Leingang v. City of Mandan Weed Board

North Dakota Supreme Court · Contracts

Contractsbreach of contractdamagesexpectation interestlost profitsservice contractprevented performanceoverhead

Facts

The City of Mandan Weed Board awarded Leingang a contract to cut weeds on lots larger than 10,000 square feet, but its agent improperly assigned some large lots to another contractor. The City admitted that it prevented Leingang's performance on that work and admitted that the contract price for the lost work was $1,933.78. At trial, Leingang testified that the gas, oil, repair, and replacement blade expenses he avoided because of the breach totaled $211.18. The trial court instead calculated damages by deriving a 20% profit margin from Leingang's tax-return Schedule C figures and deducting 80% of the contract price as expenses, including insurance, repairs, supplies, and car and truck expenses.

Issue

When a breach prevents performance of a service contract, should lost-profit damages be measured by the contract price minus only those costs the plaintiff actually avoided because performance did not occur, or may the court also deduct general business overhead without determining whether those expenses would have remained constant despite the breach?

Rule

For breach of contract, the injured party is entitled to compensation for the loss suffered, but no more than would have been gained by full performance. When a breach prevents performance of a service contract, anticipated profits may be measured by reducing the contract price by the costs the plaintiff would have spent to perform; constant overhead expenses that would have been incurred whether or not the contract was performed are not deductible from the contract price.

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

In Columbus, Ohio, Harbor View Grounds contracted with Nina Patel to clear brush from several drainage easements for $18,000. Before Nina began, Harbor View reassigned the work to another crew in breach of the agreement. Nina proves she would have spent $2,200 on fuel, disposal fees, and temporary labor, while her office rent and annual liability policy would have remained the same either way.

What is the most appropriate measure of Nina's damages?

Explanation. When breach prevents performance of a service contract, the injured party is entitled to the benefit of the bargain, but no more than full performance would have yielded. Anticipated profits may be measured by subtracting from the contract price only the costs the plaintiff would have spent to perform and therefore actually saved because of the breach. Constant overhead, such as rent and insurance that would have been incurred anyway, is not deductible. Thus, $18,000 minus $2,200 equals $15,800. (Derived from Leingang v. City of Mandan Weed Board (n.d.).)