Union Bank v. Blanchard

Supreme Court of New Hampshire · 1890 · Contracts

Contractsrecoupmentbreach of contractsale of goodsinferior qualitymeasure of damagesaccepted draftswarranty of quality

Facts

The Eldred Milling Co. agreed to sell the defendant 1,000 barrels of flour branded "Eldred's Straight" at $4.15 per barrel, with delivery at Concord or nearby as directed, and the two drafts in suit covered 250 barrels of that lot. The defendant accepted the drafts before the flour arrived, but refused full payment at maturity because the flour delivered was of inferior quality; he later tendered or paid $607.28, and the plaintiffs sought the remaining $284.22. The trial established inferior quality and assessed damages of $87.50 for that inferiority, $322.50 for the increased cost of buying 1,000 barrels of flour of the contracted quality after the market price rose, and $13.50 for freight on replacement flour shipped to dissatisfied customers. The defendant argued these damages exceeded the balance due and sought judgment for the excess.

Issue

When a buyer is sued for the unpaid balance on accepted drafts under a flour sale contract, may he use recoupment not only to defeat the seller's remaining claim but also to obtain an affirmative judgment for damages exceeding that balance? The case also presented whether certain testimony and writings about the grade and quality of the flour were properly admitted.

Rule

A defendant sued on a broken contract who elects to have his damages considered by recoupment in that action may recoup only direct damages up to the amount of the plaintiff's demand and cannot obtain an affirmative recovery beyond defeating the claim, except for costs. The buyer's damages for breach of a quality term are generally the difference between the value of the goods as warranted and their actual value at the time of sale, including gains prevented, losses sustained, and other damages reasonably anticipated by the parties as likely to result from the seller's breach and not avoidable by reasonable care of the buyer.

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Maple Crest Supply, a grain wholesaler in Des Moines, sold 500 sacks of seed to Olivia Grant, a farm-store owner in Cedar Rapids. Olivia accepted two trade drafts for part of the price before delivery, later paid the undisputed portion, and was sued for the remaining $4,000 after the seed arrived below the promised grade; at trial she proved $6,500 in direct damages from the inferior quality.

If Olivia elects to assert her damages by recoupment in the seller's suit on the drafts, what is the best result?

Explanation. Recoupment in an action on a broken contract is allowed to prevent circuity of action, but only up to the amount of the plaintiff's demand. A defendant who elects to have damages considered by recoupment may reduce or defeat the plaintiff's recovery, yet cannot obtain an affirmative money judgment for the excess in that same action, apart from costs. (Derived from Union Bank v. Blanchard (n.d.).)