a contract is breached, the non-breaching party has an affirmative duty to take reasonable steps to mitigate damages, which includes pursuing credible opportunities to minimize losses, even if those opportunities do not constitute formal, legally enforceable offers.
Facts:
- On January 23, 1979, Frank Gironda, Jr., and Patricia Gironda signed a contract with Schiavi Mobile Homes, Inc. to purchase a mobile home for $23,028.69 and paid a $1,000 deposit.
- Due to subsequent medical, financial, and marital difficulties, the Girondas breached the purchase contract.
- In September 1979, an agent for Schiavi contacted Frank Gironda, Sr., the father of Frank, Jr.
- Frank Gironda, Sr. stated he was willing to purchase the mobile home himself to prevent his son from losing the deposit.
- Frank Gironda, Sr. communicated that he owned his own home free of debt and was prepared to mortgage it to secure the funds.
- Schiavi's agent told Frank Gironda, Sr. that purchasing the home would not be necessary and did not pursue the offer.
- On November 7, 1979, Schiavi sold the mobile home to an unrelated third party for $22,000.
Procedural Posture:
- Schiavi Mobile Homes, Inc. (Plaintiff) commenced an action against Frank Gironda, Jr. and Patricia Gironda (Defendants) in the Superior Court, Oxford County, Maine (trial court).
- Following a non-jury trial, the Superior Court entered a judgment for the Plaintiff in the amount of $759.45.
- The Plaintiff (Appellant) appealed to the Supreme Judicial Court of Maine, seeking greater damages, including lost profits.
- The Defendants (Appellees) filed a cross-appeal, contending that the Plaintiff's failure to mitigate should bar any recovery of damages.
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Issue:
Does a seller fail to properly mitigate damages when it declines a credible offer from a third party to purchase goods for the full contract price after the original buyer's breach, and instead sells the goods to another party for a lower price?
Opinions:
Majority - Nichols, J.
Yes. A seller fails to properly mitigate damages when it does not take reasonable affirmative measures to keep its losses to a minimum. The duty to mitigate is a long-standing common law principle that supplements the Uniform Commercial Code and is judged by a standard of reasonableness. The trial court erred by focusing on whether the father's proposal was a legally sufficient, binding offer. The duty to mitigate is broader than simply accepting formal offers; it requires the non-breaching party to pursue reasonable opportunities to minimize losses. Here, Schiavi had a credible party, Frank Gironda, Sr., who was ready, willing, and able to purchase the mobile home for the full contract price. By failing to pursue this opportunity and instead waiting two months to sell the home at a loss of over $1,000, Schiavi acted unreasonably. Because Schiavi failed to mitigate its damages, it is barred from recovering for lost profits as a 'lost-volume seller' and for any incidental damages incurred after the point at which it should have accepted the father's offer.
Analysis:
This case clarifies that the duty to mitigate damages under the UCC is an active and broad obligation based on reasonableness, not merely a passive duty to accept formal contract offers. It establishes that a seller's failure to pursue a credible and viable opportunity to resell goods at the contract price can preclude the recovery of damages, including claims for lost profits by a 'lost-volume seller.' The decision emphasizes that a seller's actions will be scrutinized for commercial reasonableness, potentially limiting damage awards if a seller forgoes a chance to eliminate its losses. This precedent reinforces that mitigation is a fundamental prerequisite to the recovery of damages for breach of contract.
