Valentine v. General American Credit, Inc.

Supreme Court of Michigan · 1984 · Contracts

ContractsEmployment contractsDamagesemployment contractwrongful dischargemental distress damagesexemplary damagesHadley v. Baxendale

Facts

Sharon Valentine sought damages for mental distress arising from an alleged breach of an employment contract under which she claimed she was entitled to job security. She argued that job security also carried peace of mind and that breach of such a contract could be expected to cause emotional injury. She also sought exemplary damages. The dispute before the court concerned only whether those categories of damages were available in this contract action.

Issue

May a person discharged in breach of an employment contract recover mental distress damages on the theory that job security has a personal element and emotional harm is foreseeable? May such a plaintiff recover exemplary damages absent separately pleaded tortious conduct independent of the contract breach?

Rule

In Michigan, mental distress damages are generally not recoverable for breach of contract, subject only to a narrow exception for contracts made to secure the protection of personal interests or having elements of personality where the injury is not adequately compensable by reference to the contract terms. Because an employment contract is entered into primarily for economic purposes and the employee's monetary loss can be estimated with reasonable certainty, a person discharged in breach of such a contract may not recover mental distress damages. Exemplary damages are not recoverable in a common-law contract action absent allegation and proof of tortious conduct existing independent of the breach.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

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

Nina Patel worked in Denver for Front Range Billing Group under a written agreement stating she could be terminated only for cause. After the company dismissed her without cause, she sued for lost wages and also for severe anxiety and insomnia, alleging that both sides knew losing the job would be emotionally devastating because she was the sole support for her family.

Under the governing rule, may Nina recover damages for mental distress on her breach of contract claim?

Explanation. Mental distress damages are generally unavailable for breach of an employment contract. The majority reasoned that even though employment has a personal element and emotional harm may be foreseeable, the primary purpose of employment contracts is economic, not protection of personal interests, and pecuniary loss can be estimated with reasonable certainty by the contract terms and market value of services. Foreseeability alone does not trigger recovery.