Stephen E. Powers and Mary Jo Reich for appellant-respondent.

Richard N. Runes and Lauri Cohen for respondents-appellants.

Chief Judge WACHTLER and Judges MEYER, SIMONS, TITONE and HANCOCK, JR., concur; Judge ALEXANDER taking no part.

[189] KAYE, J.

Specific performance of a contract to lease "unique" billboard space is properly denied when damages are an adequate remedy to compensate the tenant and equitable relief would impose a disproportionate burden on the defaulting landlord. However, owing to an error in the assessment of damages, the order of the Appellate Division should be modified so as to remit the matter to Supreme Court, New York County, for further proceedings with respect to damages.

By agreement dated December 16, 1981, Barbara Michaels leased to plaintiff, Van Wagner Advertising, for an initial period of three years plus option periods totaling seven additional years space on the eastern exterior wall of a building on East 36th Street in Manhattan. Van Wagner was in the business of erecting and leasing billboards, and the parties anticipated that Van Wagner would erect a sign on the leased space, which faced an exit ramp of the Midtown Tunnel and was therefore visible to vehicles entering Manhattan from that tunnel.

In early 1982 Van Wagner erected an illuminated sign and leased it to Asch Advertising, Inc. for a three-year period commencing March 1, 1982. However, by agreement dated January 22, 1982, Michaels sold the building to defendant S & M Enterprises. Michaels informed Van Wagner of the sale in early August 1982, and on August 19, 1982 S & M sent Van Wagner a letter purporting to cancel the lease as of October 18 pursuant to section 1.05, which provided:

"Notwithstanding anything contained in the foregoing provisions to the contrary, Lessor (or its successor) may terminate [190] and cancel this lease on not less than 60 days prior written notice in the event and only in the event of:

"a) a bona fide sale of the building to a third party unrelated to Lessor".

Van Wagner abandoned the space under protest and in November 1982 commenced this action for declarations that the purported cancellation was ineffective and the lease still in existence, and for specific performance and damages.

In the litigation the parties differed sharply on the meaning of section 1.05 of the lease. Van Wagner contended that the lease granted a right to cancel only to the owner as it was about to sell the building — not to the new purchaser — so that the building could be conveyed without the encumbrance of the lease. S & M, in contrast, contended that the provision clearly gave it, as Michaels' successor by virtue of a bona fide sale, the right to cancel the lease on 60 days' notice. Special Term denied Van Wagner's motion for a preliminary injunction, concluding that the lease by its terms gave S & M the authority to cancel and that Van Wagner was therefore not likely to succeed on the merits.^[1]

At a nonjury trial, both parties introduced parol evidence, in the form of testimony about negotiations, to explain the meaning of section 1.05. Additionally, one of S & M's two partners testified without contradiction that, having already acquired other real estate on the block, S & M purchased the subject building in 1982 for the ultimate purpose of demolishing existing buildings and constructing a mixed residential-commercial development. The project is to begin upon expiration of a lease of the subject building in 1987, if not sooner.

Trial Term concluded that Van Wagner's position on the issue of contract interpretation was correct, either because the lease provision unambiguously so provided or, if the provision were ambiguous, because the parol evidence showed that the "parties to the lease intended that only an owner making a bona fide sale could terminate the lease. They did not intend that once a sale had been made that any future purchaser could terminate the lease at will." Trial Term declared the lease "valid and subsisting" and found that the "demised space is unique as to location for the particular advertising purpose intended by Van Wagner and Michaels, the original [191] parties to the Lease." However, the court declined to order specific performance in light of its finding that Van Wagner "has an adequate remedy at law for damages". Moreover, the court noted that specific performance "would be inequitable in that its effect would be disproportionate in its harm to the defendant and its assistance to plaintiff." Concluding that "[t]he value of the unique qualities of the demised space has been fixed by the contract Van Wagner has with its advertising client, Asch for the period of the contract", the court awarded Van Wagner the lost revenues on the Asch sublease for the period through trial, without prejudice to a new action by Van Wagner for subsequent damages if S & M did not permit Van Wagner to reoccupy the space. On Van Wagner's motion to resettle the judgment to provide for specific performance, the court adhered to its judgment.

On cross appeals the Appellate Division affirmed, without opinion. We granted both parties leave to appeal.

Whether or not a contract provision is ambiguous is a question of law to be resolved by a court (Sutton v East Riv. Sav. Bank, 55 N.Y.2d 550, 554). In our view, section 1.05 is ambiguous. Reasonable minds could differ as to whether the lease granted a purchaser of the property a right to cancel the lease, or limited that right to successive sellers of the property (see, Chimart Assoc. v Paul, 66 N.Y.2d 570, 573). However, Trial Term's alternate finding — that the parol evidence supported Van Wagner's interpretation of the provision — was one of fact. That finding, having been affirmed by the Appellate Division and having support in the record, is beyond the scope of our review (see, Huntley v State of New York, 62 N.Y.2d 134, 137). Thus, S & M's cancellation of Van Wagner's lease constituted a breach of contract.

Given defendant's unexcused failure to perform its contract, we next turn to a consideration of remedy for the breach: Van Wagner seeks specific performance of the contract, S & M urges that money damages are adequate but that the amount of the award was improper.^[2]

Whether or not to award specific performance is a decision [192] that rests in the sound discretion of the trial court, and here that discretion was not abused. Considering first the nature of the transaction, specific performance has been imposed as the remedy for breach of contracts for the sale of real property (Judnick Realty Corp. v 32 W. 32nd St. Corp., 61 N.Y.2d 819, 823; Da Silva v Musso, 53 N.Y.2d 543, 545; S.E.S. Importers v Pappalardo, 53 N.Y.2d 455), but the contract here is to lease rather than sell an interest in real property. While specific performance is available, in appropriate circumstances, for breach of a commercial or residential lease, specific performance of real property leases is not in this State awarded as a matter of course (see, Gardens Nursery School v Columbia Univ., 94 Misc 2d 376, 378).^[3]

Van Wagner argues that specific performance must be granted in light of the trial court's finding that the "demised space is unique as to location for the particular advertising purpose intended". The word "uniqueness" is not, however, a magic door to specific performance. A distinction must be drawn between physical difference and economic interchangeability. The trial court found that the leased property is physically unique, but so is every parcel of real property and so are many consumer goods. Putting aside contracts for the sale of real property, where specific performance has traditionally been the remedy for breach, uniqueness in the sense of physical difference does not itself dictate the propriety of equitable relief.

By the same token, at some level all property may be interchangeable with money. Economic theory is concerned with the degree to which consumers are willing to substitute the use of one good for another (see, Kronman, Specific Performance, 45 U Chi L Rev 351, 359), the underlying assumption [193] being that "every good has substitutes, even if only very poor ones", and that "all goods are ultimately commensurable" (id.). Such a view, however, could strip all meaning from uniqueness, for if all goods are ultimately exchangeable for a price, then all goods may be valued. Even a rare manuscript has an economic substitute in that there is a price for which any purchaser would likely agree to give up a right to buy it, but a court would in all probability order specific performance of such a contract on the ground that the subject matter of the contract is unique.

The point at which breach of a contract will be redressable by specific performance thus must lie not in any inherent physical uniqueness of the property but instead in the uncertainty of valuing it: "What matters, in measuring money damages, is the volume, refinement, and reliability of the available information about substitutes for the subject matter of the breached contract. When the relevant information is thin and unreliable, there is a substantial risk that an award of money damages will either exceed or fall short of the promisee's actual loss. Of course this risk can always be reduced — but only at great cost when reliable information is difficult to obtain. Conversely, when there is a great deal of consumer behavior generating abundant and highly dependable information about substitutes, the risk of error in measuring the promisee's loss may be reduced at much smaller cost. In asserting that the subject matter of a particular contract is unique and has no established market value, a court is really saying that it cannot obtain, at reasonable cost, enough information about substitutes to permit it to calculate an award of money damages without imposing an unacceptably high risk of undercompensation on the injured promisee. Conceived in this way, the uniqueness test seems economically sound." (45 U Chi L Rev, at 362.) This principle is reflected in the case law (see, e.g., Erie R. R. Co. v City of Buffalo, 180 N.Y. 192, 200; St. Regis Paper Co. v Santa Clara Lbr. Co., 173 N.Y. 149, 160; Dailey v City of New York, 170 App Div 267, 276-277, affd 218 N.Y. 665), and is essentially the position of the Restatement (Second) of Contracts, which lists "the difficulty of proving damages with reasonable certainty" as the first factor affecting adequacy of damages (Restatement [Second] of Contracts § 360 [a]).

Thus, the fact that the subject of the contract may be "unique as to location for the particular advertising purpose [194] intended" by the parties does not entitle a plaintiff to the remedy of specific performance.

Here, the trial court correctly concluded that the value of the "unique qualities" of the demised space could be fixed with reasonable certainty and without imposing an unacceptably high risk of undercompensating the injured tenant. Both parties complain: Van Wagner asserts that while lost revenues on the Asch contract may be adequate compensation, that contract expired February 28, 1985, its lease with S & M continues until 1992, and the value of the demised space cannot reasonably be fixed for the balance of the term. S & M urges that future rents and continuing damages are necessarily conjectural, both during and after the Asch contract, and that Van Wagner's damages must be limited to 60 days — the period during which Van Wagner could cancel Asch's contract without consequence in the event Van Wagner lost the demised space. S & M points out that Van Wagner's lease could remain in effect for the full 10-year term, or it could legitimately be extinguished immediately, either in conjunction with a bona fide sale of the property by S & M, or by a reletting of the building if the new tenant required use of the billboard space for its own purposes. Both parties' contentions were properly rejected.

First, it is hardly novel in the law for damages to be projected into the future. Particularly where the value of commercial billboard space can be readily determined by comparisons with similar uses — Van Wagner itself has more than 400 leases — the value of this property between 1985 and 1992 cannot be regarded as speculative. Second, S & M having successfully resisted specific performance on the ground that there is an adequate remedy at law, cannot at the same time be heard to contend that damages beyond 60 days must be denied because they are conjectural. If damages for breach of this lease are indeed conjectural, and cannot be calculated with reasonable certainty, then S & M should be compelled to perform its contractual obligation by restoring Van Wagner to the premises. Moreover, the contingencies to which S & M points do not, as a practical matter, render the calculation of damages speculative. While S & M could terminate the Van Wagner lease in the event of a sale of the building, this building has been sold only once in 40 years; S & M paid several million dollars, and purchased the building in connection with its plan for major development of the block. The theoretical termination right of a future tenant of the existing [195] building also must be viewed in light of these circumstances. If any uncertainty is generated by the two contingencies, then the benefit of that doubt must go to Van Wagner and not the contract violator. Neither contingency allegedly affecting Van Wagner's continued contractual right to the space for the balance of the lease term is within its own control; on the contrary, both are in the interest of S & M (see, by analogy, Amerman v Deane, 132 N.Y. 355). Thus, neither the need to project into the future nor the contingencies allegedly affecting the length of Van Wagner's term render inadequate the remedy of damages for S & M's breach of its lease with Van Wagner.

The trial court, additionally, correctly concluded that specific performance should be denied on the ground that such relief "would be inequitable in that its effect would be disproportionate in its harm to defendant and its assistance to plaintiff" (see, Matter of Burke v Bowen, 40 N.Y.2d 264, 267; Cox v City of New York, 265 N.Y. 411; Restatement [Second] of Contracts § 364 [1] [b]). It is well settled that the imposition of an equitable remedy must not itself work an inequity, and that specific performance should not be an undue hardship (see, Pomeroy and Mann, Specific Performance of Contracts § 185 [3d ed 1926]). This conclusion is "not within the absolute discretion of the Supreme Court" (McClure v Leaycraft, 183 N.Y. 36, 42; see, Trustees of Columbia Col. v Thacher, 87 N.Y. 311; cf. Forstmann v Joray Holding Co., 244 N.Y. 22). Here, however, there was no abuse of discretion; the finding that specific performance would disproportionately harm S & M and benefit Van Wagner has been affirmed by the Appellate Division and has support in the proof regarding S & M's projected development of the property.

While specific performance was properly denied, the court erred in its assessment of damages. Our attention is drawn to two alleged errors.

First, both parties are dissatisfied with the award of lost profits on the Asch contract: Van Wagner contends that the award was too low because it failed to take into account incidental damages such as sign construction, and S & M asserts that it was too high because it failed to take into account offsets against alleged lost profits such as painting costs. Both arguments are precluded. Although the trial was not bifurcated or limited to the issue of liability, the Asch contract was placed in evidence and neither party chose to [196] submit additional proof of incidental damages or other expenses for that period. Nor — as is evident from the judgment — did the trial court understand that any separate presentations would be made as to damages for that period. Based on the Asch contract indicating revenues, and the lease indicating expenses, the trial court properly calculated Van Wagner's lost profits. Having found that the value of the space was fixed by the Asch contract for the entire period of that contract, however, the court erred in awarding the lost revenues only through November 23, 1983. Damages should have been awarded for the duration of the Asch contract.

Second, the court fashioned relief for S & M's breach of contract only to the time of trial, and expressly contemplated that "[i]f defendant continues to exclude plaintiff from the leased space action for continuing damages may be brought." In requiring Van Wagner to bring a multiplicity of suits to recover its damages the court erred. Damages should have been awarded through the expiration of Van Wagner's lease.

Accordingly, the order of the Appellate Division should be modified, with costs to plaintiff, and the case remitted to Supreme Court, New York County, for further proceedings in accordance with this opinion and, as so modified, affirmed.

Order modified, etc.

[1] Contrary to the assertion of S & M, denial of a motion for a preliminary injunction does not "constitute the law of the case or an adjudication on the merits" (Walker Mem. Baptist Church v Saunders, 285 N.Y. 462, 474).

[2] We note that the parties' contentions regarding the remedy of specific performance in general, mirror a scholarly debate that has persisted throughout our judicial history, reflecting fundamentally divergent views about the quality of a bargained-for promise. While the usual remedy in Anglo-American law has been damages, rather than compensation "in kind" (see, Holmes, The Path of the Law, 10 Harv L Rev 457, 462 [1897]; Holmes, The Common Law, at 299-301 [1881]; and Gilmore, The Death of Contract, at 14-15), the current trend among commentators appears to favor the remedy of specific performance (see, Farnsworth, Legal Remedies for Breach of Contract, 70 Colum L Rev 1145, 1156 [1970]; Linzer, On the Amorality of Contract Remedies — Efficiency, Equity, and the Second Restatement, 81 Colum L Rev 111 [1981]; and Schwartz, The Case for Specific Performance, 89 Yale LJ 271 [1979]), but the view is not unanimous (see, Posner, Economic Analysis of Law § 4.9, at 89-90 [2d ed 1977]; Yorio, In Defense of Money Damages for Breach of Contract, 82 Colum L Rev 1365 [1982]).

[3] But see, 5A Corbin, Contracts § 1143, at 131; at 7, n 62 [1971 Pocket Part]; 11 Williston, Contracts § 1418A [3d ed]; Pomeroy and Mann, Specific Performance of Contracts § 9, at 18-19 [3d ed 1926]; Restatement [Second] of Contracts § 360 comment a, illustration 2; Restatement [Second] of Contracts § 360 comment e; cf. City Stores Co. v Ammerman, 266 F Supp 766, affd Per Curiam 394 F.2d 950.

1 DeG., M & G. 604, 42 Eng. Rep. 687 (Ch. 1852)
BENJAMIN LUMLEY
v.
JOHANNA WAGNER, ALBERT WAGNER and FREDERICK GYE
Before the Lord Chancellor Lord St. Leonards.
May 22, 26, 1852.

[604] [S. C. 5 De G. & Sm. 485; 21 L. J. Ch. 898; 16 Jur. 871. See Adamson v. Gill, 1868, 17 L. T. 466 ; Catt v. Tourle, 1868, L. R. 4 Ch. 660 ; Merchants’' Trading Co. v. Banner, 1871, L. R. 12 Eg. 23. Observed upon, Montague v. Flockon, 1873, L. R. 16 Eq. 189. Considered, Wolverhampton and Walsal Railway v. London and Northwestern Railway, 1873, L. R. 16 Eq. 433. See Fothergill v. Rowland, 1873, L. R. 17 Eq. 141; Warne v. Routledge, 1873, L. R. 18 Eq. 499 ; Leech v. Schweder, L. R. 9 Ch. 468 (n.);j Bowen v. Hall, 1881, 6 Q. B. D. 341 ; Alderson v. Maddison, 1881, 7 Q. B. D. 181 ; 8 App. Cas. 467; Donnell v. Bennett, 1883, 22 Ch. D. 838. Discussed, Whitwood Chemical Co. v. Hardman [1891], 2 Ch. 416. See Ryan v. Mutual tontine, &c., Association [1893], 1 Ch. 127. Distinguished, Davis v. Foreman [1894], 3 Ch. 654. See Robinson V. Heuer [1898], 2 Ch. 458; Manchester Ship Canal Co. v. Manchester Racecourse Go. [1901], 2 Ch. 37;  Formby v. Baker [1903], 2 Ch. 553.]

J. W. agreed with B. L. that she, J. W., would sing at B. L.'s theatre during certain period of time, and would not sing elsewhere without his written authority. Held, on a bill filed to restrain J. W. from singing for a third party, and granting an injunction for that purpose, that the positive and negative stipulations of the agreement formed but one contract, and that the Court would interfere to prevent the violation of the negative stipulation, although it could not enforce the specific performance of the entire contract.

Kemble v. Kean, 6 Sim. 333, and Kimberley v. Jennings, 6 Sim. 340, overruled.

The Plaintiff relied on the Defendants' knowledge of a fact said to be communicated to them in a letter, of which no copy was kept, but the receipt of which the Defendants admitted. The Defendants denied that it contained the statement alleged, but did not produce the letter, or satisfactorily account for its nonproduction. Held, under these circumstances, that the Plaintiff's representation must be taken to be true.

The bill in this suit was filed on the 22d April 1852, by Benjamin Lumley, the lessee of Her Majesty's Theatre, against Johanna Wagner, Albert Wagner, her father, and Frederick Gye, the lessee of Covent Garden Theatre: it stated that in November 1851 Joseph Bacher, as the agent of the Defendants Albert Wagner and Johanna Wagner, came to and concluded at Berlin an agreement in writing in the French language, bearing date the 9th November 1851, and which agreement, being translated into English, was as follows :—

" The undersigned Mr. Benjamin Lumley, possessor of Her Majesty's Theatre at London, and of the Italian Opera at Paris, of the one part, and Mademoiselle Johanna [688 Wagner, cantatrice of the Court of His Majesty the King of Prussia, with the consent of her father, Mr. A. Wagner, residing at Berlin, of the other part, have concerted and concluded the following contract :—First, Mademoiselle Johanna Wagner binds herself to sing three months at the theatre of Mr. Lumley, Her Majesty's, at London, to date from the 1st of April 1852 (the [605] time necessary for the journey comprised therein), and to give the parts following:  1st, Romeo, Montecchi; 2d, Fides, Prophete ; 3d, Valentine, Huguenots ; 4th, Anna, Don Juan; 5th, Alice, Robert le Diable; 6th, an opera chosen by common accord.—Second, The three first parts must necessarily be, 1st, Romeo, 2d, Fides, 3d, Valentine; these parts once sung, and then only she will appear, if Mr. Lumley desires it, in the three other operas mentioned aforesaid.—Third, These six parts belong exclusively to Mademoiselle Wagner, and any other cantatrice shall not presume to sing them during the three months of her engagement. If Mr. Lumley happens to be prevented by any cause soever from giving these operas, he is, nevertheless, held to pay Mademoiselle Johanna Wagner the salary stipulated lower down for the number of her parts as if she had sung them.-—Fourth, In the case where Mademoiselle Wagner should be prevented by reason of illness from singing in the course of a month as often as it has been stipulated, Mr. Lumley is bound to pay the salary only for the parts sung.—Fifth, Mademoiselle Johanna Wagner binds herself to sing twice a week during the run of the three months; however, if she herself was hindered from singing twice in any week whatever, she will have the right to give at a later period the omitted representation.—Sixth, If Mademoiselle Wagner, fulfilling the wishes of the direction, consent to sing more than twice a week in the course of three months, this last will give to Mademoiselle Wagner £50 sterling for each representation extra. —-Seventh, Mr. Lumley engages to pay Mademoiselle Wagner a salary of £400 sterling per month, and payment will take place in such manner that she will receive £100 sterling each week.—Eighth, Mr. Lumley will pay, by letters of exchange, to Mademoiselle Wagner at Berlin, the 15th of March 1852, the sum of £300 sterling, a sum which will be deducted from her engagement in his [606] retaining £100 each month.—Ninth, In all cases except that where a verified illness would place upon her a hindrance, if Mademoiselle Wagner shall not arrive in London eight days after that from whence dates her engagement, Mr. Lumley will have the right to regard the non-appearance as a rupture of the contract, and will be able to demand an indemnification.— Tenth, In the case where Mr. Lumley should cede his enterprise to another, he has the right to transfer this contract to his successor, and in that case Mademoiselle Wagner has the same obligations and the same rights towards the last as towards Mr. Lumley.

" JOHANNA WAGNER.
"ALBERT WAGNER."

"Berlin, the 9th November 1851."

The bill then stated that in November 1851 Joseph Bacher met the Plaintiff in Paris, when the Plaintiff objected to the agreement as not containing an usual and necessary clause, preventing the Defendant Johanna Wagner from exercising her professional abilities in England without the consent of the Plaintiff, whereupon Joseph Bacher, as the agent of the Defendants Johanna Wagner and Albert Wagner, and being fully authorized by them for the purpose, added an article in writing in the French language to the agreement, and which, being translated into English, was as follows:—

"Mademoiselle Wagner engages herself not to use her talents at any other theatre, nor in any concert or reunion, public or private, without the written authorization of Mr. Lumley.

"Dr. JOSEPH BACHER,
"For Mademoiselle Johanna Wagner,
and authorized by her."

The bill then stated that J. and A. Wagner subsequently made another engagement with the [607] Defendant F. Gye, by which it was agreed that the Defendant J. Wagner should, for a larger sum than that stipulated by the agreement with the Plaintiff, sing at the Royal Italian Opera, Covent Garden, and abandon the agreement with the Plaintiff. The bill then stated that the Defendant F. Gye had full knowledge of the previous agreement with the Plaintiff, and that the Plaintiff had received a protest from the Defendants J. and A. Wagner, repudiating the agreement on the allegation that the Plaintiff had failed to fulfil the pecuniary portion of the agreement.

The bill prayed that the Defendants Johanna Wagner and Albert Wagner might restrained from violating or committing any breach of the last article of the agreement; that the Defendant Johanna Wagner might be restrained from singing and performing or singing at the Royal Italian Opera, Covent Garden, or at any other theatre or place without the sanction or permission in writing of the Plaintiff during the existence of the agreement with the Plaintiff; and that the Defendant Albert 'Wagner might be restrained from permitting or sanctioning the Defendant Johanna "Wagner singing and performing or singing as aforesaid; that the Defendant Frederick Gye might be restrained from accepting the professional services of the Defendant Johanna Wagner as a singer and performer or singer at the said Royal Italian Opera, Covent Garden, or at any other theatre or place, and from permitting her to sing and perform or to sing at the Royal Italian Opera, Covent Garden, during the existence of the agreement with the Plaintiff, without the permission or sanction of the Plaintiff.

The answer of the Defendants A. and J. Wagner attempted to show that Joseph Bacher was not their authorized agent, at least for the purpose of adding the restrictive clause, and that the Plaintiff had failed to make the stipu-[608]-lated payment by the time mentioned in the agreement. The Plaintiff having obtained an injunction from the Vice-Chancellor, Sir James Parker, on the 9th May 1852, the Defendants now moved by way of appeal before the Vice-Chancellor (1) to discharge His Honour's order.

Mr. Bethell, Mr. Malins and Mr. Martindale, in support of the appeal motion. We submit that the agreement in the present case being one of which the Court cannot decree specific performance, the jurisdiction by injunction does not attach. The Vice-Chancellor has rested his decision mainly on the authority of Dietrichsen v. Cabburn (2 Phil. 52), but there the decision was founded on the special circumstances of the case tending to establish a partnership, which clearly does not exist here, nor does it warrant such an extension of the principle as has been assumed to be there established ; this is shewn by the observations of Lord Cottenham himself in the subsequent case of Heathcote v. The North Staffordshire Railway Company (2 Mac. & G. 100). In that case, on dissolving an injunction which had been granted by the Vice-Chancellor of England, restraining the company from applying to Parliament for powers to relieve them from the performance of their contract, his Lordship said, "The covenant is a mere legal contract which the Act asked for may prevent the Defendant from performing, but that is all: if A. contract with B. to deliver goods at a certain time and place, will equity interfere to prevent A. from doing anything which may or can prevent him from so delivering the goods?  If, indeed, A. had agreed to sell an estate to B. and then proposed to deal [609] with the estate so as to prevent him from performing his contract, equity would interfere; because in that case B. would, by the contract, have obtained an interest in the estate itself, which, in the case of the goods, he would not." We contend that the agreement is a purely personal contract, for the infraction of which damages are a complete and ample remedy: the agreement is, in fact, nothing more than a contract of hiring and service, and whatever the relation between the employer and employed may be, whether master or 'servant, or principal and agent, or manager and actor, this Court will, in all such cases, abstain from interfering, either directly or indirectly; Kemble v. Kean (6 Sim. 333), Kimberley v. Jennings (6 Sim. 340), Stocker• v. Brockelbank (3 Mac. & G. 250).

[THE LORD CHANOELLOR. In the case of Stocker v. Brockelbank there was no negative covenant.]

The general principle upon which we rely is, that this Court never interferes to restrain the breach of the negative part of a contract in any case where it cannot specifically enforce the performance of the positive part of the contract ; Baldwin v. The Society for the Diffusion of Useful Knowledge (9 Sim. 393), Hooper v. Brodrick (11 Sim. 47), Hills v. Croll (2 Phil. 60). The earlier authorities cited by the Plaintiff in the Court below, namely, Martin v. Nutkin (2 P. W. 266), Barret v. Blagrave (5 Ves. 555), Martin v. Colman (18 Ves. 437), are all distinguishable. In the case of Martin v . .Nutkin (2 P. W. 266) the ringing of the bells was restrained, because not only was there no adequate remedy at law, but the contract was one clearly falling within the ordinary jurisdiction of the Court for specific performance. The same remark applies also to the case of Barrett v. Bla-[610]-grave (5 Ves. 555), which involved the doctrine of part performance, the tenant having enjoyed the benefits of the lease. In Morris v. Colman (18 Ves. 437), the injunction was granted upon the ground of partnership, as shewn by Lord Eldon in the case of Clarke v. Price (2 Wils. 157); and, applying'the language of his Lordship in that case to the present, we say that if the agreement is one which the Court will not carry into execution (and this must be admitted) the Court cannot indirectly enforce it.

[THE LORD CHANOELLOR observed that in the case of Blakemore v. The Glamorganshire Canal Navigation (1 Myl. & K. 154) Lord Eldon had got over his scruples ; for he there granted an injunction, the effect of which was indirectly to compel the company to restore certain works to the state in which they originally stood, His. Lordship added that he had always felt some difficulty in acquiescing in the propriety of that decision.]

The utmost extent to which the Court ought to go in granting such prohibitory injunctions, when a proper case is shewn for its interference, is in the form adopted in the case of Robinson v. Lord Byron (1 Bro. C. C. 588), where the Defendant was restrained from preventing the flow of water in the usual quantities; but it is to be observed that, wherever there is a clear legal remedy, as exists in the present instance, this Court will decline to interfere in cases arising out of the doctrine of specific performance, Collins v. Plumb ( 16 Ves. 454).

[THE LORD CHANCELLOR. This Court interferes by injunction in the case of articled clerks, surgeons' apprentices, &c., who have covenanted, after they leave their masters not to practise within certain limits, although no question of specific performance is involved.]

The utmost extent to which the Court ought to go in granting such prohibitory injunctions, when a proper case is shewn for its interference, is in the form adopted in the case of Robinson v. Lord Byron (1 Bro. C. C. 588), where the Defendant was restrained from preventing the flow of water in the usual quantities; but it is to be observed that, wherever there is a clear legal remedy, as exists in the present instance, this Court will decline to interfere in cases arising out of the doctrine of specific performance, Collins v. Plumb ( 16 Ves. 454).

[THE LORD CHANCELLOR. This Court interferes by injunction in the case of articled clerks, surgeons' apprentices, &c., who have covenanted, after they leave their masters not to practise within certain limits, although no question of specific performance is involved.]

[611] Those cases, of which Swallow v. Wallingfond (12 Jur. 403) is an example, are in the nature of concluded contracts, and where the jurisdiction of this Court is only exercised with the view of effectuating the whole contract by preventing the party, who has received a valuable consideration for his covenant, from infringing that covenant. On the same principle, as well as to prevent the commission of irreparable damage, a tenant was restrained from violating a covenant he had entered into with his landlord not to burn the demised lands, Gervais v. Edwands (2 Dru. & War. 80).

