Lamkins v. International Harvester Co.

Supreme Court of Arkansas · Contracts

ContractsConsequential damagesSpecial damagesSalesHadley v. Baxendalespecial damagesconsequential damagesseller liability

Facts

The buyer agreed to purchase a tractor and related equipment from dealer Gay Lacy, and after delivery signed the note and sales papers when the tractor lacked starter and lighting equipment, allegedly based on the dealer's promise to supply that equipment within three weeks. The equipment was not supplied within that time because of governmental priority regulations, and the buyer claimed that without lights he could not work at night and therefore lost the ability to plant and cultivate twenty-five acres of soybeans. The written note and order did not state that any equipment was missing, did not indicate that the tractor was to be used at night, and did not mention liability for crop-loss damages. The buyer sought $450 in special damages as a setoff based on the loss allegedly caused by the delayed furnishing of the lights and starter.

Issue

Whether the seller could be held liable for special damages for crop loss resulting from the buyer's inability to use the tractor at night when the seller failed to furnish starter and lighting equipment within the contemplated time. More specifically, the question was whether the evidence showed the notice and tacit consent required to impose consequential-damages liability.

Rule

To recover special or consequential damages for delay in delivery, the buyer must show that at or before the making of the contract the seller knew of the special circumstances that would expose the buyer to such damages and that the seller at least tacitly consented to assume the particular risk. Mere notice of special circumstances is not enough, especially where the claimed damages are out of proportion to the consideration; the circumstances must show that the seller understood the buyer reasonably believed the contract included that special condition. In addition, when damages are claimed for being prevented from planting a crop, the measure of damages is the rental value of the land.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Amarillo, Texas, Owen Mercer bought a used hay baler from Plains Ridge Equipment, a local dealer, for $9,800. At the time of contracting, Owen told the dealer he needed the machine by June 1 because he planned to service custom fields for neighboring farms and would lose several lucrative jobs if delivery was late, but the written sales order said nothing about those jobs or any special liability; the baler arrived three weeks late.

If Owen sues for the profits he says he lost from the missed custom jobs, which is the strongest basis for denying recovery of those consequential damages?

Explanation. Under the majority rule, recovery of special or consequential damages for delay requires more than notice of special circumstances. The seller must know of those circumstances at or before contracting and must at least tacitly consent to assume that particular risk. Here, the dealer knew Owen wanted timely delivery for custom jobs, but the facts do not show an implied agreement to bear liability for the lost-job profits. (Derived from Lamkins v. International Harvester Co. (n.d.).)