Roth v. Speck

District of Columbia Municipal Court of Appeals · 1956 · Contracts

Contractsdamagesmitigationemployment contractduty to mitigateemployment contractemployee breachdamages

Facts

Plaintiff owned a beauty salon and contracted on April 15, 1955, to employ defendant as a hairdresser for one year at $75 per week or 50 percent of gross receipts, whichever was greater. Defendant worked about six and one-half months and then left, after having built and maintained a following because of his exceptional skill. Plaintiff testified that he tried to mitigate by hiring one replacement at a complete loss and then another who was still not earning his salary. A witness testified that defendant later worked elsewhere for $100 per week, and defendant admitted he was then earning that amount.

Issue

When an employee breaches an employment contract before the term ends, what damages may the employer recover, and was the employer here limited to nominal damages? More specifically, could the employer recover lost profits or, alternatively, damages measured by the value or replacement cost of the employee's services?

Rule

A plaintiff who proves breach of contract is entitled to damages, but if proof of actual damages is vague or speculative, only nominal damages may be awarded. For breach of an employment contract by an employee, the measure of damages is the cost of obtaining other service equivalent to that promised and not performed. Additional consequential injury may be recovered if, at the time of contracting, the employee had reason to foresee it, but lost profits are not recoverable when they are too conjectural. The employee bears the burden of proving facts in mitigation of the damages caused by the breach.

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

In Denver, Nora Bennett hired Luis Ortega under a one-year written contract to serve as head pastry chef for her restaurant at a guaranteed $1,200 per week. After four months, Luis quit and immediately accepted a similar pastry-chef position in Phoenix paying $1,450 per week. Nora claims the restaurant also lost holiday dessert profits, but her proof is only that sales are usually "better in winter."

If Nora proves breach, which measure of damages is most appropriate under the governing rule?

Explanation. For an employee’s breach of an employment contract, the proper measure is the cost of obtaining equivalent services for the period not performed. The employee’s later salary is some evidence of the value of those services, but not an automatic award of the whole salary. Lost profits are not recoverable when proved only by conjecture, such as general testimony about seasonal sales.