Mr. Bacon and Mr. H. Clarke, contra, in support of the injunction. The prayer of the bill in the present case is not for specific performance and for an injunction as ancillary to that relief, but for an injunction simply, to prevent the violation of the negative stipulation in the Defendants' agreement. With respect to the alleged distinction in the case of Morris v. Colman (18 Ves. 437), on the ground of a partnership, that was in fact no distinction, nor did it form an element in the decision of the case, which was based solely on the existence of the negative stipulation; and the case of Clarke v. Price (2 Wils. 157), which was relied upon by the Appellants, serves clearly to illustrate this position, for in that case not only was there a prayer for specific performance, but the agreement contained no negative stipulation. The cases of Kemble v. Kean (6 Sim. 333) and Kimberley v. Jennings (6 Sim. 340) are the only two cases which are at all opposed to the uniform current of authority, which establishes the Plaintiff's right to the injunction; but it is to be observed that Sir L. Shadwell, who decided these [612] two cases, was himself the Judge who, in the subsequent case of Rolfe v. Rolfe (15 Sim 88), recognized and acted upon the distinction for which we contend, thereby virtually if not actually overruling his previous decisions. We rely upon the decision of Lord Cottenham in Dietrichsen v .. Cabburn (2 Phil. 52; see p. 58); he there says, "If the bill states a right or title in the Plaintiff to the benefit of the negative agreement of the Defendant, or of his abstaining from the contemplated act, it is not as I conceive material whether the right be at law or under an agreement which cannot be otherwise brought under the jurisdiction of a Court of Equity." On this principle the Court acts in restraining the violation of covenants in a lease, by a tenant, French v. Macale (2 Dru. & War. 269). The same doctrine was also recognised by Lord Langdale, in the case of Whittaker v. Howe (3 Beav. 383;  see p. 395), where he says :—" I do not think that this Court can refuse to grant an injunction to restrain the violation of a contract or covenant, because there may be some part of the agreement which the Court could not compel the Defendant specifically to perform." It was said that this Court would, at all events, only interfere in cases where there had been part performance, but such a construction would exclude all executory contracts. In' the present case, however, there has been a part performance, inasmuch as the Plaintiff has incurred considerable expense in preparing operas in which the Defendant J. Wagner was to sing. It was further said that the Court never interferes in cases like the present, which was alleged to be one of personal service; but in the case of articled clerks, &c., the Court has continually restrained them from practising within certain limits, in violation of their agreements.

Mr. Bethell, in reply, [613] The jurisdiction of the Court in granting injunctions may be said to be limited to four classes of cases. The first class includes those where its aid is sought to obtain preventive relief, and where, if not granted, irreparable mischief would ensue, as in the cases of nuisances and infringement of patents. The second class includes those in which the injunction is ancillary to the relief prayed, as in Whittaker v. Howe (3 Beav. 383), which being a case of partnership the injunction was auxiliary for the purpose of preserving the status quo: in the present instance, however, the injunction, so far from being in the nature of ancillary relief, prejudges the whole case. The third class of cases embraces those where the Court, being able to give direct and full relief, has restrained the breach of unilateral agreements when only one part remains to be performed, and the effect of the injunction is to afford a complete remedy, and to leave no part of the agreement unperformed: thus, for example, in the case of restraining a tenant from committing a breach of his covenant, the whole contract is directly and positively performed; and the same remark is applicable to the decision in Rolfe v. Rolfe (15 Sim. 88), where the whole of the agreement had been completed, with the exception of the part which remained to be performed by the operation of the injunction; besides the question there resulted out of a partnership transaction: Where, however, the Court by its interference cannot do the complete act which was the subject of the agreement between the parties, it has declined to interfere, Smith v. Fromont (2 Swanst. 330). In the case now under discussion, the Court is called upon to deal indirectly with part of an agreement, in which the negative portion is so involved with the positive as to be only subservient to the whole agreement. There is also a fourth class of cases, namely, bills of peace, in which the Court is in the [614] habit of granting a perpetual injunction to quiet the possession of the Plaintiff, but those are inapplicable to the present.

THE LORD CHANCELLOR. The question which I have to decide in the present case arises out of a very simple contract, the effect of which is, that the Defendant Johanna Wagner should sing at Her Majesty's Theatre for a certain number of nights, and that she should not sing elsewhere (for that is the true construction) during that period. As I understand the points taken by the Defendants' counsel in support of this appeal they in effect come to this, namely, that a Court of Equity ought not to grant an injunction except in cases connected with specific performance, or where the injunction being to compel a party to forbear from committing an act (and not to perform an act), that injunction will complete the whole of the agreement remaining unexecuted.

I have then to consider how the question stands on principle and on authority, and in so doing I shall observe upon some of the cases which have been referred to and commented upon by the Defendants in support of their contention. The first was that of Martin v. Nutkin (2 P. W. 266), in which the Court issued an injunction restraining an act from being done where it clearly could not have granted any specific performance; but then it was said that that case fell within one of the exceptions which the Defendants admit are proper cases for the interference of the Court, because there the ringing of the bells, sought to be restrained, had been agreed to be suspended by the Defendant in consideration of the erection by the Plaintiffs of a cupola and clock, the agreement being in effect the price stipulated for the Defendant's relinquishing bell-ringing at stated periods; the Defendant having accepted the [615] benefit, but rejected the corresponding obligation, Lord Macclesfield first granted the injunction which the Lords Commissioners, at the hearing of the cause, continued for the lives of the Plaintiffs. That case therefore, however it may be explained as one of the exceptional cases, is nevertheless a clear authority shewing that this Court has granted an injunction prohibiting the commission of an act in respect of which the Court could never have interfered by way of specific performance.

The next case referred to was that of Barrett v. Blagrave (5 Ves. 555), which came first before Lord Loughborough, and afterwards before Lord Eldon (6 Ves. 104). There, a lease had originally been granted by the Plaintiffs, the proprietors of Vauxhall Gardens, of an adjoining house, under an express covenant that the lessee would not carryon the trade of a victualler or retailer of wines, or generally any employment that would be to the damage of the proprietors of Vauxhall Gardens ; an underlease having been made to the Defendants, who were violating the covenant by the sale of liquors, the proprietors of Vauxhall Gardens filed a bill for an injunction, which was granted by Lord Loughborough. It has been observed in the argument here, that in granting the injunction Lord Loughborough said :—" It is in the nature of specific performance," and that, therefore, that case also falls under one of the exceptional cases. When that case came before Lord Eldon, he dissolved the injunction, but upon a different ground, namely, on that of acquiescence for many years, and in a sense he treated it as a case of specific performance. As far as the words go, the observations of those two eminent Judges would seem to justify the argument which has been addressed to me; in effect, however, it was only specific performance, because a prohibition, pre-[616]-venting the commission of an act may as effectually perform an agreement as an order for the performance of the act agreed to be done. The agreement in that case being, that the house should not be opened for the purposes of entertainment to the detriment of Vauxhall Gardens, the Court granted the injunction; that was the performance of the agreement in substance, and the term “ specific performance" is aptly applied in such a case, but not in the sense in which it has been used before me.

It was also contended that the Plaintiff's remedy, if any, was at law; but it is no objection to the exercise of the jurisdiction by injunction that the Plaintiff may have a legal remedy. The case of Robinson v. Lord Byron (I Bro. C. C. 588), before Lord Thurlow, so very often commented upon by succeeding Judges, is a clear illustration of that proposition, because in that case the Defendant, Lord Byron, who had large pieces of water in his park which supplied the Plaintiff's mills, was abusing his right by preventing a regular supply to the Plaintiff's mill, and, although the Plaintiff had a remedy at law, yet this Court felt no difficulty in restraining Lord Byron by injunction from preventing the regular flow of the water. Undoubtedly, there are cases such as that cited for the Defendants, of Collins v. Plumb (16 Ves. 454), before Lord Eldon, in which this Court has declined to exercise the power (which in that instance it was assumed to have had) of preventing the commission of an Act, because such power could not be properly and beneficially exercised. In that case the negative covenant, not to sell water to the prejudice of the Plaintiffs, was not enforced by Lord Eldon, not because he had any doubt about the jurisdiction of the Court (for upon that point he had no doubt), but because it was impossible to ascertain every time the water was supplied by the Defendants whether it was or not [617] to the damage of the Plaintiffs; but whether right or wrong, that learned Judge, in refusing to exercise the jurisdiction on very sufficient grounds, meant in no respect to break in on the general rules deducible from the previous authorities.

At an early stage of the argument I adverted to the familiar cases of attorneys' clerks, and surgeons' and apothecaries' apprentices, and the like, in which this Court has constantly interfered, simply to prevent the violation of negative covenants; but it was said that in such cases the Court only acted on the principle that the clerk or apprentice had received all the benefit, and that the prohibition operated upon a concluded contract, and that, therefore, the injunction fell within one of the exceptional cases. I do not, however, apprehend that the jurisdiction of the Court depends upon any such principle : it is obvious that in those cases the negative covenant does not come into operation until the servitude is ended, and, therefore, that the injunction cannot be required or applied for before that period.

The familiar case of a tenant covenanting not to do a particular act was also put during the argument; but it was said that in such a case the jurisdiction springs out of the relation of landlord and tenant, and that the tenant having received the benefit of an executed lease, the injunction operates only so as to give effect to the whole contract; that, however, cannot be the principle on which this Court interferes, for, beyond all doubt, where a lease is executed containing affirmative and negative covenants, this Court will not attempt to enforce the execution of the affirmative covenants either on the part of the landlord or the tenant, but will leave it entirely to a Court of law to measure the damages ; though with respect to the negative covenants, if the tenant, for example, has sti-[618]-pulated not to cut or lop timber, or any other given act of forbearance, the Court does not ask how many of the affirmative covenants on either side remain to be performed under the lease, but acts. at once by giving effect to the negative covenant, specifically executing it by prohibiting the commission of acts which have been stipulated not to be done. So far, then, each of the cases to which I have referred appears to me to be in direct contravention of the rules which have been so elaborately pressed upon me by the Defendants' counsel.

The present is a mixed case, consisting not of two correlative acts to be done—one by the Plaintiff, and the other by the Defendants, which state of facts may have and in some cases has introduced a very important difference—but of an act to be done by J. Wagner alone, to which is superadded a negative stipulation on her part to abstain from the commission of any act which will break in upon her affirmative covenant ; the one being ancillary to, concurrent and operating together with, the, other. The agreement to sing for the Plaintiff during three months at his theatre, and during that time not to sing for anybody else, is not a correlative contract, it is. in effect one contract; and though beyond all doubt this Court could not interfere. to enforce the specific performance of the whole of this contract, yet in all sound. construction, and according to the true spirit of the agreement, the engagement to perform for three months at one theatre must necessarily exclude the right to perform at the same time at another theatre. It was clearly intended that J. Wagner was to exert her vocal abilities to the utmost to aid the theatre to which she agreed to attach herself. I am of opinion that if she had attempted, even in the absence of any negative stipulation, to perform at another theatre, she would have broken the spirit and [619] true meaning of the contract as much as she would now do with reference to the contract into which she has actually entered.

Wherever this Court has not proper jurisdiction to enforce specific performance, it operates to bind men's consciences, as far as they can be bound, to a true and literal performance of their agreements ; and it will not suffer them to depart from their contracts at their pleasure, leaving the party with whom they have contracted to the mere chance of any damages which a jury may give. The exercise of this: jurisdiction has, I believe, had a wholesome tendency towards the maintenance of that good faith which exists in this country to a much greater degree perhaps than in any other; and although the jurisdiction is not to be extended, yet a Judge would desert his duty who did not act up to what his predecessors have handed down as the rule for his guidance in the administration of such an equity.

It was objected that the operation of the injunction in the present case was mischievous, excluding the Defendant J. Wagner from performing at any other theatre while this Court had no power to compel her to perform at Her Majesty's Theatre .. It is true that I have not the means of compelling her to sing, but she has no cause of complaint if I compel her to abstain from the commission of an act which she has, bound herself not to do, and thus possibly cause her to fulfill her engagement. The jurisdiction which I now exercise is wholly within the power of the Court, and being of opinion that it is a proper case for interfering, I shall leave nothing unsatisfied by the judgment I pronounce. The effect, too, of the injunction in restraining J. Wagner from singing elsewhere may, in the event of an action being brought against. her by the Plaintiff, prevent any such amount of vindictive damages being given against her as a jury might probably be [620] inclined to give if she had carried her talents and exercised them at the rival theatre: the injunction may also; as I have. said, tend to the fulfillment of her engagement; though, in continuing the injunction, I disclaim doing indirectly what I cannot do directly.

Referring again to the authorities, I am well aware that they have not been uniform, and that there undoubtedly has been a difference of decision on the question now revived before me; but, after the best consideration which I have been enabled to give to the subject, the conclusion at which I have arrived is, I conceive, supported by the greatest weight of authority. The earliest case most directly bearing on the point is that Morris v. Colman (18 Ves. 437): there Mr. Colman was a part proprietor with Mr. Morris of the Haymarket Theatre, and they were partners in that concern, and by the deed of partnership Mr. Colman agreed that he would not exercise his dramatic abilities for any other theatre than the Haymarket; he did not, however, covenant that he would write for the Haymarket, but it was merely a negative Covenant that he would not write for any other theatre than the Haymarket. Lord Eldon granted an injunction against Mr. Colman writing for any other theatre than the Haymarket; and the ground on which Lord Eldon assumed that jurisdiction was the subject of some discussion at the Bar. It was truly said for the Defendants that that was a case of partnership; and it was said, moreover, that Lord Cottenham was mistaken in the case of Dickersen v. Cabburn (2 Phil. 52), when he said that Lord Eldon had not decided Morris v. Colman on the ground of there being a partnership. I agree that the observations which fell from Lord Eldon in the subsequent case of Clarke v. Price (2 Wils. 157) shew that he did mainly decide it on the ground of partnership; [621] but he did not decide it exclusively on that ground. In the argument of Morris v. Colman (18 Ves. 437) Sir Samuel Romily suggested a case almost identical with the present: he contended that the clause restraining Mr. Colman from writing for any other theatre was no more against public policy than a stipulation that Mr. Garrick should not perform at any other theatre than that at which he was engaged would have been. Lord Eldon, adverting in his judgment to the case put at the Bar, said—" If Mr. Garrick was now living would it be unreasonable that he should contract with Mr. Colman to perform only at the Haymarket Theatre, and Mr. Colman with him to write for the theatre alone? Why should they not thus engage for the talents of each other ? " He gives the clearest enunciation of his opinion that that would be an agreement which this Court would enforce by way of injunction.

The late Vice-Chancellor Shadwell, of whom I always wish to be understood to speak with the greatest respect, decided in a different way in the cases of Kemble v. Kean (6 Sim. 333) and Kimberley v. Jennings (6 Sim. 340), on which I shall presently make a few observations. In the former case he observed that Lord Eldon must be understood, in the case of Morris v. Colman (18 Ves. 437), to have spoken according to the subject-matter before him, and must there be considered to be addressing himself to a case in which Colman and Garrick would both have bad a partnership interest in the theatre. I must however, entirely dissent from that interpretation. Lord Eldon's words are perfectly plain, they want no comment upon them, they speak for themselves. He was alluding to a case in which Garrick, as a performer, would have had nothing to do with the theatre beyond the implied engagement that he would not perform anywhere else; and I have [622] come to a very clear conclusion that Lord Eldon would have granted the injunction in that case although there had been no partnership.

The authority of Clarke v. Price (2 Wils. 157) was much pressed upon me by the learned counsel for the Defendants; but that is a case which does not properly belong to their argument, because there there was no negative stipulation, and I quite admit that this Court cannot enforce the performance of such an affirmative stipulation as is to be found in that case; there the Defendant having agreed to take notes of cases in the Court of Exchequer, and compose reports for the Plaintiff, and having failed to do so, the Plaintiff, Mr. Clarke, filed a bill for an injunction, and Lord Eldon, when refusing the injunction, in effect, said, I cannot compel Mr. Price to sit in the Court of Exchequer and take notes and compose reports; and the whole of his judgment shews that he proceeded (and so it has been considered in later cases) on the ground that there was no covenant, on the part of the Defendant, that he would not compose reports for any other person. The expressions in the judgment are :—" I cannot, as in the other case" (referring to Morris v. Colman (18 Ves. 437)), " say that I will induce him to write for the Plaintiff by preventing him from writing for any other person;" and then come these important words" for that is not the nature of the agreement." Lord Eldon, therefore, was of opinion, upon the construction of that agreement, that it would be against its meaning to affix to it a negative quality and import a covenant into it by implication, and he, therefore, very properly, as I conceive, refused that injunction; that case, therefore, in no respect touches the question now before me, and I may at once declare that if I had only to deal with the affirmative covenant of the Defendant J. Wagner that she would perform at Her Majesty's Theatre, I should not have granted any injunction.

[623] Thus far, I think, the authorities are very strong against the Defendants' contention ; but the case of Kemble v. Kean (6 Sim. 333), to which I have already alluded, is the first case which has in point of fact introduced all the difficulties on this part of the law. There Mr. Kean entered into an agreement precisely similar to the present: he agreed that he would perform for Mr. Kemble at Drury Lane, and that he would not perform anywhere else during the time that he had stipulated to perform for Mr. Kemble. Mr. Kean broke his engagement, a bill was filed, and the Vice-Chancellor Shadwell was of opinion that he could not grant an injunction to restrain Mr. Kean from performing elsewhere, which he was either about to do or actually doing, because the Court could not enforce the performance of the affirmative covenant that he would perform at Drury Lane for Mr. Kemble. Being pressed by that passage which I have read from in the Lord Chancellor's judgment in Morris v. Colman (18 Ves. 437), he put that paraphrase or commentary upon it which I have referred to :  that is, he says: "Lord Eldon is speaking of a case where the parties are in partnership together." I have come to a different conclusion : and I am bound to say that, in my apprehension, the case of Kemble v. Kean was wrongly decided and cannot be maintained.

The same learned Judge followed up his decision in that case in the subsequent one of Kimberly v. Jennings (6 Sim. 340) ; that was a case of hiring and service, and the Vice-Chancellor there virtually admitted that a negative covenant might be enforced in this Court, and quoted an instance to that effect within his own knowledge. He said: "I remember a case in which a nephew wished to go on the stage, and his uncle gave him a large sum of money in consideration of his covenanting not to [624] perform within a particular district ; the Court would execute such a covenant, on the ground that a valuable consideration had been given for it." He admits, therefore, the jurisdiction of the Court, if nothing but that covenant remained to be executed. The learned Judge, however, adds, "but here the negative covenant does not stand by itself: it is coupled with the agreement for service for a certain number of years, and then for taking the Defendant into partnership: . . . this agreement cannot be performed in the whole, and, therefore, this Court cannot perform any part of it." Whatever may have been the mutual obligations in that case, which prevented the Court from giving effect to the negative covenant, I am not embarrassed with any such difficulties here, because, as I have already shewn, both the covenants are on the part of the Defendants.

The case of Hooper v. Brodrick (11 Sim. 47) was cited, as an instance in which the Court had refused an injunction under circumstances like the present; but, in that case, the lessee of an inn had covenanted to use and keep it open as an inn during a certain time, and not to do any act whereby the licence might become forfeited. In point of fact, the application was that he might be compelled to keep it open, and the Vice-Chancellor makes this observation: "The Court ought not to have restrained the Defendant from discontinuing to use and keep open the demised premises as an inn, which is the same in effect as ordering him to carryon the business of an innkeeper; but it might have restrained him from doing, or causing or permitting to be done, any act which would have put it out of his power, or the power of any other person, to carryon that business on the premises. It is not, however, shewn that the Defendant has threatened, or intends to do, or to cause or permit to be done, any act whereby the [625] licences may become forfeited or be refused; and, therefore, the injunction must be dissolved." That, therefore, is an authority directly against the Defendants, because it shews that if there had been an intention to break the negative covenant, this Court would have granted the injunction.

The case of Smith v. Fromont (2 Swanst. 330) was also relied upon by the Defendants, as an instance where the injunction had been refused, but there there was no negative covenant; it was an attempt to restrain, by injunction, a man from supplying horses to a coach for a part of a road, when the party who was applying for the injunction was himself incapable of performing his obligation to horse his part of the road. Lord Eldon, in refusing the injunction and deprecating the interference of the Court in such cases, there said: "The only instance I recollect of an application to this Court to restrain the driving of coaches occurred in the case of a person who, having sold the business of a coach proprietor from Reading to London, and undertaking to drive no coach on that road, afterwards established one. 'With some doubt, whether I was not degrading the dignity of this Court by interfering, I saw my way in that case; because one party had there covenanted absolutely against interfering with the business which he had sold to the other." That again is a direct authority, therefore, against the Defendants, as Lord Eldon expressly says he had interfered in the case of a negative covenant, although he could not interfere on that, occasion because there was no such covenant.

Some observations have been made upon a decision of my own in Ireland, in the, case of Gevais v. Edwarcls (2 Dru. & War. 80); [626] that decision I believe to be, right, but it is quoted to shew that I was of opinion that this Court cannot interfere to enforce specific performance, unless it can execute the whole of an agreement. I abide by the opinion I there expressed, and I mean to do nothing in this case which shall in any manner interfere with that opinion. That was properly a case for specific performance, but from the nature of the contract itself there was a portion of it which could not be executed. I said, in effect: I cannot execute this contract which is intended to be binding on both parties; I cannot execute a portion of this contract for one, and leave the other portion of the contract unexecuted for the other; and, therefore, as I cannot execute the whole of the contract, I am bound to execute no part of it: that, however, has no bearing on the present case, for here I leave nothing unperformed which the Court can ever be called upon to perform.

In Hills v. Croll (2 Phil. 60), Lord Lyndhurst refused to enforce an injunction to restrain the violation of a negative covenant. It was a case in which A. had given to B. a sum of money, and B. covenanted that he would buy all the acids he wanted from the manufactory of A., who covenanted that he would supply the acids, and B. also covenanted that he would buy his acids from no other person. Lord Lyndhurst refused to prohibit B. from obtaining acids from any other quarter, both because the covenants were correlative, and because he could not compel A. to supply B. with acids; and if, therefore, he had restrained B. from taking acids from any other quarter, he might have ruined him in the event of A. breaking his affirmative covenant to supply the acids. That case has never been rightly understood. [627] It is supposed that Lord Lyndhurst's decision was based upon a. wrong principle; that he followed the authority of Gervais v. Edwards and such cases, and that he improperly applied the' rule which was in that class of cases properly applied, but under the circumstances of the case before him, I think the rule was not improperly applied.(2)

[628] The next case which has been so much observed upon was that before Lord Cottenham, of Dietrichsen v. Gabburn (2 Phil. 52). That was a very simple case, and the [629] question upon what principle it was decided formed the subject of discussion before me. A man, in order to obtain a great circulation of his patent medicine, entered [630] into a contract with a vendor of such articles, giving him a general agency for the sale of the medicine, with 40 per cent discount, and stipulating that he would not supply anybody else at a larger discount than 25 per cent. ; he violated his contract, and was proceeding to employ other agents with a larger discount than 25 per cent ; an injunction was applied for and was granted: it was. said that it was properly granted, because it was a case of partnership. This, however, was not the fact; it was not a case of partnership, but was strictly one of principal and agent; and it was only because there was the negative covenant that the Court gave effect to it. It is impossible to read Lord Cottenham's judgment, without being satisfied that he did not consider it to be a part-[631]-nership, though he said it was in the nature of a partnership; and in a popular sense it might. be so called, because the parties were there both dealing with respect to the same subject, from which each was to have a benefit, but in no legal sense was it a partnership.

Up to the period when Dietrichsen v. Cabburn (2 Phil. 52) was decided, I apprehend that there could have been no doubt on the law as applicable to this case, except for the authority of Vice-Chancellor Shadwell; but with great submission it appears to me that the whole of that learned Judge's authority is removed by himself by his decision in the later case of Rolfe v. Rolfe (15 Sim. 88). In that case A. B. and C. were partners as tailors. A. and B. went out of the trade on consideration of receiving £1000 each, and C. was to continue the business on his own account. A. entered into a covenant that he would not carryon the trade of a tailor which he had just sold, within certain limits, and C. entered into a covenant that he would employ A . as cutter at a certain allowance. The bill was filed simply for an injunction to prevent A. from setting up as a tailor within the prescribed limits, and the Vice-Chancellor granted that injunction. It was objected that this Court could not grant the injunction when there was something remaining to be performed, for that A. had a right to be employed as a cutter, which right this Court would not even attempt to deal with or enforce as against C. That case, therefore, was open to a difficulty which does not occur here; in fact, the same difficulty which might have arisen in Hills v. Croll (2 Phil. 60) before Lord Lyndhurst. But the Vice-Chancellor held that to be no difficulty at all; observing that the bill simply asked for an injunction which he would grant; although he could not give effect to the [632] affirmative covenant to do the act in respect of which no specific performance was asked: his own decisions in Kemble v Kean (6 Sim. 333), and in Kimberley v. Jennings (6 Sim. 340), were pressed upon him; but he observed "that the bills in the cases cited asked for specific performance of the agreement, and that the injunctions were sought as only ancillary to that relief ; but the bill in the present case asked merely for an injunction." He no longer put it on the inability of the Court to enforce a negative covenant, but he put it on the form of the pleadings. Whether that form was sufficient to justify his opinion is a question with which I need not deal; but I am very clearly of opinion that the case of Rolfe v. Rolfe (15 Sim. 88) does remove the whole weight of that learned Judge's authority on this subject.

It was said in argument that the injunction prayed in Rolfe v. Rolfe (15 Sim. 88) was merely ancillary to the relief; but it will be seen that that was not so, and that the prayer extended only to the injunction, and had nothing to do with relief in the shape of specific performance; and the learned Judge himself stated that, if it had gone to that extent, he, following his former decisions, would not have granted the injunction.

From a careful examination of all these authorities I am of opinion that the principles and rules deducible from them are in direct contravention of those principles and rules which were so elaborately pressed upon me during the argument; and I wish it to be distinctly understood that I entertain no doubt whatever that the point of law has been properly decided in the Court below. It was, nevertheless, and with some reason, said that although the point of law should be decided in the [633] Plaintiff's favour, still he might be excluded from having the benefit of it on the merits of the case.

His Lordship here entered into a minute examination of the statements in the answers and affidavits as to the unauthorized addition of the restrictive clause, and as to the non-fulfillment by the Plaintiff of his portion of the agreement. In reference to those points he observed that, whether the clause was originally added with or without authority, the evidence shewed a clear acquiescence on the part of the Defendants to its remaining in the agreement ; that the operation of the agreement had been in the first instance postponed to suit the convenience of the Defendants; and that as to the payment of the £300, although the Plaintiff could not have come into a Court of Equity to enforce the contract without having tendered the amount stipulated to be paid, yet it was distinctly proved that it had in fact been paid to the common agent of both parties for the purpose of being handed to the Defendants. His Lordship concluded by saying that, looking at the merits and circumstances of the case, as well as at the point of law raised, he must refuse this motion, with costs. In the course of the argument, and in order to prove the Plaintiff's readiness to perform his part of the contract, an affidavit made by Dr. Bacher was read, which was to the effect that he had written and sent a letter to the Defendant J. Wagner, informing her of his having received from the Plaintiff the £300, and offering to pay that sum according to her instructions. A letter of the same date as that referred to in the affidavit was admitted to have been received by the Defendant J. Wag-[634]ner, but it was positively denied that it contained any such offer. The letter itself was not forthcoming, and its non-production was not accounted for. No copy was kept by Dr. Bacher.

THE LORD CHANCELLOR observed that, when the affidavit, as to the contents of the letter, was made, Dr. Bacher could not have known that the letter would not be produced; that the affidavit, therefore, if untrue, was at the imminent peril of exposure by the production of the letter; and that under such circumstances the representation in the affidavit must be taken to be true.

NOTES

[1] The case was heard by the Lord Chancellor on a representation that it was intended to confine the argument to the legal :question alone, which, it was said, involved an important point of equity jurisdiction, on which the authorities were conflicting.

[2] The following, containing all the material portions of Lord Lyndhurst's judgment in Hills y. Croll, is taken from the shorthand writer's notes, and has been kindly furnished to the reporters by one of the counsel who was engaged in that cause, and by whom a very full report of the case will be found published in "Reports of Cases in the Law of Real Property and Conveyancing," Vol. i. p. 541 :—

" THE LORD CHANCELLOR. In this case of Hills v. Croll, Croll had obtained two patents for the purpose of purifying gas, and the result of the purification of gas was the manufacture of muriate of ammonia and sulphate of ammonia. He entered into a contract with Hills, who is the Plaintiff in this suit, and the contract was to this effect: Mr. Croll was to purchase all the acids that he was to use in his process, under his patent, from Mr. Hills: Mr. Hills, on his side, was to have the right of purchasing all the ammonia that should be produced as the result of those processes, at certain prices as to the one and as to the other. In addition to this, there was a. stipulation that, in all the licences that were granted for using those patents, the parties to whom those licences were to be granted should be bound to purchase all the acids which were used in the processes from Mr. Hills, and that Mr. Hills should have the same option that he had in the case of Croll, of purchasing from them all the ammonia that should be produced in the course of the processes. It was also stipulated that Mr. Hills should have the option to supply either muriatic acid or sulphuric acid, as he should think proper, regulating his option by the market prices of the muriate of ammonia and the sulphate of ammonia. I think this is the substance of the original agreement between these parties. The agreement was entered into in the month of March 1841. It was found, on the part of Mr. Croll, that the mode of payment and other arrangements, with respect to this agreement, were inconvenient, in consequence of which a correspondence takes place between him and Mr. Hills, in the month of September 1842, and the agreement was modified according to the terms of a letter, dated, I think, in September, written by him. One of the stipulations in the original agreement was, that Mr. Hills should be a signing party in all the licences that were granted by Mr. Croll for the use of the patent. The first stipulation, in the letter of September, was that he should not be required to be a signing party; but it provided that there should be a covenant in all those agreements, a covenant to the effect stated in the original agreement, namely, that the parties to whom the licences were granted should purchase their acids from Hills, and give Hills the right to purchase the ammonia. Regulations were also made altering the terms on which the acids were to be purchased and the ammonia to be sold. There were some other subordinate stipulations to which it is not necessary at present to advert. The letter, however, concluded with a stipulation to this effect, that if Mr. Croll was in any particular to depart from the agreement so modified, the original agreement was to be enforced, I think those two documents, the original agreement and the letter, formed the substance of the contract between the parties as it existed after September 1842.

