Wilson v. Hays
544 S.W.2d 833 (1976)
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Rule of Law:
Under the Texas Business and Commerce Code, a buyer cannot recover consequential damages for lost profits resulting from a seller's breach of contract if the buyer fails to present evidence that they attempted to prevent such losses by cover or other reasonable mitigation efforts. The burden of proving that the loss could not have been reasonably prevented rests on the buyer.
Facts:
- W. D. Hays was in the business of buying and selling used building materials.
- Bobby Wilson was in the business of demolishing buildings.
- In March 1972, Wilson and Hays entered into an oral agreement for Wilson to sell and deliver 600,000 used bricks to Hays for one cent per brick.
- Hays paid Wilson the full price of $6,000 in advance.
- Wilson delivered only 400,000 bricks, failing to deliver the remaining 200,000 bricks as agreed.
- At the time of the breach, the market value of used bricks in the area was five cents per brick.
Procedural Posture:
- W. D. Hays (Plaintiff) sued Bobby Wilson (Defendant) in a Texas trial court for breach of an oral contract.
- The case was tried before a jury, which returned a verdict in favor of Hays.
- The jury found that Wilson failed to deliver 200,000 bricks and awarded Hays damages for the price paid, the difference in market value, and lost profits.
- The trial court entered a judgment for Hays in the amount of $13,645.00 plus interest, based on the jury's verdict.
- Bobby Wilson (Appellant) appealed the trial court's judgment to the intermediate court of appeals, with W.D. Hays as the Appellee.
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Issue:
Does the Texas Business and Commerce Code permit a buyer to recover consequential damages for lost profits from a seller's non-delivery of goods when the buyer has not presented any evidence of attempting to cover or otherwise mitigate the loss?
Opinions:
Majority - James, Justice
No. The Texas Business and Commerce Code does not permit a buyer to recover consequential damages for lost profits without evidence of mitigation. Under Section 2.715, consequential damages include any loss which could not reasonably be prevented by cover or otherwise. The court found Hays was entitled to recover the $2,000 he paid for the bricks he did not receive, as permitted by Section 2.711. Hays was also entitled to damages for non-delivery under Section 2.713, calculated as the difference between the market price ($10,000 for 200,000 bricks at five cents each) and the contract price ($2,000 for 200,000 bricks at one cent each), which amounts to $8,000. However, the award for lost profits constituted consequential damages, which are only recoverable if the buyer attempts to mitigate damages. The court found no evidence that Hays made any effort to cover by purchasing substitute bricks or otherwise tried to prevent his loss. The burden of proving that such losses were not preventable is on the buyer, and Hays failed to meet this burden.
Analysis:
This decision reinforces the fundamental contract law principle of mitigation of damages within the specific context of the Uniform Commercial Code (UCC). It clarifies that the buyer's duty to cover is not merely a defensive argument for the seller but an affirmative requirement for the buyer to prove as a prerequisite for recovering consequential damages like lost profits. This places a clear evidentiary burden on the non-breaching buyer to demonstrate reasonable efforts to minimize losses. The case serves as a crucial precedent for commercial transactions, signaling that buyers cannot passively allow damages to accrue and then expect full recovery for lost business opportunities without first attempting to secure substitute goods.
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