Spang Industries, Inc., Fort Pitt Bridge Division v. Aetna Casualty & Surety Company

United States Court of Appeals for the Second Circuit · 1975 · Contracts

512 F.2d 365 (1975)

Updated July 26, 2026

ContractsConsequential damagesForeseeabilityInterestcontract damagesspecial damagestime of performancemutually agreed delivery

Facts

Fort Pitt quoted Torrington a price to fabricate, furnish, and erect structural steel for a bridge, and Fort Pitt's confirming letter stated that delivery was "to be mutually agreed upon." After Torrington later specified that delivery was needed in late June 1970, Fort Pitt tentatively scheduled that date, later said it could not meet it, then promised shipment in early August 1970 but again delivered late. Because the steel arrived too late for ordinary sequencing and unloading arrangements failed, Torrington had to unload steel itself and pour bridge concrete on a crash basis in freezing conditions to avoid postponement until the next spring. Torrington sought damages for those added expenses, and the district court awarded a reduced amount and offset it against the balance due Fort Pitt.

Issue

When a contract leaves the time of performance to be agreed upon later, is foreseeability of delay damages measured as of the later agreement fixing performance? If so, were Torrington's added unloading, overtime, equipment, and concrete-protection costs recoverable as damages reasonably within the contemplation of the parties, and was Fort Pitt also entitled to additional interest on partial late payments?

Rule

Under Hadley v. Baxendale, a breaching party is liable for damages that arise naturally from the breach or that were reasonably within the contemplation of the parties when the contract was made. When a contract provides that the time of performance will be fixed later, knowledge of the consequences of nonperformance is imputed to the defaulting party as of the time the parties agree on that performance date. Expenses incurred in a reasonable effort to mitigate harm that the breaching party had reason to foresee are recoverable, and when partial payments are made, they are applied first to accrued interest and then to principal.

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Lakeview Civil Builders in Albany subcontracted with Ironspan Fabricators, a fictional steel company in Pittsburgh, to supply bridge beams for a county overpass in northern Maine. Their written agreement set price and scope but stated that the shipment date would be "set by later mutual agreement." In October, the parties agreed to a May delivery date, which Ironspan accepted, but Ironspan delivered in August, forcing Lakeview to pay extra labor and cold-weather protection costs to complete deck work before freezing temperatures.

If Ironspan argues that these extra costs were not foreseeable because the original subcontract was signed before any delivery date was chosen, which is the best answer?

Explanation. The majority held that where the contract itself provides that the time of performance will be fixed later, the defaulting party is charged with knowledge of the consequences of nonperformance as of the later agreement fixing that date. Thus, once Ironspan accepted the May date, foreseeability is assessed then, not solely at the original signing. The opinion also rejected any requirement of a separate tacit agreement to assume such liability. (Derived from Spang Industries, Inc., Fort Pitt Bridge Division v. Aetna Casualty & Surety Company (1975).)