"Some doubt was expressed as to whether or not the contract so modified has been acted upon in that shape. It appears beyond all doubt that it was so acted upon, because the accounts were, from time to time, rendered on the 'footing of the Modified agreement, and it is also clear from the letter of Mr. Hills of the 8th of December, in which he refers expressly to the prices that were regulated by the letter of September 1842."

His Lordship here referred to another question raised in the course of the discussion, namely, whether the second or modified agreement had been put an end to by the operation of the clause providing for the enforcement of the first or original agreement; and, after remarking that it was unnecessary for him, for the purpose of the present question, to come to any conclusive decision on that point, proceeded as follows :—

"Those are the facts of the case for the purpose of raising the narrow question, as it appears to me, which the Court has to decide. The bill was filed for the purpose of calling on' the Court to declare that that agreement should be specifically performed.

"Now, there is no principle of the Court which I understand to be more dearly established than this, that the Court will not decree an agreement to be specifically performed, unless it can execute the whole of the agreement. The question, therefore, in this case will be whether the Court has power, from the nature of this agreement, to execute the whole of it, every part of it. Part of the prayer which is consequent upon a specific performance is, that' the Defendant should be restrained from purchasing acids from anybody but Mr. Hills, and also, that he should be restrained from granting licences, except according to the agreement that was in force between the parties.

"Now, then, with respect to the first of these points, there is a stipulation on the part of Hills that he will supply the acids; there is a stipulation on the part of Mr. Croll that he will purchase acids from Hills, and from no other person. Has the Court any power whatever to compel Mr. Hills to comply with that? Can the Court order Mr. Hills to continue the manufacture of acids for the purpose of supplying Mr. Croll? Can the Court call upon him, if he should not manufacture acids, and require him to purchase acids for the purpose of supplying Mr. Cron ? It is clear, I apprehend, that the Court has no such power. There are cases in which the Court, will do indirectly what it cannot do directly. A case commonly cited for that purpose is the case of a nuisance. The Court would not compel a party who had erected a wall to the nuisance of another–would not compel the party by any direct order to pull down that wall; but the Court can make an order requiring him not to continue the nuisance, which would have the effect of compelling him to pull down the wall. In the case of Morris v. Colman, the Court restrained Mr. Colman from writing for any other theatre, inferring from that that the order would compel Mr. Colman, or have the tendency to compel Mr. Colman, to write for the Haymarket Theatre; but in this case the Court has no power to compel Mr. Hills to supply acids by ordering him not to supply acids to any other person; that is not the agreement, nor was it ever intended that it should be the agreement. Therefore, unless the Court can compel him, by a direct order, to supply Mr. Croll, from time to time, with the acids that Mr. Croll requires, it is quite clear that this Court cannot execute all the parts of this contract; the Court cannot, therefore, compel the party specifically to perform the contract.

"It was thrown out, in the course of the argument, that this Court might compel one party to perform his part of the contract, and leave the other party to his remedy at law. No such principle has ever been acted on in this Court; it has been so laid down over and over again, and in a recent case that was cited at the Bar (Gervais v. Edwards, 2 Dru. & War. 80), Sir Edward Sugden held that, unless this Court can execute every part of the contract, this Court will not compel a specific performance, of a part. When 'this cause, therefore, comes to a hearing, I am of opinion that, according to the facts as they at present stand, and according to the statement of the principle I have mentioned, this Court cannot restrain Mr. Croll from purchasing acids elsewhere, because it cannot compel Mr. Hills, on his side, to furnish all the acids that may be necessary for the manufacture carried on by Mr. Croll. If the Court cannot do this, it cannot restrain the parties at the hearing. It is quite clear that, upon this interlocutory application, the Court cannot restrain Mr. Croll from purchasing acids elsewhere. I apprehend, therefore, that the decision of the Vice-Chancellor, which proceeded on the principle I have stated, and rightly, on the grounds I have stated, and which I believe is the principle of this Court, and the principle on which the Vice-Chancellor acted as to that part of the case, is correct ; and equally applies, as it appears to me it does, to that part of the notice of motion with respect to the licences, because that forms a part of the contract, the generaI contract. If the Court cannot execute the whole of the contract, it cannot execute the contract in part; therefore I am of opinion that, in this case, the motion must be refused, and refused with costs."

2 E & B 216

Lumley
v
Gye

QUEEN'S BENCH
1st January 1853

Cases Argued and Determined in the Queen's Bench, in Trinity Term, XVI. Victoria.

The Judges who usually sat in Banc in this Term were:

Lord Campbell C. J.
Coleridge J.
Erle J.
Crompton J.

Lumley against Gye. 1853. 1st and 2d counts of declaration, by lessee of a theatre: for maliciously procuring W. (who had agreed with plaintiff to perform and sing at his theatre and no where else for a certain term) to break her contract and not to perform or sing at plaintiff's theatre, and to continue away during the term for which W. was engaged. 3d count, averring that W. had engaged with plaintiff to be, and had become and was, plaintiff's dramatic artiste for a certain term, and complaining that plaintiff maliciously procured her to depart out of her said employment during the term. On demurrer: — Held, by Wightman, Erle and Crompton Js., that the counts were all good, and that an action lies for maliciously procuring a breach of contract to give exclusive personal services for a time certain, equally whether the employment has commenced or is only in fieri, provided the procurement be during the subsistence of the contract, and produces damage: and that, to sustain such an action, it is not necessary that the employer and employed should stand in the strict relation of master and servant. Semble, by the same Judges, that the action would lie for the malicious procurement of the breach of any contract, though not for personal services, if by the procurement damage was intended to result and did result to the plaintiff. — Coleridge J. dissentiente, and holding that the action for procuring a third person to depart from his engagement is founded on the Statute of Labourers, and is strictly confined to cases where the employer and employed stand in such relation of master and servant as was within that statute; and that, in all other eases, the remedy for a breach of contract is only on the contract, and against those privy to it. And that, as a dramatic performer is not a servant, therefore the counts were all bad. — The defendant had, under stat. 15 & 16 Vict. c. 76, s. 80, obtained leave to plead and demur also. On an application to postpone the trial of the issues in fact till the issue in law had been finally disposed of in a Court of Error: —Held: that the Court had no power to make such an order; inasmuch as the judgment on the demurrer had disposed of the issue in law, finally as far as regarded this Court.

[S. C. 22 L J. Q. B. 463; 17 Jur. 827; 1 W. R. 432. Dictum approved,
Cattle v. Stockton Waterworks, 1875, L. E. 10 Q. B. 457. Applied,
Bowen v. Hall, 1881, 6 Q. B. D. 39;
Mogul Steamship Company v. M'Gregor, 1889-91, 23 Q. B. D. 608; [1892] A. C. 25;
De Francesco v. Barnum, 1890, 63 L. T. 515. Followed,
Temperton v. Russell, [1893] 1 Q. B. 727. Commented on,
Allen v. Flood, [1898] A. C. 1. Referred to,
Lyons v. Wilkins, [1899] 1 Ch. 272. Approved,
Quinn v. Leathem, [1901] A. C. 510. Applied,
Bead v. Friendly Society of Operative Stonemasons, [1902] 2 K. B. 97, 737. Discussed,
Glamorgan Coal Company v. South Wales Miners' Federation, [1903] 1 K. B. 131; [1903] 2 K. B. 576; [1905] A. C. 253;
National Phonograph Company, Limited v. Edison-Bell Consolidated Phonograph Company, Limited, [1908] 1 Ch. 348, 359;
Conway v. Wade, [1908] 2 K. B. 849; [1909] A. C. 510.]

The 1st count of the declaration stated that plaintiff was lessee and manager of the Queen's Theatre, for [217] performing operas for gain to him; and that he had contracted and agreed with Johanna Wagner to perform in the theatre for a certain time, with a condition, amongst others, that she should not sing nor use her talents elsewhere during the term without plaintiff's consent in writing: Yet defendant, knowing the premises, and maliciously intending to injure plaintiff as lessee and manager of the theatre, whilst the agreement with Wagner was in force, and before the expiration of the term, enticed and procured Wagner to refuse to perform: by means of which enticement and procurement of defendant, Wagner wrongfully refused to perform, and did not perform during the term.

Count 2, for enticing and procuring Johanna Wagner to continue to refuse to perform during the term, after the order of Vice Chancellor Parker, affirmed by Lord St. Leonards ^[1], restraining her from performing at a theatre of defendants.

Count 3. That Johanna Wagner bad been and was hired by plaintiff to sing and perform at his theatre for a certain time, as the dramatic artiste of plaintiff, for reward to her, and had become and was such dramatic artiste of plaintiff at his theatre: Yet defendant, well knowing &c., maliciously enticed and procured her, then being such dramatic artiste, to depart from the said employment.

In each count special damage was alleged.

[218] Demurrer. Joinder.

The demurrer was argued in the sittings after Hilary Term last ^[2].

Willes, for the defendant. The counts disclose a breach of contract on the part of Wagner, for which the plaintiff's remedy is by an action on the contract against her. The relation of master and servant is peculiar; and, though it originates in a contract between the employer and the employed, it gives rise to rights and liabilities, on the part of the master, different from those which would result from any other contract. Thus the master is liable for the negligence of his servant, whilst an ordinary contractor is not liable for that of the person with whom he contracts. And a master may lawfully defend his servant when a contractor may not defend his contractee. And so a master may bring an action for enticing away his servant. But these are anomalies, having their origin in times when slavery existed: they are intelligible on the supposition that the servant is the property of his master: and, though they have been continued long after all but free service has ceased, they are still confined to cases where the relation of master and servant in the strict sense, exists. In the present case Wagner is a dramatic artiste, not a servant in any sense. (It is unnecessary to report the argument for the defendant further in detail, as the points made in it, and the authorities relied upon, are fully stated in the judgments of Crompton J. and Wightman J. )

Cowlng, contrà. The general principle is laid down [219] in Comyns's Digest, Action upon the Case (A). "In all cases, where a man has a temporal loss, or damage by the wrong of another, he may have an action upon the case, to be repaired in damages. " In Comyns's Digest, Action upon the Case for Misfeasance (A 6), an instance is given; " If he threaten the tenants of another, whereby they depart from their tenures, " citing 1 Rol. Abr. 108, Action sur Case (N) pl. 21. An action lies for procuring plaintiffs wife to remain absent; Winsmore v. Greenbank (Willes, 577). An action lay for ravishment of ward; and, if " a man procureth a ward to go from his guardian, this is a ravishment in law; " 2 Inst. 440. Now, as neither the tenants, the wife nor the ward are servants, it cannot be said that the action for procurement is an anomaly confined to the case of master and servant. "Every master has by his contract purchased for a valuable consideration the services of his domestics for a limited time.: the inveigling or hiring his servant, which induces a breach of this contract, is therefore an injury to the master; and for that injury the law has given a remedy by a special action on the case: and he may also have an action against the servant for the nonperformance of his agreement. " 3 Bl. Com. 142, Blackstone thus treats the action by a master as an example of a general rule that "inducing a breach of contract" is an injury for which an action lies. And surely any one, not a lawyer, would agree that the malicious and intentional procurement of a breach of contract was a wrong, and that the breach of contract intended to be procured was the direct consequence of that wrongful procurement. Green v. Button (2 C. M. & R. 707) is apparently an authority for that larger proposition; and [220] so is Sheperd v. Wake man (1 Sid. 79). It is not accurate to say that the remedy for breach of contract is confined to those privy to the contract; Levy v. Langridge ^[3]. In that ease the son recovered though the warranty was to the father. It is true that the damage to the plaintiff must be the natural and immediate consequence of the wrong of the defendant, and that it is not often that the unjustifiable act of an independent party is the natural consequence of that wrong; but, when, as on this demurrer must be taken to be the fact, the defendant uses the contracting party as his tool to break the contract to the damage of the plaintiff, why should he not be answerable for the damage he thus intentionally produces? The procurement may in some cases be privileged, just as a libel or slander may be: but here it is malicious. It is, however, unnecessary to go so far in this case, as the contract is for exclusive personal services, and the authorities are clear that in such cases the action lies. (The arguments for the plaintiff on this part of the ease, and the authorities cited, are so fully stated in the judgments that it is unnecessary to repeat them here. )

"Willes, in reply. The averment of malice can make no difference. If the action does not lie without malice, it does not lie with it; and malice is never averred in actions for seducing servants. The passage cited from Comyns's Digest, Action upon the Case (A), does not throw much light on the matter. It is not disputed that damage resulting from a wrong gives a cause of [221] action; but the defendant's point is that the act complained of is not a wrong within the technical meaning of the word: and this is an instance of the rule, ex damno sine injuriâ non oritur actio. The instances cited, as supporting the general proposition, all range themselves under some well known, class of wrongs. The reference in Comyns's Digest, Action upon the Case for Misfeasance (A 6), is to 1 Roll. Ab. 108. Action sur Case, (N) pl. 21; where it appears that the menaces were to " tenants at will, of life and limb. " The tenants therefore were not bound to remain; and the threats of life and limb must have been an interference with the plaintiffs property. Ravishment of ward also proceeds on the ground that the guardian had a property in his ward. Winsmore v. Greenbank (Willes, 577) extends the law as to enticing servants to enticing a wife; but the principle is the same. The common law considers the wife the property and servant of the husband. In Sheperd v. Wakeman (1 Sid. 79) the action was for asserting that the plaintiff was already married, per quod she lost her marriage: but to assert that a woman is about to commit bigamy is actionable per se. Levy v. Langridge (4 M. & W. 337) was decided on the ground that there was what was equivalent to a fraudulent representation to the plaintiff as to an article which he was to use. The act complained of in Green v. Button, (2 C. M. & R. 707) was also a wrong in itself. The injury done was analogous to slander of title. (The argument in reply, as to the effect of the contract being for exclusive service, is sufficiently shewn by the judgments. )

Cur. adv. vult.

[222] In this term (June 3) the learned Judges, being divided in opinion, delivered their judgments seriatim.

Crompton J. The declaration in this case consisted of three counts. The two first stated a contract between the plaintiff, the proprietor of the Queen's Theatre, and Miss Wagner, for the performance by her for a period of three months at the plaintiff's theatre; and it then stated that the defendant, knowing the premises and with a malicious intention, whilst the agreement was in full force, and before the expiration of the period for which Miss Wagner was engaged, wrongfully and maliciously enticed and procured Miss Wagner to refuse to sing or perform at the theatre, and to depart from and abandon her contract with the plaintiff and all service thereunder, whereby Miss Wagner wrongfully, during the full period of the engagement, refused and made default in performing at the theatre; and special damage arising from the breach of Miss Wagner's engagement was then stated. The third count stated that Miss Wagner had been hired and engaged by the plaintiff, then being the owner of Her Majesty's Theatre, to perform at the said theatre for a certain specified period as the dramatic artiste of the plaintiff for reward to her in that behalf, and had become and was such dramatic artiste for the plaintiff at his said theatre for profit to the plaintiff in that behalf; and that the defendant, well knowing the premises and with a malicious intention, whilst Miss Wagner was such artiste of the plaintiff, wrongfully and maliciously enticed and procured her, so being such artiste of the plaintiff, to depart from and out of the said employment of the plaintiff, whereby [223] she wrongfully departed from and out of the said service and employment of the plaintiff, and remained and continued absent from such service and employment until the expiration of her said hiring and engagement to the plaintiff by effluxion of time; and special damage arising from the breach of Miss Wagner's engagement was then stated. To this declaration the defendant demurred: and the question for our decision is, Whether all or any of the counts are good in substance?

The effect of the two first counts is, that a person, under a binding contract to perform at a theatre, is induced by the malicious act of the defendant to refuse to perform and entirely to abandon her contract; whereby damage arises to the plaintiff, the proprietor of the theatre. The third count differs, in stating expressly that the performer had agreed to perform as the dramatic artiste of the plaintiff, and had become and was the dramatic artiste of the plaintiff for reward to her; and that the defendant maliciously procured her to depart out of the employment of the plaintiff as such dramatic artiste; whereby she did depart out of the employment and service of the plaintiff; whereby damage was suffered by the plaintiff. It was said, in support of the demurrer, that it did not appear in the declaration that the relation of master and servant ever subsisted between the plaintiff and Miss Wagner; that Miss Wagner was not averred, especially in the two first counts, to have entered upon the service of the plaintiff; and that the engagement of a theatrical performer, even if the performer has entered upon the duties, is not of such a nature as to make the performer a servant, within the rule of law which gives an action to the master for the wrongful enticing away of his [224] servant. And it was laid down broadly, as a general proposition of law, that no action will lie for procuring a person to break a contract, although such procuring is with a malicious intention and causes great and immediate injury. And the law as to enticing servants was said to be contrary to the general rule and principle of law, and to be anomalous, and probably to have had its origin from the state of society when serfdom existed, and to be founded upon, or upon the equity of, the Statute of Labourers. It was said that it would be dangerous to hold that an action was maintainable for persuading a third party to break a contract, unless some boundary or limits could be pointed out; and that the remedy for enticing away servants was confined to cases where the relation of master and servant, in a strict sense, subsisted between the parties; and that, in all other cases of contract, the only remedy was against the party breaking the contract.

Whatever may have been the origin or foundation of the law as to enticing of servants, and whether it be, as contended by the plaintiff, an instance and branch of a wider rule, or whether it be, as contended by the defendant, an anomaly and an exception from the general rule of law on such subjects, it must now be considered clear law that a person who wrongfully and maliciously, or, which is the same thing, with notice, interrupts the relation subsisting between master and servant by procuring the servant to depart from the master's service, or by harbouring and keeping him as servant after he has quitted it and during the time stipulated for as the period of service, whereby the master is injured, commits a wrongful act for which he is responsible at law. I think that the rule applies wherever [225] the wrongful interruption operates to prevent the service during the time for which the parties have contracted that the service shall continue: and I think that the relation of master and servant subsists, sufficiently for the purpose of such action, during the time for which there is in existence a binding contract of hiring and service between the parties; and I think that it is a fanciful and technical and unjust distinction to say that the not having actually entered into the service, or that the service not actually continuing, can make any difference. The wrong and injury are surely the same, whether the wrong doer entices away the gardener, who has hired himself for a year, the night before he is to go to his work, or after he has planted the first cabbage on the first morning of his service; and I should be sorry to support a distinction so unjust, and so repugnant to common sense, unless bound to do so by some rule or authority of law plainly shewing that such distinction exists. The proposition of the defendant, that there must be a service actually subsisting, seems to be inconsistent with the authorities that shew these actions to be maintainable for receiving or harbouring servants after they have left the actual service of the master. In Blake v. Lanyon (6 T. R. 221) it was held by the Court of King's Bench, in accordance with the opinion of Gawdy J. in Adams v. Bafeald (1 Leon. 240), and against the opinion of the two other Judges who delivered their opinions in that case, that an action will lie for continuing to employ the servant of another after notice, without having enticed him away, and although the defendant had received the servant innocently. It is [226] there said that " a person who contracts with another to do certain work for him is the servant of that other till the work is finished, and no other person can employ such servant to the prejudice of the first master; the very act of giving him employment is affording him the means of keeping him out of his former service. " This appears to me to shew that we are to look to the time during which the contract of service exists, and not to the question whether an actual service subsists at the time. In Blake v. Lanyon (6 T. R. 221) the party, so far from being in the actual service of the plaintiff, had abandoned that service, and entered into the service of the defendant in which he actually was; but, inasmuch as there was a binding contract of service with the plaintiffs, and the defendant kept the party after notice, he was held liable to an action. Since this decision, actions for wrongfully hiring or harbouring servants after the first actual service had been put an end to have been frequent; see Pilkington v. Scott (15 M. & W. 657), Hartley v. Cummings (5 Com. B. 247). In Sykes v. Dixon (9 A. & E. 693), where the distinction as to the actual service having been put an end to was relied upon for another purpose, it does not seem to have occurred to the bar or the Court that the action would fail on account of there having been no actual service at the time of the second hiring or the harbouring; but the question as to there being, or not being, a binding contract of service in existence at the time seems to have been regarded as the real question.

The objection as to the actual employment not having commenced would not apply in the present ease to the third count, which states that Miss Wagner had become [227] the artiste of the plaintiff, and that the defendant had indueed her to depart from the employment. But it was further said that the engagement, employment or service, in the present case, was not of such a nature as to constitute the relation of master and servant, so as to warrant the application of the usual rule of law giving a remedy in ease of enticing away servants. The nature of the injury and of the damage being the same, and the supposed right of action being in strict analogy to the ordinary ease of master and servant, I see no reason for confining the case to services or engagements under contracts for services of any particular description; and I think that the remedy, in the absence of any legal reason to the contrary, may well apply to all cases where there is an unlawful and malicious enticing away of any person employed to give his personal labour or service for a given time under the direction of a master or employer who is injured by the wrongful act; more especially when the party is bound to give such personal services exclusively to the master or employer; though I by no means say that the service need be exclusive. Two Nisi priùs decisions were cited by the counsel for the defendant in support of this part of the argument. One of these, cases, Ashley v. Harrison (1 Peake's N. P. C. 194. 1 Esp. N. P. C. 48), was an action against the defendant for having published a libel against a performer, whereby she was deterred from appearing on the stage: and Lord Kenyon held the action not maintainable. This decision appears, especially from the report of the case in Espinasse, to have proceeded on the ground that the damage was too remote to be connected with the defendant's act. This [228] was pointed out as the real reason of the decision by Mr. Erskine in the case of Tarleton v. M'Gawley (1 Peake's N. P. C. 207), tried at the same sittings as Ashley v. Harrison (1 Peake's N. P. C. 194. 1 Esp. N. P. C. 48). The other case, Taylor v. Neri (1 Esp. N. P.. C. 386), was an action for an assault on a performer, whereby the plaintiff lost the benefit of his services; and Lord Chief Justice Eyre said that he did not think that the Court had ever gone further than the case of a menial servant; for that, if a daughter had left the service of her father, no action per quod servitium amisit would lie. He afterwards observed that, if such action would lie, every man whose servant, whether domestic or not, was kept away a day from his business could maintain an action; and he said that the record stated that Breda was a servant hired to sing, and in his judgment he was not a servant at all; and he nonsuited the plaintiff. Whatever may be the law as to the class of actions referred to, for assaulting or debauching daughters or servants per quod servitium amisit, and which differ from actions of the present nature for the wrongful enticing or harbouring with notice, as pointed out by Lord Kenyon in Fores v. Wilson (1 Peake's N. P. C. 55), it is clear from Blake v. Lanyon (6 T. R. 221) and other subsequent cases, Sykes v. Dixon (9 A. & E. 693), Pilkington v. Scott (15 M. & W. 657) and Hartley v. Cummings (5 Com. B. 247), that the action for maliciously interfering with persons in the employment of another is not confined to menial servants, as suggested in Taylor v. Neri (1 Esp. N. P. C. 386). In Blake v. Lanyon (6 T. R. 221) a journeyman who was to work by the piece, and who had left his work [229] unfinished, was held to be a servant for the purposes of such an action; and I think that it was most properly laid down by the Court in that ease, that a person who contracts to do certain work for another is the servant of that other (of course with reference to such an action) until the work be finished. It appears to me that Miss Wagner had contracted to do work for the plaintiff within the meaning of this rule; and I think that, where a party has contracted to give his personal services for a certain time to another, the parties are in the relation of employer and employed, or master and servant, within the meaning of this rule. And I see no reason for narrowing such a rule; but I should rather, if necessary, apply such a remedy to a case "new in its instance, but" " not new in the reason and principle of it" ^[4], that is, to a case where the wrong and damage are strictly analogous to the wrong and damage in a well recognised class of cases. In deciding this case on the narrower ground, I wish by no means to be considered as deciding that the larger ground taken by Mr. Cowling is not tenable, or as saying that in no case except that of master and servant is an action maintainable for maliciously inducing another to break a contract to the injury of the person with whom such contract has been made. It does not appear to me to be a sound answer, to say that the act in such cases is the act of the party who breaks the contract; for that reason would apply in the acknowledged case of master and servant. Nor is it an answer, to say that there is a remedy against the contractor, and that the party relies on the contract; for, besides that reason also applying to the case of master and servant, the action on the contract [230] and the action against the malicious wrong-doer may be for a different matter; and the damages occasioned by such malicious injury might be calculated on a very different principle from the amount of the debt which might be the only sum recoverable on the contract. Suppose a trader, with a malicious intent to ruin a rival trader, goes to a banker or other party who owes money to his rival, and begs him not to pay the money which he owes him, and by that means ruins or greatly prejudices the party: I am by no means prepared to say that an action could not be maintained, and that damages, beyond the amount of the debt if the injury were great, or much less than such amount if the injury were less serious, might not be recovered. Where two or more parties were concerned in inflicting such injury, an indictment, or a writ of conspiracy at common law, might perhaps have been maintainable; and, where a writ of conspiracy would lie for an injury inflicted by two, an action on the ease in the nature of conspiracy will generally lie; and in such action on the case the plaintiff is entitled to recover against one defendant without proof of any conspiracy, the malicious injury and not the conspiracy being the gist of the action ^[5]. In this class of cases it must be assumed that it is the malicious act of the defendant, and that malicious act only, which causes the servant or contractor not to perform the work or contract which he would otherwise have done. The servant or contractor may be utterly unable to pay anything like the amount of the damage sustained entirely from the wrongful act of the defendant: and it would seem unjust, and contrary to the general princi-[231]-ples of law, if such wrongdoer were not responsible for the damage caused by his wrongful and malicious act. Several of the cases cited by Mr. Cowling on this part of the case seem well worthy of attention.

Without however deciding any such more general question, I think that we are justified in applying the principle of the action for enticing away servants to a case where the defendant maliciously procures a party, who is under a valid contract to give her exclusive personal services to the plaintiff for a specified period, to refuse to give such services during the period for which she had so contracted, whereby the plaintiff was injured.

I think, therefore, that our judgment should be for the plaintiff.

Erle J. The question raised upon this demurrer is, Whether an action will lie by the proprietor of a theatre against a person who maliciously procures an entire abandonment of a contract to perform exclusively at that theatre for a certain time; whereby damage was sustained? And it seems to me that it will. The authorities are numerous and uniform, that an action will lie by a master against a person who procures that a servant should unlawfully leave his service. The principle involved in these cases comprises the present; for, there, the right of action in the master arises from the wrongful act of the defendant in procuring that the person hired should break his contract, by putting an end to the relation of employer and employed; and the present case is the same. If it is objected that this class of actions for procuring a breach of contract of hiring rests upon no principle, and ought not to be extended beyond the cases heretofore decided, and that, as those have related [232] to contracts respecting trade, manufactures or household service, and not to performance at a theatre, therefore they are no authority for an action in respect of a contract for such performance; the answer appears to me to be, that the class of cases referred to rests upon the principle that the procurement of the violation of the right is a cause of action, and that, when this principle is applied to a violation of a right arising upon a contract of hiring, the nature of the service contracted for is immaterial. It is clear that the procurement of the violation of a right is a cause of action in all instances where the violation is an actionable wrong, as in violations of a right to property, whether real or personal, or to personal security: he who procures the wrong is a joint wrong-doer, and may be sued, either alone or jointly with the agent, in the appropriate action for the wrong complained of. Where a right to the performance of a contract has been violated by a breach thereof, the remedy is upon the contract against the contracting party; and, if he is made to indemnify for such breach, no further recourse is allowed; and, as in case of the procurement of a breach of contract the action is for a wrong and cannot be joined with the action on the contract, and as the act itself is not likely to be of frequent occurrence nor easy of proof, therefore the action for this wrong, in respect of other contracts than those of hiring, are not numerous; but still they seem to me sufficient to shew that the principle has been recognised. In Winsmore v. Greenbank (Willes, 577) it was decided that the procuring of a breach of the contract of a wife is a cause of action. The only distinction in principle between this case and [233] other cases of contracts is, that the wife is not liable to be sued: but the judgment rests on no such grounds; the procuring a violation of the plaintiff's right under the marriage contract is held to be an actionable wrong. In Green v. Button (2 C. M. & R. 707) it was decided that the procuring a breach of a contract of sale of goods by a false claim of lien is an actionable wrong. Sheperd v. Wakeman (1 Sid. 79) is to the same effect, where the defendant procured a breach of a contract of marriage by asserting that the woman was already married. In Ashley v. Harrison (1 Peake's N. P. C. 194. 1 Esp. N. P. C. 48) and in Taylor v. Neri (1 Esp. N. P. C. 386) it was properly decided that the action did not lie, because the battery, in the first case, and the libel, in the second case, upon the contracting parties were not shewn to be with intent to cause those persons to break their contracts, and so the defendants by their wrongful acts did not procure the breaches of contract which were complained of. If they had so acted for the purpose of procuring those breaches, it seems to me they would have been liable to the plaintiffs. To these decisions, founded on the principle now relied upon, the cases for procuring breaches of contracts of hiring should be added; at least Lord Mansfield's judgment in Bird v. Randall (3 Burr. 1345) is to that effect. This principle is supported by good reason. He who maliciously procures a damage to another by violation of his right ought to be made to indemnify; and that, whether he procures an actionable wrong or a breach of contract. He who procures the non-delivery of goods according to contract may inflict an injury, the same as he who procures the abstraction of goods after delivery; and both ought on the same ground to be made [234] responsible. The remedy on the contract may be inadequate, as where the measures of damages is restricted; or in the ease of non-payment of a debt where the damage may be bankruptcy to the creditor who is disappointed, but the measure of damages against the debtor is interest only; or, in the case of the non-delivery of the goods, the disappointment may lead to a heavy forfeiture under a contract to complete a work within a time, but the measure of damages against the vendor of the goods for non-delivery may be only the difference between the contract price and the market value of the goods in question at the time of the breach. In such cases, he who procures the damage maliciously might justly be made responsible beyond the liability of the contractor.

With respect to the objection that the contracting party had not begun the performance of the contract, I do not think it a tenable ground of defence. The procurement of the breach of the contract may be equally injurious, whether the service has begun or not, and in my judgment ought to be equally actionable, as the relation of employer and employed is constituted by the contract alone, and no act of service is necessary thereto.

The result is that there ought to be, in my opinion, judgment for the plaintiff.

Wightman J. ^[6]. This was a demurrer to a declaration in an action against the defendant for, maliciously, and with intent to injure the plaintiff, causing, procuring and enticing Miss Wagner, who had contracted with the plaintiff to sing at his theatre, to break her contract and refuse to sing, by which he sustained damage.

[235] The declaration contained three counts. The two first are for, wrongfully and maliciously, enticing and procuring Miss Wagner to refuse and make default in the performance of an executory contract, entered into by her with the plaintiff to sing and otherwise perform at his theatre, and to depart from and abandon her contract with the plaintiff and all service thereunder, without alleging that Miss Wagner was in the service and employ of the plaintiff, and that she left such service and employ by the procurement and enticement of the defendant. The third count states that Miss Wagner, before the committing the grievances complained of by the plaintiff, had been and was hired and engaged by the plaintiff to sign and perform at his theatre, from the 15th April 1852 to the 15th July following, as the dramatic artiste of the plaintiff, and that she had become and was such dramatic artiste of the plaintiff, and that the defendant, well knowing the premises, wrongfully and maliciously enticed and procured the said Miss Wagner to depart from and out of the said employment of the plaintiff, and to continue absent from it until the end of the period for which she was engaged. The two first counts are for maliciously procuring Miss Wagner to break a contract for service, and to refuse to perform it; and the third is for maliciously procuring her to depart from the employment of the plaintiff.

It was contended, for the defendant, that an action is not maintainable for inducing another to break a contract, though the inducement is malicious and with intent to injure; and that the breach of contract complained of is, in contemplation of law, the wrongful act of the contracting party, and not the consequence of the malieious persuasion of the party charged; which ought [236] not to have had any effect or influence; and that the damage is not the legal consequence of the acts of the defendant. It was further urged, that the cases in which actions have been held maintainable for seducing servants and apprentices from the employ of their masters are exceptions to the general rule, and are not to be extended; and that the present case, as it appears upon the declaration, is not within any of the excepted cases.

With respect to the first and second counts of the declaration, it was contended, for the plaintiff, that an action on the case is maintainable for maliciously procuring a person to refuse to perform a contract, into which he has entered, and by which refusal the plaintiff has sustained an injury; and, though no case was cited upon the argument in which such an action had been brought, or directly held to be maintainable, it was said that on principle such action was maintainable; and the authority of Lord Chief Baron Comyns was cited, that in all cases where a man has a temporal loss or damage by the wrong of another he may have an action on the ease. In the present case there is the malicious procurement of Miss Wagner to break her contract, and the consequent loss to the plaintiff. Why then may not the plaintiff maintain an action on the case? Because, as it is said, the loss or damage is not the natural or legal consequence of the acts of the defendant. There is the injuria, and the damnum; but it is contended that the damnum is neither the natural nor legal consequence of the injuria, and that, consequently, the action is not maintainable, as the breaking her contract was the spontaneous act of Miss Wagner herself, who was under no obligation to yield to the persuasion or procurement of the defendant. [237] And the case of Vickers v. Wilcocks (8 East, 1), which though it has been much brought into question has never been directly overruled, was relied upon as an authority upon this point for the defendant. That case, however, is clearly distinguishable from the present upon the ground, suggested by Lord Chief Justice Tindal in Ward v. Weeks (7 Bing. 211, 215), that the damage in that case, as well as in Vickers v. Wilcocks (8 East, 1), was not the necessary consequence of the original slander uttered by the defendants, but the result of spontaneous and unauthorized communications made by those to whom the words were uttered by the defendants. The distinction is taken in Green v. Button (2 C. M. & R. 707), in which it was held that an action was maintainable against the defendant for maliciously and wrongfully causing certain persons to refuse to deliver goods to the plaintiff, by asserting that he had a lien upon them and ordering these persons to retain the goods until further orders from him. It was urged for the defendant in that case, that, as the persons in whose custody the goods were were under no legal obligation to obey the orders of the defendant, it was the mere spontaneous act of these persons which occasioned the damage to the plaintiff: but the Court held the action to be maintainable, though the defendant did make the claim as of right, he having done so maliciously and without any reasonable cause, and the damage accruing thereby. In Winsmore v. Greenbank (Willes, 577) the plaintiff in his first count alleged that, his wife having unlawfully left him and lived apart from him, during which time a considerable fortune was left for her separate use, and she being willing to return to the plaintiff, whereby he [238] would have had the benefit of her fortune, the defendant, in order to prevent the plaintiff from receiving any benefit from the wife's fortune and the wife from being reconciled to him, unlawfully and unjustly persuaded, procured and enticed the wife to continue absent from the plaintiff, and she did by means thereof continue absent from him, whereby he lost the comfort and society of the wife and her aid in his domestic affairs, and the profit and advantage he would have had from her fortune. Upon motion in arrest of judgment this count was held good, and that it sufficiently appeared that there was both damnum and injuria: it was prima facie an unlawful act of the wife to live apart from her husband; and it was unlawful, and therefore tortious, in the defendant to procure and persuade her to do an unlawful act: and, as the damage to the plaintiff was occasioned thereby, an action on the ease was maintainable. This case appears to me to be an exceedingly strong authority in the plaintiff's favour in the present case. It was undoubtedly prima facie an unlawful act on the part of Miss Wagner to break her contract, and therefore a tortious act of the defendant maliciously to procure her to do so; and, if damage to the plaintiff followed in consequence of that tortious act of the defendant, it would seem, upon the authority of the two cases referred to, of Green v. Button (2 C. M. & R. 707) and Winsmore v. Greenbank (Willes, 577), as well as upon general principle, that an action on the case is maintainable. A doubt was expressed by Lord Eldon, in Morris v. Langdale (2 Bos. & Pul. 284, 289), whether in an action on the case for slander the plaintiff could succeed upon an allegation of special damage, that, [239] by reason of the speaking of the words, other persons refused to perform their contracts with him; Lord Eldon observing that that was a damage which might be compensated in actions by the plaintiff against such persons. It has, however, been remarked with much force by Mr. Starkie, in his Treatise on the Law of Libel, vol. 1, p. 205 (2nd edition), that such a doctrine would be productive of much hardship in many oases, as a mere right of action for damages for non-performance of a contract can hardly be considered a full compensation to a person who has lost the immediate benefit of the performance of it. The doubt indeed is hardly sustainable on principle; and there are many cases in which actions have been maintained for slanderous words, not in themselves actionable, on the ground of the speaking of the words having induced other persons to act wrongfully towards the plaintiffs; as in the case of Newman v. Zachary (Aleyn, 3), where an action on the case was held to be maintainable for wrongfully representing to the bailiff of a manor that a sheep was an estray, in consequence of which it was wrongfully seized. Upon the whole, therefore, I am of opinion that, upon the general principles upon which actions upon the case are founded, as well as upon authority, the present action is maintainable.

It is not, however, necessary, for the maintenance of the third count of the declaration at least, to rely upon so general a principle; for the case, at all events, appears to me to fall within the cases which the defendant considers are exceptions to a general rule, and in which actions have been held maintainable, for procuring persons to quit the service in which they have been retained and employed. The defendant con-[240]- tends that the exception is limited to the cases of apprentices and menial servants and others to whom the provisions of the Statutes of Labourers would be applicable. It appears to me however, upon consideration of the cases cited upon the argument, that the right of an employer to maintain an action on the case for procuring or inducing persons in his service to abandon their employment is not so limited; but that it extends to the case of persons who have contracted for personal service for a time, and who during the period have been wrongfully procured and incited to abandon such service, to the loss of the persons whom they had contracted to serve. The right to maintain such an action is by the common law, and not by the Statute of Labourers, which however gives a remedy, which the common law did not, in cases where persons, within the purview of the Statute, have voluntarily left the service in which they were engaged, and have been retained by another who knew of their previous employment. In Brooke's Abridgement, tit. Laborers, pl. 21 ^[7], it is said: In trespass it was agreed that at common law, if a man had taken my servant from me, trespass lay vi et armis; but if he had procured the servant to depart and he retained him, action lay not at common law vi et armis, but it lay upon the case upon the departure by procurement. In the case of Adams v. Bafeald (1 Leo. 240), where the plaintiff declared that his servant departed his service without cause and the defendant knowing him to be his servant retained him, two Judges out of three held that the action did not lie at common [241] law unless the defendant procured him to leave the service. In all these cases the words "servant" and "service" are used; but there is nothing to indicate the kind of servant or of service in respect of which the dicta and decisions occurred. There is a case in the Yearb. Mich. 10 H. 6, pl. 30, fol. 8 B., in which it is said that an action does not lie against a chaplain upon the Statute of Labourers for not chaunting the mass; for it is said he may not be always disposed to sing, and can no more be coerced by force of the statute than a knight, esquire or gentleman. There is no doubt but that the Statute of Labourers only applied to persons whose only means of living was by the labour of their hands. It was passed in the 25th year of Edward the 3rd (stat. 1), and recites that so many of the people, especially workmen and servants, had died of the plague that those that remained required excessive wages, and that there was lack of ploughmen and such labourers, and then obliged every person within the age of sixty, not living in merchandise, nor exercising any craft, nor having of his own whereof he may live, nor proper land which he may till himself, to serve whoever might require him at such wages as were paid in the twentieth year of the King's reign or five or six other years before. The remedies and penalties given by this and the next subsequent Statute of Labourers were limited to the persons described in them; but the remedies given by the common law are not in terms limited to any description of servant or service. The more modern cases give instances, and contain dicta of Judges, which appear to warrant a more extended application of the right of action for [242] procuring a servant to leave his employment than that contended for by the defendant. In Hart v. Aldridge (1 Cowp. 54) the plaintiff brought an action for enticing away the plaintiff's servants who worked for him as journeymen shoemakers. It appeared that they worked for the plaintiff for no determinate time, but only by the piece, and had, at the time of the enticing away, each a pair of shoes of the plaintiff unfinished. It was contended that a journeyman hired not for time but by the piece was not a servant; but Lord Mansfield said that by being found to be the plaintiff's " journeymen " they were found to be the plaintiff's servants. "The point turns upon the jury finding that the persons enticed away were employed by the plaintiff as Ms journeymen. It might perhaps have been different if the men had taken work for every body. " In the present case, Miss Wagner was, as stated in the third count and admitted by the demurrer, employed by the plaintiff as his dramatic artiste. Can it make any real difference that in Hart v. Aldridge (1 Cowp. 54) the persons enticed were employed by the plaintiff as his journeymen shoemakers, and that in the present case Miss Wagner was employed by the plaintiff as his dramatic artiste? In both cases the services were the personal services of the persons engaged; and, though the description of the services was very different, the personal service being in the one case to make shoes, and in the other to sing songs, it seems to me difficult to distinguish the oases upon any principle: it is the exclusive personal service that gives the right. In Blake v, Lanyon (6 T. R. 221), which was a case very similar in respect to the nature of the service to that of Hart v. Aldridge (1 Cowp. 54), it was stated by the Court, [243] as a general proposition, that " a person who contracts with another to do certain work for him is the servant of that other till the work is finished. " These cases appear to me to be very strong authorities in favour of the plaintiff, as far at least as regards the third count. Two cases however were cited for the defendant, as direct authorities against the maintenance of the present action. The first was that of Ashley v. Harrison (1 Peake's N. P. C. 194. 1 Esp. N. P. C. 48), in which the plaintiff declared that he had retained Madam Mara to sing publickly for him in certain musical performances which he exhibited for profit at Covent Garden Theatre, but that the defendant, contriving to lessen his profits and to deter Madam Mara from singing, published a libel concerning her which deterred her from singing, as she could not sing without danger of being assaulted and ill treated in consequence of the libel. Lord Kenyon held, at Nisi priùs, that the action was not maintainable, as the injury was too remote. The case does not appear to have undergone much discussion; it was only a decision at Nisi priùs; but it is clearly distinguishable from the present, as Madam Mara was deterred from singing, not directly in consequence of any thing done by the defendant, but in consequence of her fear that what he did might induce somebody else to assault and ill treat her. The injury in that ease may have been well held to be too remote; but it does not at all resemble this, where the loss is the direct consequence of the defendant's act. The other case was that of Taylor v. Neri (1 Esp. N. P. C. 386), which certainly bears more directly upon the present. The declaration stated that the plaintiff, being manager [244] of the Opera house, had engaged Breda to sing; that the defendant beat him; whereby the plaintiff lost his service. Lord Chief Justice Eyre expressed a doubt whether the action was maintainable, observing that, if such an action could be supported, every person whose servant, whether domestic or not, was kept away a day from his business could maintain an action. He was of opinion that Breda was not a servant at all. The case was very little discussed, was a decision at Nisi priùs, and does not appear to have undergone much consideration; and, without adverting to some distinctions between that and the present case, it can hardly be considered as an authority of much weight for the defendant.

I am therefore of opinion that upon the whole case, as it appears upon these pleadings, the plaintiff is entitled to our judgment.

Coleridge J. The plaintiff in this case, by the first count of his declaration, shapes his case in substance as follows: he alleges a contract made between himself and Johanna Wagner for her to perform in his theatre in operas for a specified time, i.e. from the 15th April to the 15th July, on certain terms, and, among these, one that she was not during the time to sing or use her talents elsewhere than in his theatre without his written authority. He then complains that the defendant, knowing the premises, and maliciously intending to injure him and to prevent Johanna Wagner from performing according to her contract, whilst the agreement was in full force, but before the commencement of the term, on the 8th April, enticed and procured her to make default in singing or performing at the theatre, [245] and to depart from and abandon her contract, against his will and without his written authority, by means of which enticement and procurement she unlawfully and wrongfully wholly refused to perform her contract, and he sustained special damage. The 2d count applies to an enticement, after certain proceedings in equity, to Johanna Wagner to continue her default for the residue of the term. The 3d count states that Johanna Wagner was hired and engaged by the plaintiff to sing and perform at his theatre, for a certain time, as his dramatic artiste for reward, and had become and was such dramatic artiste, and complains that defendant, maliciously intending to injure him, enticed and procured her to depart from and out of his said employment. These counts are demurred to; and the demurrers raise the questions, Whether an action will lie against a third party for maliciously and injuriously enticing and procuring another to break a contract for exclusive service as a singer and theatrical performer: in the first place, while the contract is merely executory; in the second, after it is in course of execution? I make no distinction between the counts, and am of opinion that it will not in either case, and that the defendant is entitled to our judgment generally.

In order to maintain this action, one of two propositions must be maintained; either that an action will lie against any one by whose persuasions one party to a contract is induced to break it to the damage of the other party, or that the action, for seducing a servant from the master or persuading one who has contracted for service from entering into the employ, is of so wide application as to embrace the case of one in the position and profession of Johanna Wagner. After, much consi-[246]- deration and enquiry I am of opinion that neither of these propositions is true; and they are both of them so important, and, if established by judicial decision, will lead to consequences so general, that, though I regret the necessity, I must not abstain from entering into remarks of some length in support of my view of the law.

It may simplify what I have to say, if I first state what are the conclusions which I seek to establish. They are these: that in respect of breach of contract the general rule of our law is to confine its remedies by action to the contracting parties, and to damages directly and proximately consequential on the act of him who is sued; that, as between master and servant, there is an admitted exception; that this exception dates from the Statute of Labourers, 23 Edw. 3, and both on principle and according to authority is limited by it. If I am right in these positions, the conclusion will be for the defendant, because enough appears on this record to shew, as to the first, that he, and, as to the second, that Johanna Wagner, is not within the limits so drawn.

First then, that the remedy for breach of contract is by the general rule of our law confined to the contracting parties. I need not argue that, if there be any remedy by action against a stranger, it must be by action on the ease. Now, to found this, there must be both injury in the strict sense of the word (that is a wrong done), and loss resulting from that injury: the injury or wrong done must be the act of the defendant; and the loss must be a direct and natural, not a remote and indirect, consequence of the defendant's act. Unless there be a loss thus directly and proximately connected with the act, the mere intention, or even the endeavour, to [247] produce it will not found the action. The existence of the intention, that is the malice, will in some cases be an essential ingredient in order to constitute the wrongfulness or injurious nature of the act; but it will neither supply the want of the act itself, or its hurtful consequence: however complete the injuria, and whether with malice or without, if the act be after all sine damno, no action on the case will lie. The distinction between civil and criminal proceedings in this respect is clear and material; and a recollection of the different objects of the two will dispose of any argument founded merely on the allegation of malice in this declaration, if I shall be found right in thinking that the defendant's act has not been the direct or proximate cause of the damage which the plaintiff alleges he has sustained. If a contract has been made between A. and B. that the latter should go supercargo for the former on a voyage to China, and C., however maliciously, persuades B. to break his contract, but in vain, no one, I suppose, would contend that any action would lie against C. On the other hand, suppose a contract of the same kind made between the same parties to go to Sierra Leone, and C. urgently and bonâ fide advises B. to abandon his contract, which on consideration B. does, whereby loss results to A.; I think no one will be found bold enough to maintain that an action would lie against C. In the first case no loss has resulted; the malice has been ineffectual; in the second, though a loss has resulted from the act, that act was not C.'s, but entirely and exclusively B. 's own. If so, let malice be added, and let C. have persuaded, not bonâ fide but malâ fide and maliciously, still, all other circumstances remaining the same, the same reason applies; for it is malitia sine [248] damno, if the hurtful act is entirely and exclusively B.'s, which last circumstance cannot be affected by the presence or absence of malice in C. Thus far I do not apprehend much difference of opinion: there would be such a manifest absurdity in attempting to trace up the act of a free agent breaking a contract to all the advisers who may have influenced his mind, more or less honestly, more or less powerfully, and to make them responsible civilly for the consequences of what after all is his own act, and for the whole of the hurtful consequences of which the law makes him directly and fully responsible, that I believe it will never be contended for seriously. This was the principle on which Lord Kenyon proceeded in Ashley v. Harrison (1 Peake's N. P. C. 194. 1 Esp. N. P. C. 48). There the defendant libelled Madame Mara: the plaintiff alleged that, in consequence, she, from apprehension of being hissed and ill treated, forbore to sing for him, though engaged, whereby he lost great profits. Lord Kenyon nonsuited the plaintiff: he thought the defendant's act too remote from the damage assigned. But it will be said that this declaration charges more than is stated in the case last supposed, because it alleges, not merely a persuasion or enticement, but a procuring. In Wins- more v. Greenbank (Willes, 577) the same word was used in the first count of the declaration, which alone is material to the present case; and the Chief Justice who relied on it, and distinguished it from enticing, defined it to mean "persuading with effect; " and he held that the husband might sue a stranger for persuading with effect his wife to do a wrongful act directly hurtful to himself. Although I should hesitate to be [249] bound by every word of the judgment, yet I am not called on to question this definition or the decision of the case. Persuading with effect, or effectually or successfully persuading, may no doubt sometimes be actionable — as in trespass — even where it is used towards a free agent: the maxims, qui facit per alium facit per se, and respondeat superior, are unquestionable; but, where they apply, the wrongful act done is properly charged to be the act of him who has procured it to be done. He is sued as a principal trespasser, and the damage, if proved, flows directly and immediately from his act, though it was the hand of another, and he a free agent, that was employed. But, when you apply the term of effectual persuasion to the breach of a contract, it has obviously a different meaning; the persuader has not broken and could not break the contract, for he had never entered into any; he cannot be sued upon the contract; and yet it is the breach of the contract only that is the cause of damage. Neither can it be said that in breaking the contract the contractor is the agent of him who procures him to do so; it is still his own act; he is principal in so doing, and is the only principal. This answer may seem technical; but it really goes to the root of the matter. It shews that the procurer has not done the hurtful act; what he has done is too remote from the damage to make him answerable for it. The case itself of Winsmore v. Greenbank (Willes, 577) seems to me to have little or no bearing on the present: a wife is not, as regards her husband, a free agent or separate person; if to be considered so for the present purpose, she is [250] rather in the character of a servant, with this important peculiarity, that, if she be induced to withdraw from his society and cohabit with another or do him any wrong, no action is maintainable by him against her. In the case of criminal conversation, trespass lies against the adulterer as for an assault on her, however she may in fact have been a willing party to all that the defendant had done. No doubt, therefore, effectual persuasion to the wife to withdraw and conceal herself from her husband is in the eye of the law an actual withdrawing and concealing her; and so, in other counts of the declaration, was it charged in this very ease of Winsmore v. Greenbank (Willes, 577). A case explainable and explained on the same principle is that of ravishment of ward. The writ for this lay against one who procured a man's ward to depart from him; and, where this was urged in a case hereafter to be cited ^[8], Judge Hankford ^[9] gives the answer: the reason is, he says, because the ward is a chattel, and vests in him who has the right. None of this reasoning applies to the case of a breach of contract: if it does, I should be glad to know how any treatise on the law of contract could be complete without a chapter on this head, or how it happens that we have no decisions upon it. Certainly no subject could well be more fruitful or important; important contracts are more commonly broken with than without persuaders or procurers, and these often responsible persons when the principals may not be so. I am aware that with respect to an action on the case the argument primæ impressionis is sometimes of no weight. If the circumstances under which the action would be brought have not before arisen, or are of rare occurrence, it will be of none, or only of inconsiderable weight; but, if the circumstances have been common, if there has been frequently occasion for the action, I apprehend it is important to find that the action has yet never been tried. Now we find a plentiful supply both of text and decision in the case of seduction of servants: and what inference does this lead to, contrasted with the silence of the books and the absence of decisions on the case of breach of ordinary contracts? Let this too be considered: that, if by the common law it was actionable effectually to persuade another to break his contract to the damage of the contractor, it would seem on principle to be equally so to uphold him, after the breach, in continuing it. Now upon this the two conflicting cases of Adams v. Bafeald (1 Leon. 240) and Blake v. Lanyon (6 T. E. 221) are worth considering. In the first, two Judges against one decided that an action does not lie for retaining the servant of another, unless the defendant has first procured the servant to leave his master; in the second, this was overruled; and, although it was taken as a fact that the defendant had hired the servant in ignorance and, as soon as he knew that he had left his former master with work unfinished, requested him to return, which we must understand to have been a real, earnest request, and only continued him after his refusal, which we must take to have been his independent refusal, it was held that the action lay: and this reason is given: " the very act of giving him employment is [252] affording him the means of keeping out of his former service. " Would the Judges who laid this down have held it actionable to give a stray servant food or clothing or lodging out of charity? Yet these would have been equally means of keeping him out of his former service. The true ground on which this action was maintainable, if at all, was the Statute of Labourers, to which no reference was made. But I mention this case now as shewing how far courts of justice may be led if they allow themselves, in the pursuit of perfectly complete remedies for all wrongful acts, to transgress the bounds which our law, in a wise consciousness as I conceive of its limited powers, has imposed on itself, of redressing only the proximate and direct consequences of wrongful acts. To draw a line between advice, persuasion, enticement and procurement is practically impossible in a court of justice; w. ho shall say how much of a free agents' resolution flows from the interference of other minds, or the independent resolution of his own? This is a matter for the casuist rather than the jurist; still less is it for the juryman. Again, why draw the line between bad and good faith? If advice given malâ fide, and loss sustained, entitle me to damages, why, though the advice be given honestly, but under wrong information, with a loss sustained, am I not entitled to them. According to all legal analogies, the bona fides of him who, by a conscious wilful act, directly injures me will not relieve him from the obligation to compensate me in damages for my loss. Again, where several persons happen to persuade to the same effect, and in the result the party persuaded acts upon the advice, how is it to be determined against whom the action may be brought, whether they are to be sued [253] jointly or severally, in what proportions damages are to recovered? Again, if, instead of limiting our recourse to the agent, actual or constructive, we will go back to the person who immediately persuades or procures him one step, why are we to stop there? The first mover, and the malicious mover too, may be removed several steps backward from the party actually induced to break the contract: why are we not to trace him out? Morally he may be the most guilty. I adopt the arguments of Lord Abinger and my brother Alderson in the case of Winterbottom v. Wright (10 M. & W. 109); if we go the first step, we can shew no good reason for not going fifty. And, again, I ask how is it that, if the law really be as the plaintiff contends, we have no discussions upon such questions as these in our books, no decisions in our reports ? Surely such cases would not have been of rare occurrence: they are not of slight importance, and could hardly have been decided without reference to the Courts in Banc. Not one was cited in the argument bearing closely enough upon this point to warrant me in any further detailed examination of them. I conclude therefore what occurs to me on the first proposition on which the plaintiffs case rests.

I come now to the second proposition, that the decisions in respect of master and servant, and the seducing of the latter from the employ of the former, are exceptions grafted on the general law traceable up to the Statute of Labourers. This is of course distinct from the question of the extent of the exception, that is, to what classes of servants it applies: [254] but the enquiries are so connected together in fact, and the latter has so obvious a bearing in support of the former, that it will be better to take them both together.

Now, in the first place, I cannot find any instance of this action having been brought before the statute passed; the weight of which fact is much increased by finding that it was of common occurrence very soon after. The evidence for it is not merely negative; for the mischief and the cause of action appear to have been well known before, and the want of the remedy felt. The common law did give a remedy in certain cases; and Judges are found pointing out what that remedy was, and to what cases it applied. From the cases collected in Fitzherbert's Abridgement, tit. Laborers, it appears that the distinction between the action at common law and the action upon the statute was well known: wherever the former action lay it was in trespass, and not on the case: in saying which I do not rely merely on the words, — writ of trespass, — which might be applicable to trespass on the case; but I rely on the operative words of the writ, which stated a taking vi et armis: it might be joined with trespass quare clausum fregit or trespass for the asportation of chattels or false imprisonment. The count necessarily charged the taking of the servant out of the service of the plaintiff; whereas the writ upon the statute, as appears from Fitzherbert's Natura Brevium, 167 B, charges the retainer and admission of the servant into the defendant's service after he has been induced to withdraw, or has withdrawn without reasonable cause, from that of the plaintiff. I do not wish unnecessarily to multiply citations from the Year Books; but it will [255] be necessary to refer to some, and at greater length than they are found in the abridgments. I begin with one out of the order of time, because it is so full to the purpose, and because it may be referred to as abridged by Brooke (Abridgement, tit. Laborers, pl. 21), I think incorrectly in a material point. He says that it was agreed in it, that case lay for the departure by procurement, but not where the servant departed without procurement and was afterwards retained. The case is Year Book Mich. 11 H. 4 (a. d. 1409), fol. 23 A, pl. 46. Not, as he cites it with a slight inaccuracy, 21, 22. "Thomas Frome brings writ of trespass at the common law against defendant for his close broken, and one J. his servant taken out of his service (pris hors de son service), and certain sheep driven away with force and arms. " There were different pleadings and much discussion as to the separate causes of action, which introduces some confusion into the case. As to the servant, Tremain pleaded: " we found him wandering in a certain place in another county; and there he came and offered his service to us, and made covenant with us to serve us; and so demands judgment." Skrene, for the plaintiff, replies: "he has admitted that the servant was in our service, and that he has received him into his service; and so he has admitted our action. " Hankford ^[10] says, however: "When the servant was wandering, if the defendant had not cognizance that he was in your service, then this first receiver cannot be adjudged a wrong done by the defendant but by the servant. " Upon this Skrene amends his pleading, and says that the servant made a covenant with the plaintiff to serve him [256] in the office of "Berchier" ^[11] "for a whole year, within which year the defendant procured our servant to go out of our service, by force of which procurement he went out of our service within the year, and the defendant retains him in his service; which matter we wish to aver; " and demands judgment: on which Hill ^[12] says: " his writ of trespass as to the servant does not lie upon the matter shewn; for the plaintiff says that the defendant did nothing but procure the servant to go out of his service, by which procurement he went out of his service, and was retained with the defendant, in which ease action on the Statute of Labourers is given, and not this action. " Skrene argues: " If a man procures my servant to go out of my service, and retains him upon that, he does me wrong. " Hankford and Hill both say, " True it is that he does you wrong: but you shall not have a remedy on this manner of writ as it is here. " Culpeper ^[13]: " This action is taken upon an action at the common law; " " and the actions which were at the common law before the Statute of Labourers are not taken away by that statute; and, if a man procure and abet my servant to go with him in his service, action at common law lies well. Hill: No certes, action at common law of trespass does not lie on such a case; for such a procurement cannot be said in any manner to be against the peace. Thirning ^[14]: If my servant before the statute went out of my service, I suppose well that no action is given to the master; but if a man took my servant out of my service, there action of trespass lay at the common law, and still lies; and, if [257] I am beaten by the abettment and command of a man, the commander is guilty of trespass: so in the case here, when he shall procure the servant to depart and retains him with him, he seems guilty of trespass. " But Hill answers him: " Sir, in your case there is no marvel, because the principal actor in your case is guilty of trespass: but the case at bar is different; for the procurement only is not a trespass against the peace, nor is the departure of the servant a trespass against the peace; then, if the cause of action is not against the peace, the remainder which follows after it is not trespass against the peace: and I well agree that the defendant in this case is guilty, as of a thing done against the provisions of the statute; and this matter is as clearly within the statute as it could be, both as to the servant, who has departed from his service, and as to the defendant, who has presumed to retain him in his service against the statute. Hankford: I am of the same opinion, as my master has expressed, that, if my servant depart out of my service, at common law I have no action, and the cause was for that between my servant and me the contract sounds in the manner of a covenant in itself (en luy meme), upon which no action was given at the common law without a specialty; and for this mischief was the statute ordained and action given on it; wherefore, if you will not say that he took your servant out of your service, as you have supposed by your writ, this writ is not maintainable. Culpeper, says: "if a man procure my ward to go from me, and he goes by his procurement, I shall have ravishment of ward against him. " Hankford admits this, and says: the reason is, because the ward " is a chattel and vests in him who has the right. " After some more discussion, Skrene amends, and says: " he came to our house, and procured our [258] servant, and took him, as we have supposed by our writ. " And Tremain, being ordered to answer, pleads: " he was wandering, and offered his service to us; and we received him: without this that we took him in manner as he has alleged. " And upon this, in the end, they seem to have gone to the country. There were several points in this case: and it is not clear whether on this part the Court was ultimately divided or not: but it is clear that the judges who argued in support of the count as first pleaded contended only that it shewed a trespass. Thirning admits that, before the statute, if a servant went out of the service no action lay, but if he was taken trespass did; and then contends that the procuring in the case at bar was a taking and made the party guilty of trespass; in which he was clearly wrong. Now, if at this time case lay at common law for procuring the servant to depart, what becomes of the argument of the necessity for the statute. Or if, where one party broke a covenant at the instigation of another, ease lay, why was not that applicable to the ease of a covenanted servant. But it is clear that all agreed in this: if the defendant has taken the servant under such circumstances, you may have trespass at common law now as before the statute; but, if you cannot lay it as a trespass, your only remedy is under the statute. I may as well add Fitzherbert's Abridgement (tit. Laborers, pl. 16), which is fuller, and I think more accurate, than Brooke's. " Trespass at common law of his servant taken out of his service with force. Tremain: We found him vagrant in a certain place in another county, and there he came and proffered his service to us, and made covenant with us to serve. Judgment if action &c. Skrene: He was retained with us to serve us in the office of a bergier for a year, [259] within which the defendant procured him to go out of our service; by reason of which he went out of our service within the year and hired himself with the defendant. Hill: This action does not lie on the matter. Skrene: If a man procure my servant to go out of my service, and retains him, he does me wrong. Hill and Hankford: That is true; but you shall not have remedy on such a writ as this is. Culpeper: The action which was at common law is not taken away by the Statute of Labourers. Thirning: At common law, before the statute, if my servant went out of my service, no action was given me; but, if a man took him out of my service, an action was given at the common law, and still is; and, if I am beaten by the command of another, the commander is a trespasser. Hill: The procurement only is not trespass against the peace, nor the departure of the servant: then, if the cause of the action is not against the peace, the remnant, to wit the retainer, cannot be: but this case here is openly within the statute, as it may be against the servant upon the departure, and against the master upon the retainer. Hankford and Hill ^[15]: There was no action at the common law upon the departure, because the contract between the servant and me sounds in covenant in a manner; and for that mischief was the statute made; wherefore, if you will not say that he took your servant, this action does not lie. Whereupon the plaintiff said that the defendant procured his servant &c. and took him: and the other side traversed this: et alii e contra. " But, says Fitzherbert, it seems that the defendant should have traversed the taking at first in his plea in bar. In a case (A. D. 1373) in Yearb. Mich. 47 E. 3, fol. 14 A, pl. 15, which was, on the Statute [260] of Labourers, against a servant for departing within the term for which he was retained, the plea was " we were never in your service; " and the question was whether that was good without a traverse of the retainer; and Fincheden ^[16] said this, which was agreed to by the whole Court: " At common law, before the statute, if a man took my servant out of my service, I should have writ of trespass there, where he was in my service bodily: now the statute was made for this mischief, that if he never comes into my service, after he has made covenant to serve me, but he eloignes himself from me, I shall have such writ and suggest that he was retained in my service and departed, as here is: wherefore it is necessary to traverse the retainer; " which accordingly was done by the defendant, issue taken, and sic ad patriam.

Any one, I am certain, who will go through the cases abstracted by Fitzherbert under the title Laborers, will be satisfied that at common law, before the Statute, such an action as the present could not be maintained. Under that title 61 cases are abridged: many of them are for the seduction of servants; but there is no instance of any one in which the action at common law was sustained, unless an actual trespass was charged: and it is clear, from the case which I have cited at so much length, that the distinction between taking and procuring to go was familiar to the lawyers of that day. I can hardly imagine that this could have been said, if the common law would have given relief in such a case: and, if it could, the rapid growth of the action after the Statute of Labourers had passed would be difficult to account for.

I come then to the Statute of Labourers (23 Ed. 3); [261] and my object now is to shew that nothing in the provisions or policy of that statute will warrant the action under the circumstances of this case; and that the older authorities are decidedly against it. As we learn from the preamble, it was enacted in consequence of the great mortality among the lower classes, especially workmen and servants, in a pestilence which had prevailed in 1348-9. This pestilence will be found mentioned in our historians. And in the preamble it is said: " Many seeing the necessity of masters, and great scarcity of servants, will not serve unless they may receive excessive wages, and some rather willing to beg in idleness, than by labour to get their living; we considering the grievous incommodities, which of the lack especially of ploughmen and such labourers may hereafter come, have" &c. "ordained. " This preamble is followed by an enactment, that every person of whatever condition, free or bond, able in body, and under the age of sixty, not living by merchandise nor having any certain craft, nor having of his own wherewith to live, nor land of his own on the cultivation of which he may occupy himself, and not being in service, shall be compelled to enter into service when required on customary wages. By the second section it is made penal by imprisonment for any mower, reaper, or other labourer or servant of whatsoever state or condition he shall be, to depart from service before the expiration of the term agreed on; and no one is to receive or retain such offender in his service under like pain of imprisonment. This ordinance is the foundation of the action for the seduction of a hired servant. Upon reference to Fitzherbert, Natura Brevium, 167 B, it will be seen that the writ in such an action always recited the statute. Now it will be observed that, in order to bring a person within the first section, he must have been one [262] who was not living by merchandise, nor having any certain craft, "certum habens artificium, " nor having of his own wherewith to live, "habens de suo proprio unde vivere possit, " or land of his own in the culture of which he can occupy himself: and these limitations are more pointed by the second chapter, which speaks of " messor falcator aut alius operator vel serviens. " Looking at these words, and the language of the preamble, it is clear that mechanics and labourers in husbandry were the principal objects of the statute: and the decisions were accordingly. Fitzherbert (Natura Brevium, 168 E) says: "And so a gentleman by his covenant shall be bound to serve, although he were not compellable to serve. For if a gentleman, or chaplain, or carpenter, or such which should not be compelled to serve, &c. covenant to serve, they shall be bound by their covenant, and an action will lie against them for departing from their service. " And Lord Hale in a note refers to Yearb. Mich. 10 H. 6 (a. d. 1431), fol. 8 B, pl. 30, as shewing that a writ does not lie on the statute for the departure of a chaplain who is retained to say the mass. Several cases will be found earlier in the Year Books to the same effect. In Yearb. Trin. 50 E. 3 (a. d. 1376), fol. 13 A, pl. 3, is a case in which the parson of B. sued Thomas F., a chaplain, on the Statute of Labourers, and counted of a covenant made with him to serve in the office of seneschal, and to be his parochial chaplain for a certain term, and complained of a departure within the term. As to the office of seneschal, the defendant traversed the covenant; and, as to the residue, contended that the statute was only made for labourers and artificers, and he was neither the one nor the other, but the servant of God, and so was not bound by the statute. Clopton, for the plaintiffs, took a distinction between a [263] parochial and a private chaplain, contending that the former, from the variety and daily pressure of his duties, was in many respects to be regarded as a labourer, and within the Statute " as any other person of the people" (an early authority by the way for the modern distinction of the working clergy) ^[17]. The case was adjourned, and the Judges of the King's Bench were consulted: and the decision was that a chaplain was not bound by the statute; and as to that part of the writ he was discharged. The same law will be found in Yearb. Mich. 4 H. 4 (a. d. 1402), fol, 2 B, pl. 7, where the count on the statute, against a chaplain, was that he was retained by the plaintiff to be [264] bis chaplain, and also his proctor, and collector of tithes, and to serve him "as pees et as maines" for a certain time. The retainer to be proctor and collector was specially traversed: and it was pleaded that his retainer as chaplain was only to do divine service. The decision is not very clearly stated: but Fitzherbert (Abridgement tit. Laborers, pl. 51) appears to have understood that it was against the defendant; for he abstracts the case very shortly, and adds: " quod mirum, for he shall not be compelled to serve, but the statute is in servitio congruo. " Immediately after this he abstracts Pasch. 12 H. 6 ^[18] thus — " Action on the Statute of Labourers is not maintainable against an esquire. " And in Yearb. Hil. 19 H. 6, fol. 53 B, pl. 15 (ad. 1441) is a case on the Statute, where the count charged a retainer in the office of labourer; and the plea was: he retained us to collect his rents in a certain place, without this that we were retained with him in the office of labourer. Newton ^[19] says: " he cannot be required to serve him in the office of collecting his rents, nor to be his seneschal; which proves that he cannot be punished by this action; for this action lies only against those who can be required to serve the party as a labourer. " And then, by the advice of all, the issue was held well tendered.

I am tempted to add one case more from Yearb. Mich. 10 H. 6 (A. D. 1431), fol. 8 B, pl. 30. The Prior of W. brings writ on the Statute of Labourers against a chaplain, and counts that he was retained in his service with him for a year to do divine service, and that he departed within the year &c. Defendant's counsel demands judgment [265] of the writ: " for you see well how he brings this action against a chaplain upon the Statute of Labourers; and the statute is only to be understood against Labourers in Husbandry. Strange ^[20]: The writ is not maintainable by the statute; for you cannot compel a chaplain to sing in mass; for that at one time he is disposed to sing it, and at another not; wherefore you cannot compel him by the statute. Cottesmore ^[21]: To the same intent; for it was not made but for labourers in husbandry: as in case of a knight, an esquire, or gentleman, you cannot compel them to be in your service by the statute, for that the statute is not to be understood but of labourers, who are vagrant, and have nothing whereby to live; these shall be compelled to be in service; but a chaplain hath whereof he may live in common understanding as a gentleman: " wherefore the writ is abated, by the whole Court. Brooke (Abridgement, fol. 57, tit. Laborers, pl. 47), abstracting this, gives, as the reason of the judgment, "for it is to be understood that he hath whereof he may live, and is not always disposed to celebrate divine service. " It will be observed that many of these cases are with respect to chaplains: in one of them it is said that a chaplain is the servant of God; in another that the service for which the retainer is alleged must be a service congruous to his condition. At this distance of time, it may be difficult, without more inquiry into history, to assign a reason why there should be such a majority of eases relating to chaplains. It must be referable of course to some circumstances in the state of society at those periods. It may be collected, from a [266] royal mandate to the Archbishops and Bishops, that the services of stipendiary chaplains were at the date of the statute much in request; the Bishops are required to enforce their serving for their accustomed salary under pain of suspension and interdict. This mandate is printed in the Statutes at Large at the end of the statute: but none of the cases refer to it. But it is clear that the Courts were not laying down any rule of law applicable to chaplains only. They are repeatedly put in the same category with knights, squires, gentlemen, all who must be understood to have means of living of their own. The Courts construed the statute, and as it seems to me quite correctly. They said: if any of these covenants to serve, he will be bound by his covenant, and an action will lie at common law for the breach; but, if you rely on the compulsion of the statute, such persons are not within it. These authorities, of a date when the statute must have been well understood, might be multiplied: and, whatever may be said of the uncertainty and often conflicting nature of decisions from the Year Books, and, however we may now smile at some of the reasonings of the Judges, probably not without their weight when uttered, they seem to me satisfactorily to establish the principle, that actions framed on the statute were governed by a consideration of the object and language of the statute, and that these pointed only to the compulsion of labourers, handicraftsmen, and people of low degree who had no means of their own to live upon, and who, if they did not live by wages earned by their labour, would be vagrants, mendicants or worse. If this be so, I apprehend it is quite clear that Johanna Wagner could not have been compelled, while the statute was unrepealed, to serve the plaintiff in any of the capacities stated in this declaration. Nor, I think, can [267] it be successfully contended that we may not take judicial cognisance of the nature of the service spoken of in the declaration. Judges are not necessarily to be ignorant in Court of what every one else, and they themselves out of Court, are familiar with; nor was that unreal ignorance considered to be an attribute of the Bench in early and strict times. We find in the Year Books the Judges reasoning about the ability of knights, esquires and gentlemen to maintain themselves without wages: distinguishing between private chaplains and parochial chaplains from the nature of their employments: and in later days we have ventured to take judicial cognisance of the moral qualities of Robinson Crusoe's " man Friday " ^[22] and Esop's "frozen snake" ^[23]. We may certainly therefore take upon ourselves to pronounce that a singer at operas, or a dramatic artiste to the owner and manager of Her Majesty's theatre, is not a messor, falcator, aut alius operarius vel serviens, within either the letter or the spirit of the Statute of Labourers. And, if we were to hold to the contrary, as to the profession of Garrick and Siddons, we could not refuse to hold the same with regard to the sister arts of Painting, Sculpture and Architecture. We must lay it down that Reynolds when he agreed to paint a picture, or Flaxman when he agreed to model a statue, had entered into a contract of service, and stood in the relation of servant to him with whom he had made the agreement. But here we are not without authority. In Taylor v. Neri (1 Esp. N. P. C. 386), where the declaration in case stated that the plaintiff, being manager of the Opera House, had engaged [268] one Breda as a public singer during the season at a salary, that the defendant had assaulted and beaten Breda, by which plaintiff lost his service as a public performer, Eyre C. J. nonsuited the plaintiff, saying the record stated Breda was a servant hired to sing, and he was of opinion he was not a servant at all. It seems to me that this is the language of common sense; and no case has been cited which conflicts with it. But, if Johanna Wagner be not within the statute, and could only have been sued, as at common law, upon her contract for the breach of it, it will follow, I conceive, that the present action could not have been maintained against the defendant while the statute was in force, and of course cannot now, if, as I contend, the action arises from and is limited by the purview of the statute. Under the statute the one depended on the other: if a party sued on the second branch of the second section, he was bound to shew the servant, received or retained wrongfully, was such a one as was spoken of in the first branch; for so were the words, talem in servitio suo recipere vel retinere presumat. In the action accordingly against the seducer, the condition of the servant seduced, and the character of the service, were always material; if not stated in the count, the defendant introduced them in his plea, where they were such as were thought to take the servant out of the statute.

I conclude then that this action cannot be maintained, because: 1st. Merely to induce or procure a free contracting party to break his covenant, whether done maliciously or not, to the damage of another, for the reasons I have stated, is not actionable; 2d. That the law with regard to seduction of servants from their* masters' employ, in breach of their contract, is an ex-[269]-ception, the origin of which is known, and that that exception does not reach the case of a theatrical performer.

I know not whether it may be objected that this judgment is conceived in a narrow spirit, and tends unnecessarily to restrain the remedial powers of the law. In my opinion it is not open to this objection. It seems to me wiser to ascertain the powers of the instrument with which you work, and employ it only on subjects to which they are equal and suited; and that, if you go beyond this, you strain and weaken it, and attain but imperfect and unsatisfactory, often only unjust, results. But, whether this be so or not, we are limited by the principles and analogies which we find laid down for us, and are to declare, not to make, the rule of law.

I think, therefore, with the greatest and most real deference for the opinions of my Brethren, and with all the doubt as to the correctness of my own which those opinions, added to the novelty and difficulty of the case itself, cannot but occasion, that our judgment ought to be for the defendant: though it must be pronounced for the plaintiff.

Judgment for plaintiff.

The defendant had obtained leave to plead, as well as demur.

Creasy, on a subsequent day (June 6th), moved, on behalf of the defendant, for a rule to shew cause why the trial of the issues in fact should not be postponed till the issue in law was finally disposed of in a Court of [270] Error. He referred to stat, 15 & 16 Vict. c. 76, s. 80. [Lord Campbell C. J. The meaning of sect. 80 is that it shall be in the discretion of the Court to direct which issue shall be first disposed of in that Court. The issue in law has been, as far as this Court is concerned, finally disposed of by the judgment on the demurrer. Crompton J. Sect. 80 was framed to meet a point which might have been raised on the practice, when there were issues of law and fact, to leave to the plaintiff to determine which should be disposed of first. There is a note on that subject in Williams's Saunders ^[24]. But it would be very strong if we were to construe the words in sect. 80 so as to give a writ of error before the whole of the issues were finally disposed of in this Court.]

Per Curiam ^[25]. There will be no rule.

Rule refused.

[1]Note 1 See Lumley v. Wagner, 1 De G. McN. & G. 604.

[2]Note 2 2 February 4 and 5, 1853; before Coleridge, Wightman, Erle and Crompton Js

[3]Note 3 4 M. & W. 337; affirming the judgment of the Exchequer in Langridge v. Levy, 519

[4]Note 4 Per Holt C. J., in Keeble v. Hickeringill, 11 East, 573, 575, note (a) to Carrington v. Taylor, 11 East 571

[5]Note 5 See note (4) to Skinner v. Gunton, 1 Wms. Saund. 230.

[6]Note 6 Lord Campbell C. J. read this judgment, Wightman J, being absent in consequence of indisposition.

[7]Note 7 See the ease more fully stated in the judgment of Coleridge J., post, p. 255.

[8]Note 8 Mich. 11 H. 4, fol. 23 A, pl. 46, post, p. 255.

[9]Note 9 William Hankford, Justice of the Common Pleas in 1398, afterwards, in 1414 (1 H. 5), Chief Justice of England.

[10]Note 10 Then Justiee of Common Pleas. See ante, p. 250, note (c).

[11]Note 11 Shepherd.

[12]Note 12 Robert Hill, Justice of the Common Pleas in 1408.

[13]Note 13 John Colepeper, Justice of the Common Pleas in 1406.

[14]Note 14 William Thiring, Chief Justice of the Common Pleas in 1396.

[15]Note 15 Qe. "as Hill has said?"

[16]Note 16 William de Fincheden, Chief Justice of the Common Pleas; April 14, 1372.

[17]Note 17 This part of the case is as follows:

Hanimer [counsel]: And as to what he has surmised: that we made covenant with him to be parochial chaplain, and that we departed out of his service: we apprehend that the statute was not to any other intent than as to those who are labourers artificers; and this is neither one nor other, but the servant of God; so he is not bound by the statute: so we apprehend not that this action lies against us; for every one of the other sorts of servants (chescun auter servant), if he be in health and bodily power, he is bound to do his service, and his work from day to day; but the Chaplain is not bound to sing every day, if he will not, for divers causes which lie in his conscience (i. e. to judge of the sufficiency of which causes is left to his conscience): and so he may cease to sing for one day or two, so that he is in quite a different degree from a labourer or artificer. Clopton [counsel]: This man, who is his parochial chaplain, may more readily be adjudged a labourer than another chaplain who is to serve only as private priest (ou parson singuler). For a parochial priest has many other things to do besides to sing the mass and other divine services; for it behoves him to visit the siek of the parish in their houses, to administer to them the rights of Holy Church, and so it behoves that Parsons of the Holy Church should have their needful assistance, for they cannot do it themselves. Wherefore it seems in divers respects that he is as much within the statute as any other person of the people. Belknap [Robert Bilknap, Chief Justice of Common Pleas, October 10, 1375]: This was a case and the matter was adjourned, in the other term, till now: and it is our opinion, and that of our fellows of the King's Bench also, that he is not bound by the statute as another person is: wherefore as to this point we dismiss you; and, as to the remainder on which you are at issue, keep your day, &c

[18]Note 18 A, D. 1434. There is no Yearbook of this term.

[19]Note 19 Richard Newton, Justice of Common Pleas; 3d November 1439.

[20]Note 20 James Strangeways, Justice of the Common Pleas; February 6, 1426.

[21]Note 21 John Cottesmore, Justice of the Common Pleas; 15 October 1430: afterwards, in 1439 (17 H. 6), Chief Justice of the Common Pleas.

[22]Note 22 See Forbes v. King, 1 Dowl. P. C. 672.

[23]Note 23 See Hoare v. Silverlock, 12 Q. B. 624.

[24]Note 24 See note (3) toThe Dean and Chapter of Windsor v. Gover, 2 Wms. Saund, 300.

[25]Note 25 Lord Campbell C.J., Erle and Crompton Js.

[642]

Transferred from Superior Court, Coos County; Scammon, Judge.

Action by George Hawkins against Edward R. B. McGee. Verdict for plaintiff, which was set aside. Transferred on exceptions. New trial.

Assumpsit against a surgeon for breach of an alleged warranty of the success of an operation. Trial by jury. Verdict for the plaintiff. The writ also contained a count in negligence upon which a nonsuit was ordered, without exception.

Defendant's motions for a nonsuit and for a directed verdict on the count in assumpsit were denied, and the defendant excepted. During the argument of plaintiff's counsel to the jury, the defendant claimed certain exceptions, and also excepted to the denial of his requests for instructions and to the charge of the court upon the question of damages, as more fully appears in the opinion. The defendant seasonably moved to set aside the verdict upon the grounds that it was (1) contrary to the evidence; (2) against the weight of the evidence; (3) against the weight of the law and evidence; and (4) because the damages awarded by the jury were excessive. The court denied the motion upon the first three grounds, but found that the damages were excessive, and made an order that the verdict be set aside, unless the plaintiff elected to remit all in excess of $500. The plaintiff having refused to remit, the verdict was set aside "as excessive and against the weight of the evidence," and the plaintiff excepted.

The foregoing exceptions were transferred by Scammon, J. The facts are stated in the opinion.

Ovide J. Coulombe and Ira W. Thayer, both of Berlin, for plaintiff.

Matthew J. Ryan and Crawford D. Henlng, both of Berlin, for defendant.

BRANCH, J.

1. The operation in question consisted in the removal of a considerable quantity of scar tissue from the palm of the plaintiff's right hand and the grafting of skin taken from the plaintiff;'s chest in place thereof. The scar tissue was the result of a severe burn caused by contact with an electric wire, which the plaintiff received about nine years before the time of the transactions here involved. There was evidence to the effect that before the operation was performed the plaintiff and his father went to the defendant's office, and that the defendant, in answer to the question, "How long will the boy be in the hospital?" replied, "Three or four days, not over four; then the boy can go home and it will be just a few days when he will go back to work with a [643] good hand." Clearly this and other testimony to the same effect would not justify a finding that the doctor contracted to complete the hospital treatment in three or four days or that the plaintiff would be able to go back to work within a few days thereafter. The above statements could only be construed as expressions of opinion or predictions as to the probable duration of the treatment and plaintiff's resulting disability, and the fact that these estimates were exceeded would impose no contractual liability upon the defendant. The only substantial basis for the plaintiff's claim is the testimony that the defendant also said before the operation was decided upon, "I will guarantee to make the hand a hundred per cent perfect hand or a hundred per cent good hand." The plaintiff was present when these words were alleged to have been spoken, and, if they are to be taken at their face value, it seems obvious that proof of their utterance would establish the giving of a warranty in accordance with his contention.

The defendant argues, however, that, even if these words were uttered by him, no reasonable man would understand that they were used with the intention of entering "into any contractual relation whatever," and that they could reasonably be understood only "as his expression in strong language that he believed and expected that as a result of the operation he would give the plaintiff a very good hand." It may be conceded, as the defendant contends, that, before the question of the making of a contract should be submitted to a jury, there is a preliminary question of law for the trial court to pass upon, i. e. "whether the words could possibly have the meaning imputed to them by the party who founds his ease upon a certain interpretation," but it cannot be held that the trial court decided this question erroneously in the present case. It is unnecessary to determine at this time whether the argument of the defendant, based upon "common knowledge of the uncertainty which attends all surgical operations," and the improbability that a surgeon would ever contract to make a damaged part of the human body "one hundred per cent perfect," would, in the absence of countervailing considerations, be regarded as conclusive, for there were other factors in the present case which tended to support the contention of the plaintiff. There was evidence that the defendant repeatedly solicited from the plaintiff's father the opportunity to perform this operation, and the theory was advanced by plaintiff's counsel in cross-examination of defendant that he sought an opportunity to "experiment on skin grafting," in which he had had little previous experience. If the jury accepted this part of plaintiff's contention, there would be a reasonable basis for the further conclusion that, if defendant spoke the words attributed to him, he did so with the intention that they should be accepted at their face value, as an inducement for the granting of consent to the operation by the plaintiff and his father, and there was ample evidence that they were so accepted by them. The question of the making of the alleged contract was properly submitted to the jury.

2. The substance of the charge to the jury on the question of damages appears in the following quotation: "If you find the plaintiff entitled to anything, he is entitled to recover for what pain and suffering he has been made to endure and for what injury he has sustained over and aDove what injury he had before." To this instruction the defendant seasonably excepted. By it, the jury was permitted to consider two elements of damage: (1) Pain and suffering due to the operation; and (2) positive ill effects of the operation upon the plaintiff's hand. Authority for any specific rule of damages in cases of this kind seems to be lacking, but, when tested by general principle and by analogy, it appears that the foregoing instruction was erroneous.

"By 'damages,' as that term is used in the law of contracts, is intended compensation for a breach, measured in the terms of the contract." Davis v. New England Cotton Yarn Co., 77 N. H. 403, 404, 92 A. 732, 733. The purpose of the law is "to put the plaintiff in as good a position as he would have been in had the defendant kept his contract." 3 Williston Cont. § 1338; Hardie-Tynes Mfg. Co. v. Easton Cotton Oil Co., 150 N. C. 150, 63 S. E. 676, 134 Am. St. Rep. 899. The measure of recovery "is based upon what the defendant should have given the plaintiff, not what the plaintiff has given the defendant or otherwise expended." 3 Williston Cont. § 1341. "The only losses that can be said fairly to come within the terms of a contract are such as the parties must have had in mind when the contract was made, or such as they either knew or ought to have known would probably result from a failure to comply with its terms." Davis v. New England Cotton Yarn Co., 77 N. H. 403, 404, 92 A. 732, 733, Hurd v. Dunsmore, 63 N. H. 171.

The present case is closely analogous to one in which a machine is built for a certain purpose and warranted to do certain work. In such cases, the usual rule of damages for breach of warranty in the sale of chattels is applied, and it is held that the measure of damages is the difference between the value of the machine, if it had corresponded with the warranty and its actual value, together with such incidental losses as the parties knew, or ought to have known, would probably result from a failure to comply with its terms. Hooper v. Story, 155 N. Y. 171, 175, 49 N. E. 773; Adams Hardware Co.v. Wimbish, 201 Ala. 548, 78 So. 902; Isaacs v. Jackson, etc., Co., 108 Kan. 17, 193 P. 1081; Paducah Hosiery Mills Co. v. Proctor, 210 Ky. 806, 276 S. W. 803; Pioneer Co. v. McCurdy, 151 Minn. 304, 186 N. W. 776; Christian, [644] etc., Co. v. Goodman, 132 Miss. 786, 96 So. 692; Hardie, etc., Co. v. Easton, etc., Co., 150 N. C. 150, 63 S. E. 676, 134 Am. St. Rep. 899; York Mfg. Co. v. Chelten, etc., Co., 278 Pa. 351, 123 A. 327; General Motors, etc., Co. v. Shepard Co., 47 R. I. 88, 129 A. 825; Cavanagh v. Stevens Co., 24 S. D. 349, 123 N. W. 681; Foutty v. Chalniax Co., 99 TV. Va. 300, 128 S. E. 389.

The rule thus applied is well settled in this state. "As a general rule, the measure of the vendee's damages is the difference between the value of the goods as they would have been if the warranty as to quality had been true, and the actual value at the time of the sale, including gains prevented and losses sustained, and such other damages as could be reasonably anticipated by the parties as likely to be caused by the vendor's failure to keep his agreement, and could not by reasonable care on the part of the vendee have been avoided." Union Bank v. Blanchard, 65 N. H. 21, 23, 18 A. 90, 91; Hurd v. Dunsmore, supra; Noyes v. Blodgett, 58 N. H. 502; P. L. ch. 166, § 69, subd. 7. We therefore conclude that the true measure of the plaintiff's damage in the present case is the difference between the value to him of a perfect hand or a good hand, such as the jury found the defendant promised him, and the value of his hand in its present condition, including any incidental consequences fairly within the contemplation of the parties when they made their contract. 1 Sutherland, Damages (4th Ed.) § 92. Damages not thus limited, although naturally resulting, are not to be given.

The extent of the plaintiff's suffering does not measure this difference in value. The pain necessarily incident to a serious surgical operation was a part of the contribution which the plaintiff was willing to make to his joint undertaking with the defendant to produce a good hand. It was a legal detriment suffered by him which constituted a part of the consideration given by him for the contract. It represented a part of the price which he was willing to pay for a good hand, but it furnished no test of the value of a good hand or the difference between the value of the hand which the defendant promised and the one which resulted from the operation.

It was also erroneous and misleading to submit to the jury as a separate element of damage any change for the worse in the condition of the plaintiff's hand resulting from the operation, although this error was probably more prejudicial to the plaintiff than to the defendant. Any such ill effect of the operation would be included under the true rule of damages set forth above, but damages might properly be assessed for the defendant's failure to improve the condition of the hand, even if there were no evidence that its condition was made worse as a result of the operation.

It must be assumed that the trial court, in setting aside the verdict, undertook to apply the same rule of damages which he had previously given to the jury, and, since this rule was erroneous, it is unnecessary for us to consider whether there was any evidence to justify his finding that all damages awarded by the jury above $500 were excessive.

3. Defendant's requests for instructions were loosely drawn, and were properly denied. A considerable number of issues of fact were raised by the evidence, and it would have been extremely misleading to instruct the jury in accordance with defendant's request No. 2, that "the only issue on which you have to pass is whether or not there was a special contract between the plaintiff and the defendant to produce a perfect hand." Equally inaccurate was defendant's request No. 5, which reads as follows: "You would have to find, in order to hold the defendant liable in this case, that Dr. McGee and the plaintiff both understood that the doctor was guaranteeing a perfect result from this operation." If the defendant said that he would guarantee a perfect result, and the plaintiff relied upon that promise, any mental reservations which he may have had are immaterial. The standard by which his conduct is to be judged is not internal, but external. Woburn Bank v. Woods, 77 N. H. 172, 89 A. 491; McConnell v. Lamontagne, 82 N. H. 423, 425, 134 A. 718; Eleftherion v. Great Falls Mfg. Co. 83 N. H—, 146 A. 172.

Defendant's request No. 7 was as follows: "If you should get so far as to find that there was a special contract guaranteeing a perfect result, you would still have to find for the defendant unless you also found that a further operation would not correct the disability claimed by the plaintiff." In view of the testimony that the defendant had refused to perform a further operation, it would clearly have been erroneous to give this instruction. The evidence would have justified a verdict for an amount sufficient to cover the cost of such an operation, even if the theory underlying this request were correct.

4. It is unlikely that the questions now presented in regard to the argument of plaintiff's counsel will arise at another trial, and therefore they have not been considered.

New trial.

MARBLE, J., did not sit; the others concurred.

Present: HENNESSEY, C.J., QUIRICO, BRAUCHER, WILKINS, & ABRAMS, JJ.

John D. Hodges, Jr., for the defendant.

Charles F. Foster (Jeremiah F. Murphy with him) for the plaintiffs.

BRAUCHER, J.

After the execution of a purchase and sale agreement and before the conveyance of the real estate, the vendor removed loam, gravel, trees and shrubs. The purchasers sought and were awarded damages including [689] the fair market value of the gravel, and we hold that such an award is proper in an action for breach of contract. But the value of the gravel should not have included the value of the defendant's efforts in removing the gravel and loading it on trucks. We therefore remand the case for redetermination of the amount of damages.

The plaintiffs purchased a parcel of real estate and a single family dwelling from the defendant. The purchase and sale agreement was executed on March 8, 1971, and the deed was delivered on September 21, 1971. The plaintiffs sued for specific performance and damages, the case was referred to a master, the master's report was adopted, and judgment was entered that the plaintiffs recover $6,480 damages, plus interest.

The defendant appealed, and the Appeals Court reversed the judgment and remanded the case to the Superior Court for a redetermination of the damages. 4 Mass. App. Ct. 869 (1976): "As the plaintiffs were not in or entitled to possession of the premises during the period when the gravel was removed therefrom by the defendant, they are not entitled to the value of the gravel removed on the theory of conversion which was employed by the master in determining damages. [Citations omitted]. The plaintiffs are entitled (as alleged and prayed for in their bill) to the diminution in the value of the land which was caused by the defendant's stripping and appropriation of such of the trees, gravel and loam as did not have to be removed in order to construct the house and its septic system. [Citations omitted.]" We allowed the plaintiffs' application for further appellate review. The sole issue argued to us is the appropriate measure of damages.

We summarize the master's findings of fact. The plaintiffs first viewed the property about March 1, 1971, and found a well-wooded lot with a building under construction. About April 11, 1971, after the execution of the purchase and sale agreement, one of the plaintiffs found that many trees had been uprooted and toppled on one side of the house, and he ordered the president of the defendant company to desist. The defendant continued [690] to bulldoze the trees on the premises and removed the majority of standing trees. From May 2 to July 30, 1971, the defendant removed about 3,600 cubic yards of gravel from the property in 360 truckloads with an average fair market value of $18, for a total of $6,480. The removal of standing trees, gravel and loam was expressly disapproved by the plaintiffs except as necessitated during the construction of the house and septic system. The purchase price of $26,900 was paid when title passed on September 21, 1971, and did not reflect the diminution in value as a result of the conversion of gravel, loam and trees.

1. The nature of the claim. The master concluded that the plaintiffs were the "equitable owners" of the property after the signing of the purchase and sale agreement on March 8, 1971, and that the defendant "unlawfully converted" the gravel, loam and trees "for its own enrichment and use." The defendant argues, as the Appeals Court held, that the master measured damages on a theory of "conversion," and that a person who does not have possession or a right to immediate possession of converted property has no right of action for conversion.

There is some support in our cases for that argument, but those cases seem to be influenced by the form of the action more than by the substantive rights of the parties. See, e.g., Greve v. Wood-Harmon Co., 173 Mass. 45, 47 (1899). In a proper form of action, it seems to have been sufficient that the plaintiff had a property interest in the converted property, whether or not he had a possessory right. Gooding v. Shea, 103 Mass. 360, 362-363 (1869) (action by third mortgagee). We are now largely emancipated from the forms of action, and we are not bound by precedents as to the scope of trespass quare clausum fregit or of trover. We should uphold tort recovery if it would have been proper in an action of trespass on the case or in a suit in equity.

In many States the purchaser is treated as the equitable owner of real estate from the date of the purchase and sale agreement; the rents and profits belong to him and the losses fall on him. See Beal v. Attleborough Sav. Bank, [691] 248 Mass. 342, 344 (1924), and cases cited; 3 American Law of Property §§ 11.22, 11.30 (A.J. Casner ed. 1952). In such States the vendor is responsible to the purchaser for injury if he commits waste. Worrall v. Munn, 53 N.Y. 185, 190-191 (1873). Cf. Walker v. Dibble, 241 Ark. 692, 696 (1966). See 3 American Law of Property § 11.32 (A.J. Casner ed. 1952); 5 R. Powell, Real Property par. 649 (P. Rohan ed. 1976).

We have taken a different view. When a purchase and sale agreement has been executed, the vendor holds the legal title to the property "subject to an equitable obligation to convey" it to the purchaser "on payment of the purchase money." Barrell v. Britton, 244 Mass. 273, 278-279 (1923). Kares v. Covell, 180 Mass. 206, 209 (1902). Until the deed is delivered the vendor bears all the risks of ownership should the property be destroyed. Libman v. Levenson, 236 Mass. 221, 222-224 (1920), and cases cited. He also has the exclusive right to possession of the property and the right to rents and profits. Beal v. Attleborough Sav. Bank, 248 Mass. 342, 345 (1924). Thus the rights of the purchaser are contract rights rather than rights of ownership of real property.

Here the purchasers saw a well-wooded lot. Their agreement provides that "walks, and hardy shrubs attached to or used with the property are included in this sale." They did not consent to the destruction of the trees, and the excavation removal of the standing trees, gravel and loam was done with their express disapproval except as necessary to construction. It is not now disputed that there was a breach of duty by the vendor. We think the case must be decided, not as a tort action for injury to or conversion of property, but as a claim for a deliberate and wilful breach of contract.

2. Damages. The basic principle of contract damages is that the aggrieved party should be put in as good a position as if the other party had fully performed. See 5 A. Corbin, Contracts § 992 (1964). Cf. G.L.c. 106, § 1-106 (1). The plaintiffs do not claim that they are entitled to recover the cost of restoring the premises to [692] the condition they should have been in. Cf. Crystal Concrete Corp. v. Braintree, 309 Mass. 463, 469-471 (1941) (breach by lessee); Cavanagh v. Durgin, 156 Mass. 466, 470 (1892) (trespass); Groves v. John Wunder Co., 205 Minn. 163, 170-171 (1939) (grading contract); Jacob & Youngs, Inc. v. Kent, 230 N.Y. 239, 242-245 (1921) (construction contract). Nor do they claim a right to the net proceeds of wrongful sales of gravel made by the defendant, since no such claim was made. See Arizona Commercial Mining Co. v. Iron Cap Copper Co., 236 Mass. 185, 190 (1920) (conversion of gravel). Cf. Timko v. Useful Homes Corp., 114 N.J. Eq. 433, 434 (1933) (land contract). See Rock-Ola Mfg. Corp. v. Music & Television Corp., 339 Mass. 416, 423-425 (1959) (bailment).

In similar factual situations involving a tortious conversion of property, we have held that the diminution in the value of the premises is a proper measure of damages; alternatively, at the owner's election, we have upheld the award of the fair market value of the material removed by the defendant. Lawrence v. O'Neill, 317 Mass. 393, 396-397 (1944) (cutting of trees), and cases cited. Gallagher v. R.E. Cunniff, Inc., 314 Mass. 7, 9-10 (1943) (conversion of gravel), and cases cited. In Crystal Concrete Corp. v. Braintree, 309 Mass. 463, 471 (1941), we upheld a like award in a suit in equity for breach of the terms of a lease. In eminent domain cases, however, where the owner of the land sought to prove the value of sand and gravel in place as an element of the value of the land taken, we have held that the evidence could be excluded in the judge's discretion as confusing and speculative. Consolini v. Commonwealth, 346 Mass. 501, 502 (1963), and cases cited. Cf. H.E. Fletcher Co. v. Commonwealth, 350 Mass. 316, 323-324 (1966) (granite).

Here the gravel was actually removed, and proof of its value is not confusing or speculative. Particularly where the defendant's breach is deliberate and wilful, we think damages limited to diminution in value of the premises may sometimes be seriously inadequate. "Cutting a few trees on a timber tract, or taking a few hundred tons of [693] coal from a mine, might not diminish the market value of the tract, or of the mine, and yet the value of the wood or coal, severed from the soil, might be considerable. The wrongdoer would, in the cases instanced, be held to pay the value of the wood and coal, and he could not shield himself by showing that the property from which it was taken was, as a whole, worth as much as it was before." Worrall v. Munn, 53 N.Y. 185, 190 (1873). This reasoning does not depend for its soundness on the holding of a property interest, as distinguished from a contractual interest, by the plaintiffs. Nor is it punitive; it merely deprives the defendant of a profit wrongfully made, a profit which the plaintiff was entitled to make.

Whatever the rule in a tort action, however, we think that the measure of damages in a contract action should not include the value added by defendant's labor in severing the gravel and loading it on trucks. In Gilmore v. Wilbur, 12 Pick. 120, 122 (1831), the defendants wrongfully cut the plaintiffs' wood, converted it into charcoal, and sold it, and the plaintiffs were apparently allowed to recover the proceeds without deduction for the wrongdoers' expenses; but the point was not considered by the full court. In Handforth v. Maynard, 154 Mass. 414, 417 (1891), damages for the destruction of ice on a pond were measured by the market "value of the ice harvested and deposited upon the shore of the pond, less the expense of so harvesting and depositing it." In Rockwood v. Robinson, 159 Mass. 406, 407 (1893), the court approved recovery of damages for removal of gravel, sand and other materials measured by "the price commonly paid for such materials, as they lie in the land." Cf. Crystal Concrete Corp. v. Braintree, supra at 464 (value of gravel "in the bank").

Since the master determined the value of the gravel loaded on trucks rather than its value as it lay in the land, we remand the case to the Superior Court for determination of damages consistent with this opinion.

So ordered.

[281] Leonard Rosenstein argued the cause for appellant (Feuerstein, Sachs & Maitlin, attorneys).

Leo Kaplowitz argued the cause for respondents (Kaplowitz & Wise, attorneys).

The opinion of the Court was delivered by POLLOCK, J.

This case raises several issues under the Uniform Commercial Code ("the Code" and "UCC") concerning whether a buyer may reject a tender of goods with minor defects and whether a seller may cure the defects. We consider also the remedies available to the buyer, including cancellation of the contract. The main issue is whether plaintiffs, Mr. and Mrs. Ramirez, could reject the tender by defendant, Autosport, of a camper van with minor defects and cancel the contract for the purchase of the van.

The trial court ruled that Mr. and Mrs. Ramirez rightfully rejected the van and awarded them the fair market value of their trade-in van. The Appellate Division affirmed in a brief per curiam decision which, like the trial court opinion, was unreported. We affirm the judgment of the Appellate Division.

I

Following a mobile home show at the Meadowlands Sports Complex, Mr. and Mrs. Ramirez visited Autosport's showroom in Somerville. On July 20, 1978 the Ramirezes and Donald Graff, a [282] salesman for Autosport, agreed on the sale of a new camper and the trade-in of the van owned by Mr. and Mrs. Ramirez. Autosport and the Ramirezes signed a simple contract reflecting a $14,100 purchase price for the new van with a $4,700 trade-in allowance for the Ramirez van, which Mr. and Mrs. Ramirez left with Autosport. After further allowance for taxes, title and documentary fees, the net price was $9,902. Because Autosport needed two weeks to prepare the new van, the contract provided for delivery on or about August 3, 1978.

On that date, Mr. and Mrs. Ramirez returned with their checks to Autosport to pick up the new van. Graff was not there so Mr. White, another salesman, met them. Inspection disclosed several defects in the van. The paint was scratched, both the electric and sewer hookups were missing, and the hubcaps were not installed. White advised the Ramirezes not to accept the camper because it was not ready.

Mr. and Mrs. Ramirez wanted the van for a summer vacation and called Graff several times. Each time Graff told them it was not ready for delivery. Finally, Graff called to notify them that the camper was ready. On August 14 Mr. and Mrs. Ramirez went to Autosport to accept delivery, but workers were still touching up the outside paint. Also, the camper windows were open, and the dining area cushions were soaking wet. Mr. and Mrs. Ramirez could not use the camper in that condition, but Mr. Leis, Autosport's manager, suggested that they take the van and that Autosport would replace the cushions later. Mrs. Ramirez counteroffered to accept the van if they could withhold $2,000, but Leis agreed to no more than $250, which she refused. Leis then agreed to replace the cushions and to call them when the van was ready.

On August 15, 1978 Autosport transferred title to the van to Mr. and Mrs. Ramirez, a fact unknown to them until the summer of 1979. Between August 15 and September 1, 1978 Mrs. Ramirez called Graff several times urging him to complete the preparation of the van, but Graff constantly advised her [283] that the van was not ready. He finally informed her that they could pick it up on September 1.

When Mr. and Mrs. Ramirez went to the showroom on September 1, Graff asked them to wait. And wait they did — for one and a half hours. No one from Autosport came forward to talk with them, and the Ramirezes left in disgust.

On October 5, 1978 Mr. and Mrs. Ramirez went to Autosport with an attorney friend. Although the parties disagreed on what occurred, the general topic was whether they should proceed with the deal or Autosport should return to the Ramirezes their trade-in van. Mrs. Ramirez claimed they rejected the new van and requested the return of their trade-in. Mr. Lustig, the owner of Autosport, thought, however, that the deal could be salvaged if the parties could agree on the dollar amount of a credit for the Ramirezes. Mr. and Mrs. Ramirez never took possession of the new van and repeated their request for the return of their trade-in. Later in October, however, Autosport sold the trade-in to an innocent third party for $4,995. Autosport claimed that the Ramirez' van had a book value of $3,200 and claimed further that it spent $1,159.62 to repair their van. By subtracting the total of those two figures, $4,159.62, from the $4,995.00 sale price, Autosport claimed a $600-700 profit on the sale.

On November 20, 1978 the Ramirezes sued Autosport seeking, among other things, rescission of the contract. Autosport counterclaimed for breach of contract.

II

Our initial inquiry is whether a consumer may reject defective goods that do not conform to the contract of sale. The basic issue is whether under the UCC, adopted in New Jersey as N.J.S.A. 12A:1-101 et seq., a seller has the duty to deliver goods that conform precisely to the contract. We conclude that the seller is under such a duty to make a "perfect tender" and that a buyer has the right to reject goods that do not conform to the [284] contract. That conclusion, however, does not resolve the entire dispute between buyer and seller. A more complete answer requires a brief statement of the history of the mutual obligations of buyers and sellers of commercial goods.

In the nineteenth century, sellers were required to deliver goods that complied exactly with the sales agreement. See Filley v. Pope, 115 U.S. 213, 220, 6 S.Ct. 19, 21, 29 L.Ed. 372, 373 (1885) (buyer not obliged to accept otherwise conforming scrap iron shipped to New Orleans from Leith, rather than Glasgow, Scotland, as required by contract); Columbian Iron Works & Dry-Dock Co. v. Douglas, 84 Md. 44, 47, 34 A. 1118, 1120-1121 (1896) (buyer who agreed to purchase steel scrap from United States cruisers not obliged to take any other kind of scrap). That rule, known as the "perfect tender" rule, remained part of the law of sales well into the twentieth century. By the 1920's the doctrine was so entrenched in the law that Judge Learned Hand declared "[t]here is no room in commercial contracts for the doctrine of substantial performance." Mitsubishi Goshi Kaisha v. J. Aron & Co., Inc., 16 F.2d 185, 186 (2 Cir.1926).

The harshness of the rule led courts to seek to ameliorate its effect and to bring the law of sales in closer harmony with the law of contracts, which allows rescission only for material breaches. LeRoy Dyal Co. v. Allen, 161 F.2d 152, 155 (4 Cir.1947). See 5 Corbin, Contracts § 1104 at 464 (1951); 12 Williston, Contracts § 1455 at 14 (3 ed. 1970). Nevertheless, a variation of the perfect tender rule appeared in the Uniform Sales Act. N.J.S.A. 46:30-75 (purchasers permitted to reject goods or rescind contracts for any breach of warranty); N.J.S.A. 46:30-18 to -21 (warranties extended to include all the seller's obligations to the goods). See Honnold, "Buyer's Right of Rejection, A Study in the Impact of Codification Upon a Commercial Problem", 97 U.Pa.L.Rev. 457, 460 (1949). The chief objection to the continuation of the perfect tender rule was that buyers in a declining market would reject goods for minor nonconformities and force the loss on surprised sellers. See Hawkland, Sales and Bulk Sales Under the Uniform Commercial [285] Code, 120-122 (1958), cited in N.J.S.A. 12A:2-508, New Jersey Study Comment 3.

To the extent that a buyer can reject goods for any nonconformity, the UCC retains the perfect tender rule. Section 2-106 states that goods conform to a contract "when they are in accordance with the obligations under the contract". N.J.S.A. 12A:2-106. Section 2-601 authorizes a buyer to reject goods if they "or the tender of delivery fail in any respect to conform to the contract". N.J.S.A. 12A:2-601. The Code, however, mitigates the harshness of the perfect tender rule and balances the interests of buyer and seller. See Restatement (Second), Contracts, § 241 comment (b) (1981). The Code achieves that result through its provisions for revocation of acceptance and cure. N.J.S.A. 12A:2-608, 2-508.

Initially, the rights of the parties vary depending on whether the rejection occurs before or after acceptance of the goods. Before acceptance, the buyer may reject goods for any nonconformity. N.J.S.A. 12A:2-601. Because of the seller's right to cure, however, the buyer's rejection does not necessarily discharge the contract. N.J.S.A. 12A:2-508. Within the time set for performance in the contract, the seller's right to cure is unconditional. Id., subsec. (1); see id., Official Comment 1. Some authorities recommend granting a breaching party a right to cure in all contracts, not merely those for the sale of goods. Restatement (Second), Contracts, ch. 10, especially §§ 237 and 241. Underlying the right to cure in both kinds of contracts is the recognition that parties should be encouraged to communicate with each other and to resolve their own problems. Id., Introduction p. 193.

The rights of the parties also vary if rejection occurs after the time set for performance. After expiration of that time, the seller has a further reasonable time to cure if he believed reasonably that the goods would be acceptable with or without a money allowance. N.J.S.A. 12A:2-508(2). The determination of what constitutes a further reasonable time depends on the [286] surrounding circumstances, which include the change of position by and the amount of inconvenience to the buyer. N.J.S.A. 12A:2-508, Official Comment 3. Those circumstances also include the length of time needed by the seller to correct the nonconformity and his ability to salvage the goods by resale to others. See Restatement (Second), Contracts, § 241 comment (d). Thus, the Code balances the buyer's right to reject nonconforming goods with a "second chance" for the seller to conform the goods to the contract under certain limited circumstances. N.J.S.A. 12A:2-508, New Jersey Study Comment 1.

After acceptance, the Code strikes a different balance: the buyer may revoke acceptance only if the nonconformity substantially impairs the value of the goods to him. N.J.S.A. 12A:2-608. See Herbstman v. Eastman Kodak Co., 68 N.J. 1, 9 (1975). See generally, Priest, "Breach and Remedy for the Tender of Non-Conforming Goods under the Uniform Commercial Code: An Economic Approach," 91 Harv.L.Rev. 960, 971-973 (1978). This provision protects the seller from revocation for trivial defects. Herbstman, supra, 68 N.J. at 9. It also prevents the buyer from taking undue advantage of the seller by allowing goods to depreciate and then returning them because of asserted minor defects. See White & Summers, Uniform Commercial Code, § 8-3 at 391 (2 ed. 1980). Because this case involves rejection of goods, we need not decide whether a seller has a right to cure substantial defects that justify revocation of acceptance. See Pavesi v. Ford Motor Co., 155 N.J. Super. 373, 378 (App.Div. 1978) (right to cure after acceptance limited to trivial defects) and White & Summers, supra, § 8-4 at 319 n. 76 (open question as to the relationship between §§ 2-608 and 2-508).

Other courts agree that the buyer has a right of rejection for any nonconformity, but that the seller has a countervailing right to cure within a reasonable time. Marine Mart Inc. v. Pearce, 252 Ark. 601, 480 S.W.2d 133, 137 (1972). See Intermeat, Inc. v. American Poultry, Inc., 575 F.2d 1017, 1024 (2 Cir.1978); Moulton Cavity & Mold., Inc. v. Lyn-Flex Industries, 396 A.2d 1024, [287] 1027 n. 6 (Me. 1979); Uchitel v. F.R. Tripler & Co., 107 Misc.2d 310, 316, 434 N.Y.S.2d 77, 81 (App.Term 1980); Rutland Music Services, Inc. v. Ford Motor Co., 422 A.2d 248, 249 (Vt. 1980). But see McKenzie v. Alla-Ohio Coals, Inc., 29 U.C.C.Rep. 852, 856-857 (D.D.C. 1979).

One New Jersey case, Gindy Mfg. Corp. v. Cardinale Trucking Corp., suggests that, because some defects can be cured, they do not justify rejection. 111 N.J. Super. 383, 387 n. 1 (Law Div. 1970). Accord, Adams v. Tremontin, 42 N.J. Super. 313, 325 (App.Div. 1956) (Uniform Sales Act). But see Sudol v. Rudy Papa Motors, 175 N.J. Super. 238, 240-241 (D.Ct. 1980) (§ 2-601 contains perfect tender rule). Nonetheless, we conclude that the perfect tender rule is preserved to the extent of permitting a buyer to reject goods for any defects. Because of the seller's right to cure, rejection does not terminate the contract. Accordingly, we disapprove the suggestion in Gindy that curable defects do not justify rejection.

A further problem, however, is identifying the remedy available to a buyer who rejects goods with insubstantial defects that the seller fails to cure within a reasonable time. The Code provides expressly that when "the buyer rightfully rejects, then with respect to the goods involved, the buyer may cancel." N.J.S.A. 12A:2-711. "Cancellation" occurs when either party puts an end to the contract for breach by the other. N.J.S.A. 12A:2-106(4). Nonetheless, some confusion exists whether the equitable remedy of rescission survives under the Code. Compare Ventura v. Ford Motor Corp., 173 N.J. Super. 501, 503 (Ch.Div. 1980), aff'd 180 N.J. Super. 45 (App.Div. 1981) (rescission under UCC) and Pavesi v. Ford Motor Corp., supra, 155 N.J. Super. at 377 (equitable remedies still available since not specifically superceded, § 1-103) with Edelstein v. Toyota Motors Dist., 176 N.J. Super. 57, 63-64 (App.Div. 1980) (under UCC rescission is revocation of acceptance) and Sudol v. Rudy Papa Motors, supra, 175 N.J. Super. at 241-242 (under UCC, rescission no longer exists as such).

[288] The Code eschews the word "rescission" and substitutes the terms "cancellation", "revocation of acceptance", and "rightful rejection". N.J.S.A. 12A:2-106(4); 2-608; and 2-711 & Official Comment 1. Although neither "rejection" nor "revocation of acceptance" is defined in the Code, rejection includes both the buyer's refusal to accept or keep delivered goods and his notification to the seller that he will not keep them. White & Summers, supra, § 8-1 at 293. Revocation of acceptance is like rejection, but occurs after the buyer has accepted the goods. Nonetheless, revocation of acceptance is intended to provide the same relief as rescission of a contract of sale of goods. N.J.S.A. 12A:2-608 Official Comment 1; N.J. Study Comment 2. In brief, revocation is tantamount to rescission. See Herbstman v. Eastman Kodak Co., supra, 68 N.J. at 9; accord, Peckham v. Larsen Chevrolet-Buick-Oldsmobile, Inc., 99 Idaho 675, 677, 587 P.2d 816, 818 (1978) (rescission and revocation of acceptance amount to the same thing). Similarly, subject to the seller's right to cure, a buyer who rightfully rejects goods, like one who revokes his acceptance, may cancel the contract. N.J.S.A. 12A:2-711 & Official Comment 1. We need not resolve the extent to which rescission for reasons other than rejection or revocation of acceptance, e.g. fraud and mistake, survives as a remedy outside the Code. Compare N.J.S.A. 12A:1-103 and White & Summers, supra, § 8-1, p. 295, with N.J.S.A. 12A:2-721. Accordingly, we approve Edelstein and Sudol, which recognize that explicit Code remedies replace rescission, and disapprove Ventura and Pavesi to the extent they suggest the UCC expressly recognizes rescission as a remedy.

Although the complaint requested rescission of the contract, plaintiffs actually sought not only the end of their contractual obligations, but also restoration to their pre-contractual position. That request incorporated the equitable doctrine of restitution, the purpose of which is to restore plaintiff to as good a position as he occupied before the contract. Corbin, supra, § 1102 at 455. In UCC parlance, plaintiffs' request was for the cancellation [289] of the contract and recovery of the price paid. N.J.S.A. 12A:2-106(4), 2-711.

General contract law permits rescission only for material breaches, and the Code restates "materiality" in terms of "substantial impairment". See Herbstman v. Eastman Kodak Co., supra, 68 N.J. at 9; id. at 15 (Conford, J., concurring). The Code permits a buyer who rightfully rejects goods to cancel a contract of sale. N.J.S.A. 12A:2-711. Because a buyer may reject goods with insubstantial defects, he also may cancel the contract if those defects remain uncured. Otherwise, a seller's failure to cure minor defects would compel a buyer to accept imperfect goods and collect for any loss caused by the nonconformity. N.J.S.A. 12A:2-714.

Although the Code permits cancellation by rejection for minor defects, it permits revocation of acceptance only for substantial impairments. That distinction is consistent with other Code provisions that depend on whether the buyer has accepted the goods. Acceptance creates liability in the buyer for the price, N.J.S.A. 12A:2-709(1), and precludes rejection. N.J.S.A. 12A:2-607(2); N.J.S.A. 12A:2-606, New Jersey Study Comment 1. Also, once a buyer accepts goods, he has the burden to prove any defect. N.J.S.A. 12A:2-607(4); White & Summers, supra, § 8-2 at 297. By contrast, where goods are rejected for not conforming to the contract, the burden is on the seller to prove that the nonconformity was corrected. Miron v. Yonkers Raceway, Inc., 400 F.2d 112, 119 (2 Cir.1968).

Underlying the Code provisions is the recognition of the revolutionary change in business practices in this century. The purchase of goods is no longer a simple transaction in which a buyer purchases individually-made goods from a seller in a face-to-face transaction. Our economy depends on a complex system for the manufacture, distribution, and sale of goods, a system in which manufacturers and consumers rarely meet. Faceless manufacturers mass-produce goods for unknown consumers who purchase those goods from merchants exercising [290] little or no control over the quality of their production. In an age of assembly lines, we are accustomed to cars with scratches, television sets without knobs and other products with all kinds of defects. Buyers no longer expect a "perfect tender". If a merchant sells defective goods, the reasonable expectation of the parties is that the buyer will return those goods and that the seller will repair or replace them.

Recognizing this commercial reality, the Code permits a seller to cure imperfect tenders. Should the seller fail to cure the defects, whether substantial or not, the balance shifts again in favor of the buyer, who has the right to cancel or seek damages. N.J.S.A. 12A:2-711. In general, economic considerations would induce sellers to cure minor defects. See generally Priest, supra, 91 Harv.L.Rev. 973-974. Assuming the seller does not cure, however, the buyer should be permitted to exercise his remedies under N.J.S.A. 12A:2-711. The Code remedies for consumers are to be liberally construed, and the buyer should have the option of cancelling if the seller does not provide conforming goods. See N.J.S.A. 12A:1-106.

To summarize, the UCC preserves the perfect tender rule to the extent of permitting a buyer to reject goods for any nonconformity. Nonetheless, that rejection does not automatically terminate the contract. A seller may still effect a cure and preclude unfair rejection and cancellation by the buyer. N.J.S.A. 12A:2-508, Official Comment 2; N.J.S.A. 12A:2-711, Official Comment 1.

III

The trial court found that Mr. and Mrs. Ramirez had rejected the van within a reasonable time under N.J.S.A. 12A:2-602. The court found that on August 3, 1978 Autosport's salesman advised the Ramirezes not to accept the van and that on August 14, they rejected delivery and Autosport agreed to replace the cushions. Those findings are supported by substantial credible evidence, and we sustain them. See Rova Farms [291] Resort v. Investors Ins. Co., 65 N.J. 474, 483-484 (1974). Although the trial court did not find whether Autosport cured the defects within a reasonable time, we find that Autosport did not effect a cure. Clearly the van was not ready for delivery during August, 1978 when Mr. and Mrs. Ramirez rejected it, and Autosport had the burden of proving that it had corrected the defects. Although the Ramirezes gave Autosport ample time to correct the defects, Autosport did not demonstrate that the van conformed to the contract on September 1. In fact, on that date, when Mr. and Mrs. Ramirez returned at Autosport's invitation, all they received was discourtesy.

On the assumption that substantial impairment is necessary only when a purchaser seeks to revoke acceptance under N.J.S.A. 12A:2-608, the trial court correctly refrained from deciding whether the defects substantially impaired the van. The court properly concluded that plaintiffs were entitled to "rescind" — i.e., to "cancel" — the contract.

Because Autosport had sold the trade-in to an innocent third party, the trial court determined that the Ramirezes were entitled not to the return of the trade-in, but to its fair market value, which the court set at the contract price of $4,700. A buyer who rightfully rejects goods and cancels the contract may, among other possible remedies, recover so much of the purchase price as has been paid. N.J.S.A. 12A:2-711. The Code, however, does not define "pay" and does not require payment to be made in cash.

A common method of partial payment for vans, cars, boats and other items of personal property is by a "trade-in". When concerned with used vans and the like, the trade-in market is an acceptable, and perhaps the most appropriate, market in which to measure damages. It is the market in which the parties dealt; by their voluntary act they have established the value of the traded-in article. See Frantz Equipment Co. v. Anderson, 37 N.J. 420, 431-432 (1962) (in computing purchaser's damages for alleged breach of uniform conditional sales law, trade-in value [292] of tractor was appropriate measure); accord, California Airmotive Corp. v. Jones, 415 F.2d 554, 556 (6 Cir.1969). In other circumstances, a measure of damages other than the trade-in value might be appropriate. See Chemical Bank v. Miller Yacht Sales, 173 N.J. Super. 90, 103 (App.Div. 1980) (in determining value of security interest in boat, court rejected both book value and contract trade-in value and adopted resale value as appropriate measure of damages).

The ultimate issue is determining the fair market value of the trade-in. This Court has defined fair market value as "the price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts." In re Estate of Romnes, 79 N.J. 139, 144 (1978). Although the value of the trade-in van as set forth in the sales contract was not the only possible standard, it is an appropriate measure of fair market value.

For the preceding reasons, we affirm the judgment of the Appellate Division.

For affirmance — Chief Justice WILENTZ and Justices PASHMAN, CLIFFORD, SCHREIBER, HANDLER, POLLOCK and O'HERN — 7.

For reversal — None.

[701] In Error to the Circuit Court of the United States for the District of Colorado. Reversed.

Statement by SANBORN, Circuit Judge:

This was an action by the plaintiff in error to recover the contract price of certain stationery and advertising matter furnished the defendant. It was tried on the merits, and at the close of the evidence the court instructed the jury to return a verdict for the defendant, and this instruction is assigned as error. The plaintiff was a corporation of Wisconsin, engaged in lithographing and printing, and its principal place of business was at Milwaukee, in that state. The defendant was a corporation of Colorado, engaged in the business of milling, and its principal place of business was at Denver, in that state. In June, 1889, the plaintiff agreed to make new designs of certain buildings of defendant, with sketches of its trade-marks; to execute engravings thereof in a strictly first-class style; to embody these on the stationery described below; to submit to defendant for approval proofs thereof; to submit designs and proofs of hangers, on fine chromo plate, for advertising defendant's business, by the following fall; to engrave a strictly first-class vignette of one of defendant's plants; to submit a sketch and proof thereof to defendant; to furnish defendant with 10,000 business cards and 5,000 checks in August, 1889; to furnish, in the course of the year, letter heads, noteheads, billheads, statements, bills, envelopes, and cards to the defendant to the number of 331,100, and 5,000 hangers; and to furnish the vignette and 5,000 hangers more after the approval of the proofs thereof by the defendant. The defendant agreed to take and pay for this stationery, this vignette, and these hangers at certain agreed prices, which amounted in the aggregate to about $6,000. The plaintiff furnished the 10,000 cards and 5,000 checks required under the contract in August, 1889, and the defendant received and paid for them. The plaintiff introduced testimony to the effect that it strictly complied with and fully performed these contracts in every respect, except that it shipped the articles contracted for (which were not delivered in August) by rail from Milwaukee to the defendant, at Denver, in December, 1889, in five boxes, four of which did not arrive at Denver until 9:42 A.M., January 1, 1890, and the fifth did not arrive there until January 4, 1890; that before January 8, 1890, all of these articles were tendered to the defendant, and it refused to examine or receive them; that the sketches and proofs of the designs, trade-marks, and hangers had been submitted to and approved by the defendant during the summer and fall of 1889, before these articles were manufactured, and that the last proof was approved November 16, 1889; that on December 16, 1889, the defendant wrote the plaintiff to forward by express 2,000 statements and 3,000 envelopes ‘as per [702] proofs submitted;‘ that the state of the art and process of lithographing is such that, after the general idea of a piece of work is conceived, it is customary to make first a pencil design, and, when this is found satisfactory, to prepare a colored sketch where colored work is required; that after the sketch is colored it is lithographed, that is, transferred to a stone; that each color requires a separate stone; and in these hangers there were nine colors; that it requires from two to three months to reproduce on stone a colored sketch like that used for the hangers; that the artists' work and the reproduction on stone were the most expensive parts of this work contracted for; and that the expense of the materials and printing was but a small part of the entire expense of the work.

F. W. v. Cotzhausen, for plaintiff in error.

V. D. Markham, for defendant in error.

Before CALDWELL and SANBORN, Circuit Judges, and SHIRAS, District Judge.

SANBORN, Circuit Judge, (after stating the facts.)

The ground on which it is sought to sustain the instruction of the court below to return a verdict for the defendant in this case is that the plaintiff failed to tender or deliver the articles contracted for to the defendant, at Denver, until six or eight days after the expiration of the year, that the plaintiff did not therefore furnish them ‘in the course of the year,‘ and that this failure justified the defendant in repudiating the contract, and refusing to pay any part of the contract price.

It is a general principle governing the construction of contracts that stipulations as to the time of their performance are not necessarily of their essence, unless it clearly appears in the given case from the express stipulations of the contract or the nature of its subject-matter that the parties intended performance within the time fixed in the contract to be a condition precedent to its enforcement, and, where the intention of the parties does not so appear, performance shortly after the time limited on the part of either party will not justify a refusal to perform by the party aggrieved, but his only remedy will be an action or counterclaim for the damages he has sustained from the breach of the stipulations. In the application of this principle to the cases as they have arisen, in the promulgation of the rules naturally deduced from it, and in the assignment of the various cases to the respective classes in which the stipulation as to time of performance is, or is not, deemed of the essence of the contract, the controlling consideration has been, and ought to be, to so decide and classify the cases that unjust penalties may not be inflicted, nor unreasonable damages recovered. Thus, in the ordinary contract of merchants for the sale and delivery, or the manufacture and sale, of marketable commodities within a time certain, it has been held that performance within the time is a condition precedent to the enforcement of the contract, and that a failure in this regard would justify the aggrieved party in refusing performance at a later day. Norrington v. Wright, 115 U.S. 188-203, 6 Sup.Ct.Rep. 12. This application of the general principle commends itself as just and reasonable, [703] on account of the frequent and rapid interchange and use of such commodities made necessary by the demands of commerce, and because such goods, if not received in time by the vendee, may usually be sold to others by the vendor at small loss, and thus he may himself measure the damages he ought to suffer from his delay by the difference in the market value of his goods. On the other hand, it has been held that an express stipulation in a contract for the construction of a house, that it should be completed on a day certain, and that, in case of failure to complete it within the time limited, the builder would forfeit $1,000, would not justify the owner of the land on which the house was constructed in refusing to accept it for a breach of this stipulation when the house was completed shortly after the time fixed, nor even in retaining the penalty stipulated in the contract, but that he must perform his part of the contract, and that he could retain from or recover of the builder the damages he sustained by the delay and those only. Tayloe v. Sandiford, 7 Wheat. 13, 17. This application of the general rule is equally just and reasonable. The lumber and material bestowed on a house by a builder become of little comparative value to him, while they are ordinarily of much greater value to the owner of the land on which it stands, and to permit the latter to escape payment because his house is completed a few days later than the contract requires would result in great injustice to the contractor, while the rule adopted fully protects the owner, and does no injustice to any one. The cases just referred to illustrate two well-settled rules of law which have been deduced from this general principle, and in accordance with which this case must be determined. They are:

In contracts of merchants for the sale and delivery or for the manufacture and sale of marketable commodities a statement descriptive of the subject-matter, or some material incident, such as the time of shipment, is a condition precedent, upon the failure or nonperformance of which the party aggrieved may repudiate the whole contract. Norrington v. Wright, 115 U.S. 188, 203, 6 Sup.Ct.Rep. 12; Rolling Mill v. Rhodes, 121 U.S. 255, 261, 7 Sup.Ct.Rep. 882. But in contracts for work or skill, and the materials upon which it is to be bestowed, a statement fixing the time of performance of the contract is not ordinarily of its essence, and a failure to perform within the time stipulated, followed by substantial performance after a short delay, will not justify the aggrieved party in repudiating the entire contract, but will simply give him his action for damages for the breach of the stipulation. Tayloe v. Sandiford, 7 Wheat. 13, 17; Hambly v. Railroad Co., 21 Fed.Rep. 541, 544, 554, 557.

It only remains to determine whether the contracts in the case at bar are the ordinary contracts of merchants for the manufacture and sale of marketable commodities or contracts for labor, skill, and materials, and this is not a difficult task. A contract to manufacture and furnish articles for the especial, exclusive, and peculiar use of another, with special features which he requires, and which render them of value to him, but useless and unsalable to others,— articles whose chief cost and value are [704] derived from the labor and skill bestowed upon them, and not from the materials of which they are made,— is a contract for work and labor, and not a contract of sale. Engraving Co. v. Moore, 75 Wis. 170, 172, 43 N.W.Rep. 1124; Goddard v. Binney, 115 Mass. 450; Hinds v. Kellogg, (Com. Pl. N.Y.) 13 N.Y.Supp. 922; Turner v. Mason, (Mich.) 32 N.W.Rep. 846. Thus in Engraving Co. v. Moore, supra, where the lithographing company had contracted to manufacture a large quantity of engravings and lithographs for a theatrical manager, with special features, useful to him only during a certain season, and they were completed and set aside in the rooms of the lithographer, and there burned before delivery to the manager, the court held that the contract was not one for the sale of personal property, but one for work, skill, and materials, because it was not the materials, but the lithographer's work of skill, that gave the value to the finished advertisements, and was the actual subject-matter of the contract, and because that work and skill, while it added the chief value to the finished articles for the especial use of the defendant, made both the articles and the materials worthless for all other purposes.

The contracts in the case we are considering were not for the blank paper on which they were finally impressed; that was of small value in proportion to the value of the finished articles; they were not for the sale of anything then in existence; they were for the artistic skill and labor of the employes of the defendant in preparing the sketches and designs, transferring them upon stone, and finally impressing them upon the paper the defendant was to furnish; and they authorized the plaintiff, without other orders than the contracts themselves, and the approvals of the designs and proofs there called for, to prepare and furnish all the articles named in the contracts and to collect the contract price therefor. These contracts required the names of defendant's mills and its trademarks to be so impressed upon all these articles that when they were completed they were not only unsalable to all others, but worthless to plaintiff for all purposes but waste paper. The contracts are evidence that on December 31, 1889, the articles contracted for would have been worth about $6,000 to the defendant, and if a few days later, when they were tendered, they were not worth so much, the defendant may recover the damages it suffered from the delay from December 31, 1889, to the date of the tender, in a proper action therefor, or may have the same allowed in this action under proper pleadings and proofs, and no injustice will result; while, if the defendant was permitted on account of this delay to utterly repudiate the contract, the plaintiff must practically lose the entire $6,000. The contracts contain no stipulation from which it can be fairly inferred that the parties intended the time of performance to be even material; indeed, they strongly indicate the contrary. They provide that a certain portion of the articles shall be furnished in two months that the remainder of the stationery and 5,000 hangers shall be furnished in the course of the year, and that 5,000 hangers more and the vignette shall be furnished within a reasonable time after the proofs are approved by the defendant; there is no stipulation for the payment [705] of any damages or the avoidance of the contracts on account of a failure to perform within any of the times stipulated in the contracts, and the parties themselves proceeded so leisurely thereunder that the first and only admitted request by the defendant for the delivery of any of the articles not delivered in August was on December 16, 1889. In Tayloe v. Sandiford, supra, the court refused to permit the owner to retain the $1,000 which the house builder had expressly agreed to pay if he failed to complete the house within the time fixed in the contract. In the absence of any such stipulation, or any clearly-expressed intent that time should be material even, it would be clearly unjustified by the law and inequitable to hold that the plaintiff is compelled to forfeit his entire contract price on account of this trifling delay that may have been immaterial to the defendant, and, if not, may be fully compensated in damages.

The result is that these contracts were not for the sale and delivery, or the manufacture and delivery, of marketable commodities. They were contracts for artistic skill and labor, and the materials on which they were to be bestowed in the manufacture of articles which were not salable to any one but the defendant when completed because impressed with special features useful only to it. There was nothing in the contracts or their subject-matter indicating any intention of the parties that the stipulations as to time should be deemed of their essence; and the defendant was not justified on account of the slight delay disclosed by the record in refusing to accept the goods, or in repudiating the entire contract. This conclusion disposes of the case, and it is unnecessary to notice other errors assigned. The judgment below is reversed, and the cause remanded for further proceedings not inconsistent with this opinion.

[857]

357 N.Y.S.2d 857
34 N.Y.2d 379, 314 N.E.2d 419
Philip FREUND, Respondent,
v.
WASHINGTON SQUARE PRESS, INC., Appellant.
Court of Appeals of New York.
June 13, 1974. [858]

Joel T. Camche and Selig J. Levitan, New York City, for appellant.

[34 N.Y.2d 380] Janet Fine Cotton, New York City, for respondent.

SAMUEL RABIN, Judge.

In this action for breach of a publishing contract, we must decide what damages are recoverable for defendant's failure to publish plaintiff's manuscript. In 1965, plaintiff, an author and a college teacher, and defendant, Washington Square Press, Inc., entered into a written agreement which, in relevant part, provided as follows. Plaintiff ('author') granted defendant ('publisher') exclusive rights to publish and sell in book form plaintiff's work on modern drama. Upon plaintiff's delivery of the manuscript, defendant agreed to complete payment of a nonreturnable $2,000 'advance'. Thereafter, if defendant deemed the manuscript not 'suitable for publication', it had the right to terminate the agreement by written notice within 60 days of delivery. Unless so terminated, defendant agreed to publish the work in hardbound[314 N.E.2d 420] edition within 18 [34 N.Y.2d 381] months and afterwards in paperbound edition. The contract further provided that defendant would pay royalties to plaintiff, based upon specified percentages of sales. (For example, plaintiff was to receive 10% Of the retail price of the first 10,000 copies sold in the continental United States.) If defendant failed to publish within 18 months, the contract provided that 'this agreement shall terminate and the rights herein granted to [859] the Publisher shall revert to the Author. In such event all payments therefore made to the Author shall belong to the Author without prejudice to any other remedies which the Author may have.' The contract also provided that controversies were to be determined pursuant to the New York simplified procedure for court determination of disputes (CPLR 3031--3037, Consol.Laws, c. 8).

Plaintiff performed by delivering his manuscript to defendant and was paid his $2,000 advance. Defendant thereafter merged with another publisher and ceased publishing in hardbound. Although defendant did not exercise its 60-day right to terminate, it has refused to publish the manuscript in any form.

Plaintiff commenced the instant action pursuant to the simplified procedure practice and initially sought specific performance of the contract. The Trial Term Justice denied specific performance but, finding a valid contract and a breach by defendant, set the matter down for trial on the issue of monetary damages, if any, sustained by the plaintiff. At trial, plaintiff sought to prove: (1) delay of his academic promotion; (2) loss of royalties which would have been earned; and (3) the cost of publication if plaintiff had made his own arrangements to publish. The trial court found that plaintiff had been promoted despite defendant's failure to publish, and that there was no evidence that the breach had caused any delay. Recovery of lost royalties was denied without discussion. The court found, however, that the lost of hardcover publication to plaintiff was the natural and probable consequence of the breach and, based upon expert testimony, awarded $10,000 to cover this cost. It denied recovery of the expenses of paperbound publication on the ground that plaintiff's proof was conjectural.

The Appellate Division, (3 to 2) affirmed, finding that the cost of publication was the proper measure of damages. In support of its conclusion, the majority analogized to the construction [34 N.Y.2d 382] contract situation where the cost of completion may be the proper measure of damages for a builder's failure to complete a house or for use of wrong materials. The dissent concluded that the cost of publication is not an appropriate measure of damages and consequently, that plaintiff may recover nominal damages only.^[1] We agree with the dissent. In so concluding, we look to the basic purpose of damage recovery and the nature and effect of the parties' contract.

It is axiomatic that, except where punitive damages are allowable, the law awards damages for breach of contract to compensate for injury caused by the breach--injury which was foreseeable, i.e., reasonably within the contemplation of the parties, at the time the [860] contract was entered into. (Swain v. Schieffelin, 134 N.Y. 471, 473, 31 N.E. 1025, 1026.) Money damages are substitutional relief designed in theory 'to put the injured party in as good a position as he would have been put by full performance of the contract, at the least cost to the defendant and without charging him with harms that he had no sufficient reason to foresee when he made the contract.' (5 Corbin, Contracts, § 1002, pp. 31--32; 11 Williston, Contracts (3d ed.), § 1338, p. 198.) In other words, so far as possible, the law attempts to secure to the injured party the benefit of his bargain, subject to the limitations that the injury--whether it be losses suffered or gains prevented--was [314 N.E.2d 421] foreseeable, and that the amount of damages claimed be measurable with a reasonable degree of certainty and, of course, adequately proven. (See, generally, Dobbs, Law of Remedies, p. 148; see, also, Farnsworth, Legal Remedies for Breach of Contract, 70 Col.L.Rev. 1145, 1159.) But it is equally fundamental that the injured party should not recover more from the breach than he would have gained had the contract been fully performed. (Baker v. Drake, 53 N.Y. 211, 217; see, generally, Dobbs, Law of Remedies, p. 810.)

Measurement of damages in this case according to the cost of publication to the plaintiff would confer greater advantage than performance of the contract would have entailed to plaintiff and would place him in a far better position than he would have occupied had the defendant fully performed. Such measurement[34 N.Y.2d 383] bears no relation to compensation for plaintiff's actual loss or anticipated profit. Far beyond compensating plaintiff for the interests he had in the defendant's performance of the contract--whether restitution, reliance or expectation (see Fuller & Perdue, Reliance Interest in Contract Damages, 46 Yale L.J. 52, 53--56) an award of the cost of publication would enrich plaintiff at defendant's expense.

Pursuant to the contract, plaintiff delivered his manuscript to the defendant. In doing so, he conferred a value on the defendant which, upon defendant's breach, was required to be restored to him. Special Term, in addition to ordering a trial on the issue of damages, ordered defendant to return the manuscript to plaintiff and plaintiff's restitution interest in the contract was thereby protected. (Cf. 5 Corbin, Contracts, § 996, p. 15.)

At the trial on the issue of damages, plaintiff alleged no reliance losses suffered in performing the contract or in making necessary preparations to perform. Had such losses, if foreseeable and ascertainable, been incurred, plaintiff would have been entitled to compensation for them. (Cf. Bernstein v. Meech, 130 N.Y. 354, 359, 29 N.E. 255, 257.)

As for plaintiff's expectation interest in the contract, it was basically two-fold--the 'advance' and the royalties. (To be sure, [861] plaintiff may have expected to enjoy whatever notoriety, prestige or other benefits that might have attended publication, but even if these expectations were compensable, plaintiff did not attempt at trial to place a monetary value on them.) There is no dispute that plaintiff's expectancy in the 'advance' was fulfilled--he has received his $2,000. His expectancy interest in the royalities--the profit he stood to gain from sale of the published book--while theoretically compensable, was speculative. Although this work is not plaintiff's first, at trial he provided no stable foundation for a reasonable estimate of royalties he would have earned had defendant not breached its promise to publish. In these circumstances, his claim for royalties falls for uncertainty. (Cf. Broadway Photoplay Co. v. World Film Corp., 225 N.Y. 104, 121 N.E. 756; Hewlett v. Caplin, 275 App.Div. 797, 88 N.Y.S.2d 428.)

Since the damages which would have compensated plaintiff for anticipated royalties were not proved with the required certainty,[34 N.Y.2d 384] we agree with the dissent in the Appellate Division that nominal damages alone are recoverable. (Cf. Manhattan Sav. Inst. v. Gottfried Baking Co., 286 N.Y. 398, 36 N.E.2d 637.) Though these are damages in name only and not at all compensatory, they are nevertheless awarded as a formal vindication of plaintiff's legal right to compensation which has not been given a sufficiently certain monetary valuation. (Cf. Baker v. Hart, 123 N.Y. 470, 474, 25 N.E. 948, 949; see, generally, Dobbs, Law of Remedies, p. 191; 11 Williston, Contracts (3d ed.), § 1339A, pp. 206--208.)

In our view, the analogy by the majority in the Appellate Division to the construction contract situation was inapposite. In [314 N.E.2d 422] the typical construction contract, the owner agrees to pay money or other consideration to a builder and expects, under the contract, to receive a completed building in return. The value of the promised performance to the owner is the properly constructed building. In this case, unlike the typical construction contract, the value to plaintiff of the promised performance--publication--was a percentage of sales of the books published and not the books themselves. Had the plaintiff contracted for the printing, binding and delivery of a number of hardbound copies of his manuscript, to be sold or disposed of as he wished, then perhaps the construction analogy, and measurement of damages by the cost of replacement or completion, would have some application.

Here, however, the specific value to plaintiff of the promised publication was the royalties he stood to receive from defendant's sales of the published book. Essentially, publication represented what it would have cost the defendant to confer that value upon the plaintiff, and, by its breach, defendant saved that cost. The error by the courts below was in measuring damages not by the value to plaintiff of the promised performance but by the cost of that performance [862] to defendant. Damages are not measured, however, by what the defaulting party saved by the breach, but by the natural and probable consequences of the breach To the plaintiff. In this case, the consequence to plaintiff of defendant's failure to publish is that he is prevented from realizing the gains promised by the contract--the royalties. But, as we have stated, the amount of royalties plaintiff would have realized was not ascertained with adequate certainty[34 N.Y.2d 385] and, as a consequence, plaintiff may recover nominal damages only.

Accordingly, the order of the Appellate Division should be modified to the extent of reducing the damage award of $10,000 for the cost of publication to six cents, but with costs and disbursements to the plaintiff.

BREITEL, C.J., and JASEN, GABRIELLI, JONES and WACHTLER, JJ., concur.

STEVENS, J., taking no part.

Order modified, with costs and disbursements to plaintiff-respondent, in accordance with opinion herein and, as so modified, affirmed.

---------------

[1] Plaintiff does not challenge the trial court's denial of damages for delay in promotion or for anticipated royalties.

51 S.W.2d 572

SECURITY STORE & MANUFACTURING CO., RESPONDENT,
v.
AMERICAN RAILWAYS EXPRESS CO., APPELLANT.

No. 17560.
Kansas City Court of Appeals. Missouri.
May 23, 1932.

[573] Appeal from the Circuit Court of Jackson County. — Hon. Ralph S. Latshaw, Judge.

AFFIRMED.

Joseph F. Keirnan for respondent.

Lathrop, Crane, Reynolds, Sawyer & Mersereau and Dean Wood for appellant.

BLAND, J.

This is an action for damages for the failure of defendant to transport, from Kansas City to Atlantic City, New Jersey, within a reasonable time, a furnace equipped with a combination oil and gas burner. The cause was tried before the court without the aid of a jury, resulting in a judgment in favor of plaintiff in the sum of $801.50 and interest, or in a total sum of $1000. Defendant has appealed.

The facts show that plaintiff manufactured a furnace equipped with a special combination oil and gas burner it desired to exhibit at the American Gas Association Convention held in Atlantic City in October, 1926. The president of plaintiff testified that plaintiff engaged space for the exhibit for the reason "that the Henry L. Dougherty Company was very much interested in putting out a combination oil and gas burner; we had just developed one, after we got through, better than anything on the market and we thought this show would be the psychological time to get in contact with the Dougherty Company;" that "the thing wasn't sent there for sale but primarily to show;" that at the time the space was engaged it was too late to ship the furnace by freight so plaintiff decided to ship it by express, and, on September 18, 1926, wrote the office of the defendant in Kansas City, stating that it had engaged a booth for exhibition purposes at Atlantic City, New Jersey, from the American Gas Association, for the week beginning October 11th; that its exhibition consisted of an oil burning furnace, together with two oil burners which weighed at least 1500 pounds; that, "In order to get this exhibit in place on time it should be in Atlantic City not later than October the 8th. What we want you to do is to tell us how much time you will require to assure the delivery of the exhibit on time."

Mr. Bangs, chief clerk in charge of the local office of the defendant, upon receipt of the letter, sent Mr. Johnson, a commercial representative of the defendant, to see plaintiff. Johnson called upon plaintiff taking its letter with him. Johnson made a notation on the bottom of the letter giving October 4th, as the day that defendant was required to have the exhibit in order for it to reach Atlantic City on October 8th.

On October 1st, plaintiff wrote the defendant at Kansas City, referring to its letter of September 18th, concerning the fact that the furnace must be in Atlantic City not later than October 8th, and stating what Johnson had told it, saying:

"Now, Mr. Banks, we want to make doubly sure that this shipment is in Atlantic City not later than October 8th and the purpose of this letter is to tell you that you can have your truck call for the shipment between 12 and 1 o'clock on Saturday, October 2nd for this." (Italics plaintiff's.)

On October 2nd, plaintiff called the office of the express company in Kansas City and told it that the shipment was ready. Defendant came for the shipment on the last mentioned day, received it and delivered the express receipt to plaintiff. The shipment contained twenty-one packages. Each package was marked with stickers backed with glue and covered with silica of soda, to prevent the stickers being torn off in shipping. Each package was given a number. They ran from one to twenty-one.

Plaintiff's president made arrangements to go to Atlantic City to attend the convention and install the exhibit, arriving there about October 11th. When he reached Atlantic City he found the shipment had been placed in the booth that had been assigned to plaintiff. The exhibit was set up, but it was found [574] that one of the packages shipped was not there. This missing package contained the gas manifold, or that part of the oil and gas burner that controlled the flow of gas in the burner. This was the most important part of the exhibit and a like burner could not be obtained in Atlantic City.

Wires were sent and it was found that the stray package was at the "over and short bureau" of defendant in St. Louis. Defendant reported that the package would be forwarded to Atlantic City and would be there by Wednesday, the 13th. Plaintiff's president waited until Thursday, the day the convention closed, but the package had not arrived at the time, so he closed up the exhibit and left. About a week after he arrived in Kansas City, the package was returned by the defendant.

Banks testified that the reasonable time for a shipment of this kind to reach Atlantic City from Kansas City would be four days; that if the shipment was received on October 4th, it would reach Atlantic City by October 8th; that plaintiff did not ask defendant for any special rate; that the rate charged was the regular one; that plaintiff asked no special advantage in the shipment; that all defendant, under its agreement with plaintiff was required to do was to deliver the shipment at Atlantic City in the ordinary course of events; that the shipment was found in St. Louis about Monday afternoon or Tuesday morning; that it was delivered at Atlantic City at the Ritz Carlton Hotel, on the 16th of the month. There was evidence on plaintiff's part that the reasonable time for a shipment of this character to reach Atlantic City from Kansas City was not more than three or four days.

The petition upon which the case was tried alleges that plaintiff, on October 2, 1926, delivered the shipment to the defendant; that defendant agreed, in consideration of the express charges received from plaintiff, to carry the shipment from Kansas City to Atlantic City, and

"to deliver the same to plaintiff at Atlantic City, New Jersey, on or before October 8, 1926, the same being the reasonable and proper time necessary to transport said shipment to Atlantic City, in as good condition as when received of defendant (plaintiff) at Kansas City, Missouri; that previous to the delivery of said goods to defendant at Kansas City, Missouri, this plaintiff apprised defendant of the kind and nature of the goods and told defendant of the necessity of having the goods at Atlantic City by October 8, 1926, and the reason therefor; that defendant knew that the goods were intended for an exhibit at the place and that they would have to be at Atlantic City by that date to be of any service to the defendant (plaintiff)." (Italics ours.)

"That this defendant through its servants and agents, after being apprised of the nature of the shipment of goods and all of the necessity of having the goods at Atlantic City at the time specified, to-wit: October 8, 1926, agreed with plaintiff and promised and assured plaintiff that if they would transport the goods through defendant, and deliver said goods to defendant at Kansas City by October 4th, that they would be at Atlantic City by said date, to-wit: October 8, 1926; that relying upon the promises and assurances of the defendant's agents and servants that the goods would be in Atlantic City by October 8, 1926, this plaintiff delivered said goods to the defendant on October 2, 1926, at Kansas City, Missouri, and paid defendant the express charges on same, as above set out, in packages or parcels, numbered from one to twenty-one inclusive.

"That relying upon defendant's promise and the promises of its agents and servants, that said parcels would be delivered at Atlantic City by October 8, 1926, if delivered to defendant by October 4, 1926, plaintiff herein hired space for an exhibit at the American Gas Association Convention at Atlantic City, and planned for an exhibit at said Convention and sent men in the employ of this plaintiff to Atlantic City to install, show and operate said exhibit, and that these men were in Atlantic City ready to set up this plaintiff's exhibit at the American Gas Association Convention on October 8, 1926."

"That defendant, in violation of its agreement, failed and neglected to deliver one of the packages to its destination on October 8, 1926:

"That the package not delivered by defendant contained the essential part of plaintiff's exhibit which plaintiff was to make at said convention on October 8th, was later discovered in St. Louis, Missouri, by the defendant herein, and that plaintiff, for this reason, could not show his exhibit."

Plaintiff asked damages, which the court in its judgment allowed as follows: $147 express charges (on the exhibit); $45.12 freight on the exhibit from Atlantic City to Kansas City; $101.39 railroad and pullman fares to and from Atlantic City, expended by plaintiff's president and a workman taken by him to Atlantic City; $48 hotel room for the two; $150 for the time of the president; $40 for wages of plaintiff's other employee and $270 for rental of the booth, making a total of $801.51.

Defendant contends that its instructions in the nature of demurrers to the evidence should have been given for the reason that the petition and plaintiff's evidence show that plaintiff has based its cause of action on defendant's breach of a promise to deliver [575] the shipment at a specified time and that promise is non-enforceable and void under the Interstate Commerce Act; that the court erred in allowing plaintiff's expenses as damages; that the only damages, if any, that can be recovered in cases of this kind, are for loss of profits and that plaintiff's evidence is not sufficient to base any recovery on this ground.

No attack was made upon the petition at the trial and at this late day it must be adjudged to be sufficient if it states any cause of action whatever, however in artificially it may be drawn. Of course, the law applicable to the case is governed by the Statutes of the United States as construed by the Federal Courts. [Bilby v. A.T.S.F. Ry. Co., 199 S.W. 1004.] It is well established that a shipper cannot recover on a special contract to move a shipment within a specified time, for such would work an unjust discrimination among shippers. The only duty that the carrier is under is to carry the shipment safely and to deliver it at its destination within a reasonable time. [United States v. Am. Ry. Exp. Co., 265 U.S. 425; 44 Sup. Ct. Rep. 560; C. & A.R.R. Co. v. Kirby, 225 U.S. 155, 164; A.T. & S.F. Ry. v. Robinson, 233 U.S. 173, 34 Sup. Ct. 556; Fruit & Produce Co. v. Pa. Co., 201 Mo. App. 609.]

While the petition alleges that defendant agreed to deliver the shipment at Atlantic City on or before October 8, 1926, it also alleges that this was the reasonable and proper time necessary to transport said shipment to Atlantic City. Therefore, giving the petition a liberal construction, it would appear that all that plaintiff was contending therein was that defendant had agreed to transport the shipment within a reasonable time, and that delivery on or before October 8th was necessary to comply with the agreement. The petition refers several times to the agreement that if the goods were delivered to defendant by October 4th, they would be delivered at Atlantic City not later than October 8th, but it also alleges that the goods were not delivered to defendant until October 2nd. It is quite apparent from reading the petition, as a whole, that it was not upon a contract to deliver at Atlantic City on October 8th, goods delivered by plaintiff to defendant at Kansas City on October 4th. It would appear that the purpose of plaintiff, in pleading this agreement, was to allege sufficient facts to base its claim of special damages, that is that defendant was notified that it was necessary to have the shipment at Atlantic City by October 8th, and that the damages sustained accrued as a result of plaintiff's reliance on its being so delivered and that October 8th was plenty of time for defendant to have taken to transport the shipment. Much of the petition is surplusage but we cannot adjudge it wholly insufficient at this juncture.

There is nothing in the evidence tending to show any unjust discrimination between shippers in the agreement had between plaintiff and defendant. Boiled down to its last analysis, the agreement was nothing more than that the shipment would be transported within the ordinary time. Plaintiff sought no special advantage, was asking nothing that would be denied any other shipper, was asking no particular route, no particular train, nor for any expedited service. It was simply seeking the same rights any other shipper could have enjoyed on the same terms. No special instructions were given or involved in the case. [Foster v. Cleveland, et al. R. Co., 56 Fed. 434; Packing Co. v. Alaska S.S. Co., 22 Fed. (2d) 12.]

We think, under the circumstances in this case, that it was proper to allow plaintiff's expenses as its damages. Ordinarily the measure of damages where the carrier fails to deliver a shipment at destination within a reasonable time is the difference between the market value of the goods at the time of the delivery and the time when they should have been delivered. But where the carrier has notice of peculiar circumstances under which the shipment is made, which will result in an unusual loss by the shipper in case of delay in delivery, the carrier is responsible for the real damage sustained from such delay if the notice given is of such character, and goes to such extent, in informing the carrier of the shipper's situation, that the carrier will be presumed to have contracted with reference thereto. [Central Trust Co. v. Savannah & W.R. Co., 69 Fed. 683, 685.]

In the case at bar defendant was advised of the necessity of prompt delivery of the shipment. Plaintiff explained to Johnson the "importance of getting the exhibit there on time." Defendant knew the purpose of the exhibit and ought to respond for its negligence in failing to get it there. As we view the record this negligence is practically conceded. The undisputed testimony shows that the shipment was sent to the over and short department of the defendant in St. Louis. As the packages were plainly numbered this, prima facie, shows mistake or negligence on the part of the defendant. No effort was made by it to show that it was not negligent in sending it there, or not negligence in not forwarding it within a reasonable time after it was found.

There is no evidence or claim in this case that plaintiff suffered any loss of profits by reason of the delay in the shipment. In fact defendant states in its brief:

"The plaintiff introduced not one whit of [576] evidence showing or tending to show that he would have made any sales as a result of his exhibit but for the negligence of the defendant. On the contrary Blakesley testified that the main purpose of the exhibit was to try to interest the Henry L. Dougherty Company in plaintiff's combination oil and gas burner, yet that was all the evidence that there was as to the benefit plaintiff expected to get from the exhibit.

"As a matter of evidence, it is clear that the plaintiff would not have derived a great deal of benefit from the exhibit by any stretch of the imagination....

"Nowhere does plaintiff introduce evidence showing that the Henry L. Doherty Company in all probability would have become interested in the combination oil and gas burner and made a profitable contract with the plaintiff."

There is evidence that the exhibit was not sent to make a sale.

In support of its contention that plaintiff can sue only for loss of profit, if anything, in a case of this kind, defendant, among other cases cites that of Adams Exp. Co. v. Egbert, 36 Pa. 360. That case involved the shipment of a box containing architectural drawings or plans for a building, to a building committee of the Touro Almshouse, in New Orleans. This committee had offered a premium of $500 to the successful competitor. These plans arrived after the various plans had been passed upon and the award made to another person. It was sought in that case to recover the value of the plans. The evidence, however, showed that the plans would not have won the prize had they arrived on time. The court held that the plans, under the circumstances, had no appreciable value and recovery could not be had for them and there was no basis for recovery for loss of the opportunity to compete for the prize. The opinion states that in denying recovery for the plans it is contrary to the English rule in such cases. Other cases cited by defendant involve loss of profits or the loss of opportunity to compete in such events as horse racing and the like. In one case, Table & Chair Co. v. R.R., 105 Miss. 861, it was held that the plaintiff could recover for loss of profits that might have been made in the sale of its commodity, as a result of exhibiting a sample at an exhibition, where the shipment was delayed too late for the exhibit. Some of the cases cited by defendant hold that such profits in those classes of cases are not recoverable, and others to the contrary.

Defendant contends that plaintiff "is endeavoring to achieve a return of the status quo in a suit bases on a breach of contract. Instead of seeking to recover what he would have had, had the contract not been broken, plaintiff is trying to recover what he would have had, had there never been any contract of shipment;" that the expenses sued for would have been incurred in any event. It is no doubt, the general rule that where there is a breach of contract the party suffering the loss can recover only that which he would have had, had the contract not been broken, and this is all the cases decided upon which defendant relies, including C.M. & St. P. Ry. v. McCaull-Dinsmore Co., 253 U.S. 97, 100, 40 Sup. Ct. Rep. 504, 504. But this is merely a general statement of the rule and is not inconsistent with the holdings that, in some instances, the injured party may recover expenses incurred in relying upon the contract, although such expenses would have been incurred had the contract not been breached. [See Morrow v. Railroad, 140 Mo. App. 200, 212, 213; Bryant v. Barton, 32 Neb. 613, 616; Woodbury v. Jones, 44 N.H. 206; Driggs v. Dwight, 31 Am. Dec. 283.]

In Sperry et al. v. O'Neill-Adams Co., 185 Fed. 231, the court held that the advantages resulting from the use of trading stamps as a means of increasing trade are so contingent that they cannot form a basis on which to rest a recovery for a breach of contract to supply them. In lieu of compensation based thereon the court directed a recovery in the sum expended in preparation for carrying on business in connection with the use of the stamps. The court said, l.c 239:

"Plaintiff in its complaint had made a claim for lost profits, but, finding it impossible to marshal any evidence which would support a finding of exact figures, abandoned that claim. Any attempt to reach a precise sum would be mere blind guesswork. Nevertheless a contract, which both sides conceded would prove a valuable one, had been broken and the party who broke it was responsible for resultant damage. In order to carry out this contract, the plaintiff made expenditures which otherwise it would not have made. . . . The trial judge held, as we think rightly, that plaintiff was entitled at least to recover these expenses to which it had been put in order to secure the benefits of a contract of which defendant's conduct deprived it."

In the case of Gilbert v. Kennedy, 22 Mich. 117, involved the question of the measure of plaintiff's damages, caused by the conduct of defendant in wrongfully feeding his cattle with plaintiff's in the latter's pasture, resulting in plaintiff's cattle suffering by the overfeeding of the pasture. The court said l.c. 135, 136:

"There being practically no market value for pasturage when there was none in the market, that element of certainty is wanting, even as to those cattle which were removed [577] from the Pitcher farm to the home farm of the plaintiff for pasturage; and, as it could not apply to the others at all, and there being no other element of certainty by which the damages can be accurately measured, resort must be had to such principle or basis of calculation applicable to the circumstances of the case (if any be discoverable) as will be most likely to approximate certainty, and which may serve as a guide in making the most probable estimate of which the nature of the case will admit; and, though it may be less certain as a scale of measurement, yet if the principle be just in itself, and more likely to approximate the actual damages, it is better than any rule, however certain, which must certainly produce injustice, by excluding a large portion of the damages actually sustained."

In Hobbs v. Davis, 30 Ga. 423, a negro slave was hired to make a crop, but she was taken away by her owner in the middle of the year, the result of which the crop was entirely lost. The court said, l.c. 425:

"As it was, the true criterion of damages was perhaps, the hire of the negro, the rent of the land and all the expense incurred, and actual loss sustained by the misconduct of the defendant, rather than the conjecture of the witness, as to what the crop would have been worth.

"Compensation is a fundamental principle of damages whether the action is in contract or tort. [Wicker v. Hoppock, 6 Wall, 94, 99, 18 L. Ed. 752.] One who fails to perform his contract is justly bound to make good all damages that accrue naturally from the breach; and the other party is entitled to be put in as good a position pecuniarily as he would have been by performance of the contract."

The case at bar was to recover damages for loss of profits by reason of the failure of the defendant to transport the shipment within a reasonable time, so that it would arrive in Atlantic City for the exhibit. There were no profits contemplated. The furnace was to be shown and shipped back to Kansas City. There was no money loss, except the expenses, that was of such a nature as any court would allow as being sufficiently definite or lacking in pure speculation. Therefore, unless plaintiff is permitted to recover the expenses that it went to, which were a total loss to it by reason of its inability to exhibit the furnace and equipment, it will be deprived of any substantial compensation for its loss. The law does not contemplate any such injustice. It ought to allow plaintiff, as damages, the loss in the way of expenses that it sustained, and which it would not have been put to if it had not been for its reliance upon the defendant to perform its contract. There is no contention that the exhibit would have been entirely valueless and whatever it might have accomplished defendant knew of the circumstances and ought to respond for whatever damages plaintiff suffered. In cases of this kind the method of estimating the damages should be adopted which is the most definite and certain and which best achieves the fundamental purpose of compensation. [17 C.J., p. 846: Miller v. Robertson, 266 U.S. 243, 257, 45 Sup. Ct. Rep. 73, 78.] Had the exhibit been shipped in order to realize a profit on sales and such profits could have been realized, or to be entered in competition for a prize, and plaintiff failed to show loss of profits with sufficient definiteness, or that he would have won the prize, defendant's cases might be in point. But as before stated, no such situation exists here.

While, it is true that plaintiff already had incurred some of these expenses, in that it had rented space at the exhibit before entering into the contract with defendant for the shipment of the exhibit and this part of plaintiff's damages, in a sense, arose out of a circumstance which transpired before the contract was even entered into, yet, plaintiff arranged for the exhibit knowing that it could call upon defendant to perform its common-law duty to accept and transport the shipment with reasonable dispatch. The whole damage, therefore, was suffered in contemplation of defendant performing its contract, which it failed to do, and would not have been sustained except for the reliance by plaintiff upon defendant to perform it. It can, therefore, be fairly said that the damages or loss suffered by plaintiff grew out of the breach of the contract, for had the shipment arrived on time, plaintiff would have had the benefit of the contract, which was contemplated by all parties, defendant being advised of the purpose of the shipment.

The judgment is affirmed. All concur.

[302] F. P. Hobgood, Jr., of Greensboro, N. C., and W. M. Hendren, of Winston-Salem, N. C., for appellant.

Edward S. Parker, Jr., of Greensboro, N. C. (Aubrey L. Brooks, of Greensboro, N. C., Julius C. Smith, of Robersonville, N. C., and C. R. Wharton, of Greensboro, N. C., on the brief), for appellee.

Before PARKER, Circuit Judge, and McCLINTIC and SOPER, District Judges.

PARKER, Circuit Judge.

This was an action at law instituted in the court below by the Luten Bridge Company, as plaintiff, to recover of Rockingham county, North Carolina, an amount alleged to be due under a contract for the construction of a bridge. The county admits the execution and breach of the contract, but contends that notice of cancellation was given the bridge company before the erection of the bridge was commenced, and that it is liable only for the damages which the company would have sustained, if it had abandoned construction at that time. The judge below refused to strike out an answer filed by certain members of the board of commissioners of the county, admitting liability in accordance with the prayer of the complaint, allowed this pleading to be introduced in evidence as the answer of the county, excluded evidence offered by the county in support of its contentions as to notice of cancellation and damages, and instructed a verdict for plaintiff for the full amount of its claim. From judgment on this verdict the county has appealed.

The facts out of which the case arises, as shown by the affidavits and offers of proof appearing in the record, are as follows: On January 7, 1924, the board of commissioners of Rockingham county voted to award to plaintiff a contract for the construction of the bridge in controversy. Three of the five commissioners favored the awarding of the contract and two opposed it. Much feeling was engendered over the matter, with the result that on February 11, 1924, W. K. Pruitt, one of the commissioners who had voted in the affirmative, sent his resignation to the clerk of the superior court of the county. The clerk received this resignation on the same day, and immediately accepted same and noted his acceptance thereon. Later in the day, Pruitt called him over the telephone and stated that he wished to withdraw the resignation, and later sent him written notice [303] to the same effect. The clerk, however, paid no attention to the attempted withdrawal, and proceeded on the next day to appoint one W. W. Hampton as a member of the board to succeed him.

After his resignation, Pruitt attended no further meetings of the board, and did nothing further as a commissioner of the county. Likewise Pratt and McCollum, the other two members of the board who had voted with him in favor of the contract, attended no further meetings. Hampton, on the other hand, took the oath of office immediately upon his appointment and entered upon the discharge of the duties of a commissioner. He met regularly with the two remaining members of the board, Martin and Barber, in the courthouse at the county seat, and with them attended to all of the business of the county. Between the 12th of February and the first Monday in December following, these three attended, in all, 25 meetings of the board.

At one of these meetings, a regularly advertised called meeting held on February 21st, a resolution was unanimously adopted declaring that the contract for the building of the bridge was not legal and valid, and directing the clerk of the board to notify plaintiff that it refused to recognize same as a valid contract, and that plaintiff should proceed no further thereunder. This resolution also rescinded action of the board theretofore taken looking to the construction of a hard-surfaced road, in which the bridge was to be a mere connecting link. The clerk duly sent a certified copy of this resolution to plaintiff.

At the regular monthly meeting of the board on March 3d, a resolution was passed directing that plaintiff be notified that any work done on the bridge would be done by it at its own risk and hazard, that the board was of the opinion that the contract for the construction of the bridge was not valid and legal, and that, even if the board were mistaken as to this, it did not desire to construct the bridge, and would contest payment for same if constructed. A copy of this resolution was also sent to plaintiff. At the regular monthly meeting on April 7th, a resolution was passed, reciting that the board had been informed that one of its members was privately insisting that the bridge be constructed. It repudiated this action on the part of the member and gave notice that it would not be recognized. At the September meeting, a resolution was passed to the effect that the board would pay no bills presented by plaintiff or any one connected with the bridge. At the time of the passage of the first resolution, very little work toward the construction of the bridge had been done, it being estimated that the total cost of labor done and material on the ground was around $1,900; but, notwithstanding the repudiation of the contract by the county, the bridge company continued with the work of construction.

On November 24, 1924, plaintiff instituted this action against Rockingham county, and against Pruitt, Pratt, McCollum, Martin, and Barber, as constituting its board of commissioners. Complaint was filed, setting forth the execution of the contract and the doing of work by plaintiff thereunder, and alleging that for work done up until November 3, 1924, the county was indebted in the sum of $18,301.07. On November 27th, three days after the filing of the complaint, and only three days before the expiration of the term of office of the members of the old board of commissioners, Pruitt, Pratt, and McCollum met with an attorney at the county seat, and, without notice to or consultation with the other members of the board, so far as appears, had the attorney prepare for them an answer admitting the allegations of the complaint. This answer, which was filed in the cause on the following day, did not purport to be an answer of the county, or of its board of commissioners, but of the three commissioners named.

On December 1, 1924, the newly elected board of commissioners held its first meeting and employed attorneys to defend the action which had been instituted by plaintiff against the county. These attorneys immediately moved to strike out the answer which had been filed by Pruitt, Pratt, and McCollum, and entered into an agreement with opposing counsel that the county should have 30 days from the action of the court on the motion within which to file answer. The court denied the motion on June 2, 1927, and held the answer filed by Pruitt, Pratt, and McCollum to be the answer of the county. An order was then entered allowing the county until August 1st to file answer, pursuant to stipulation, within which time the answer of the county was filed. This answer denied that the contract sued on was legal or binding, and for a further defense set forth the resolutions of the commissioners with regard to the building of the bridge, to which we have referred, and their communication to plaintiff. A reply was filed to this, and the case finally came to trial.

At the trial, plaintiff, over the objection [304] of the county, was allowed to introduce in evidence the answer filed by Pruitt, Pratt, and McCollum, the contract was introduced, and proof was made of the value under the terms of the contract of the work done up to November 3, 1924. The county elicited on cross-examination proof as to the state of the work at the time of the passage of the resolutions to which we have referred. It then offered these resolutions in evidence, together with evidence as to the resignation of Pruitt, the acceptance of his resignation, and the appointment of Hampton; but all of this evidence was excluded, and the jury was instructed to return a verdict for plaintiff for the full amount of its claim. The county preserved exceptions to the rulings which were adverse to it, and contends that there was error on the part of the judge below in denying the motion to strike out the answer filed by Pruitt, Pratt, and McCollum; in allowing same to be introduced in evidence; in excluding the evidence offered of the resignation of Pruitt, the acceptance of his resignation, and the appointment of Hampton, and of the resolutions attempting to cancel the contract and the notices sent plaintiff pursuant thereto; and in directing a verdict for plaintiff in accordance with its claim.

As the county now admits the execution and validity of the contract, and the breach on its part, the ultimate question in the case is one as to the measure of plaintiff's recovery, and the exceptions must be considered with this in mind. Upon these exceptions, three principal questions arise for our consideration, viz.: (1) Whether the answer filed by Pruitt, Pratt, and McCollum was the answer of the county. If it was, the lower court properly refused to strike it out, and properly admitted it in evidence. (2) Whether, in the light of the evidence offered and excluded, the resolutions to which we have referred, and the notices sent pursuant thereto, are to be deemed action on the part of the county. If they are not, the county has nothing upon which to base its position as to minimizing damages, and the evidence offered was properly excluded. And (3) whether plaintiff, if the notices are to be deemed action by the county, can recover under the contract for work done after they were received, or is limited to the recovery of damages for breach of contract as of that date.

With regard to the first question the learned District Judge held that the answer of Pruitt, Pratt, and McCollum was the answer of the county, but we think that this holding was based upon an erroneous view of the law. It appears, without contradiction, not only that their answer purports to have been filed by them individually, and not in behalf of the county or of the board of commissioners, but also that it was not authorized by the board of commissioners, acting as a board at a meeting regularly held. It appears that Pruitt, Pratt, and McCollum merely met at the county seat to consider the filing of an answer to plaintiff's complaint. This was not a "regular" meeting of the board, held on the first Mondays of December and June. It was not a "special" meeting held on the first Monday in some other month. It was not shown to be a meeting "called" by the chairman upon the written request of a member of the board, and advertised at the courthouse door and in a newspaper as provided by statute. Consol. St. § 1296. And between the filing of the complaint and the filing of the answer there was not sufficient time for the advertising of a called meeting of the board. Consequently any action taken by Pruitt, Pratt, and McCollum with regard to filing an answer was not taken at a meeting of the board in legal session. Even if it be assumed that Pruitt continued to be a member of the board, and that he, Pratt, and McCollum constituted a majority thereof, nevertheless such majority could bind the county only by action taken at a meeting regularly held. The rule is well settled that the governing board of a county can act only as a body and when in legal session as such. 7 R. C. L. 941; 15 C. J. 460 and cases cited; O'Neal v. Wake County, 196 N. C. 184, 145 S. E. 28, 29; Grand Island & N. W. R. Co. v. Baker, 6 Wyo. 369, 45 P. 494, 34 L. R. A. 835, 71 Am. St. Rep. 926; Board of Com'rs of Jasper County v. Allman, 142 Ind. 573, 42 N. E. 206, 39 L. R. A. 58, 68; Campbell County v. Howard & Lee, 133 Va. 19, 112 S. E. 876; Paola, etc., R. Co. v. Anderson County Com'rs, 16 Kan. 302, 310. As said in the case last cited: "* * * Commissioners casually meeting have no power to act for the county. There must be a session of the `board.' This single entity, the `board,' alone can by its action bind the county. And it exists only when legally convened."

The North Carolina case of Cleveland Cotton-Mills v. Commissioners, 108 N. C. 678, 13 S. E. 271, 274, established the rule in North Carolina. That case arose under the old law, which required bridge contracts involving more than $500 to be made with the concurrence of a majority of the justices [305] of the peace of the county. Such a contract was made, and a majority of the justices of the county, who were not then in session, executed a written instrument approving it. Afterwards, at a regular meeting of the justices with the board of commissioners, a majority of the quorum of the justices present voted to ratify the contract. A divided court held that this ratification at the regular meeting was sufficient, although the majority of the quorum which voted for ratification was less than a majority of all of the justices of the county; but all of the members of the court agreed that the execution of the instrument by a majority of the justices when not in session was without effect. As to this, it was said in the majority opinion:

"We attach no importance to the paper signed by an actual majority of the whole number of justices of the peace of the county. The action contemplated by the law was that of the justices of the peace in a lawfully constituted meeting as a body, as in cases where the validity of an agreement made by the governing officials of any other corporation is drawn in question. Duke v. Markham, 105 N. C. 131, 10 S. E. 1017 [18 Am. St. Rep. 889]."

It will be seen that the court applied to this case, where the validity of the action of the governing officials of a public corporation was drawn in question, the rule laid down in Duke v. Markham, which is, of course, the well-settled rule in the case of private corporations, viz. that such officials can exercise their powers as members of the governing board only at a meeting regularly held. See, also, First National Bank v. Warlick, 125 N. C. 593, 34 S. E. 687; Everett v. Staton, 192 N. C. 216, 134 S. E. 492.

But in the case of O'Neal v. Wake County, supra, decided in 1928, the Supreme Court of North Carolina set at rest any doubt which may have existed in that state as to the question here involved. In holding that the county could not be held liable on a contract made at a joint meeting of the county commissioners, the county board of education, and a representative of the insurance department, the court said:

"A county makes its contracts through the agency of its board of commissioners; but to make a contract which shall be binding upon the county the board must act as a body convened in legal session, regular, adjourned, or special. A contract made by members composing the board when acting in their individual and not in their corporate capacity while assembled in a lawful meeting is not the contract of the county. As a rule authorized meetings are prerequisite to corporate action based upon deliberate conference and intelligent discussion of proposed measures. 7 R. C. L. 941; 15 C. J. 460; 43 C. J. 497; P. & F. R. Ry. Co. v. Com'rs of Anderson County, 16 Kan. 302; Kirkland v. State, 86 Fla. 84, 97 So. 502. The principle applies to corporations generally, and by the express terms of our statute, as stated above, every county is a corporate body."

We think, therefore, that Pruitt, Pratt, and McCollum, even if they constituted a majority of the board of commissioners, did not bind the county by their action in filing an answer admitting its liability, where no meeting of the board of commissioners was held according to law, and where, so far as appears, the other commissioners were not even notified of what was being attempted. It is unthinkable that the county should be held bound by such action, especially where the commissioners attempting to bind it had taken no part in its government for nearly 10 months, and where the answer filed did not defend it in any particular, but, on the contrary, asserted its liability. If, therefore, the answer be considered as an attempt to answer on behalf of the county, it must be stricken out, because not authorized by its governing board; if considered as the answer of Pruitt, Pratt, and McCollum individually, it must go out because, having been sued in their official capacity, they had no right to answer individually. And, of course, not having been authorized by the county, the answer was not admissible as evidence against it on the trial of the cause.

Coming to the second inquiry — i. e., whether the resolutions to which we have referred and the notices sent pursuant thereto are to be deemed the action of the county, and hence admissible in evidence on the question of damages — it is to be observed that, along with the evidence of the resolutions and notices, the county offered evidence to the effect that Pruitt's resignation had been accepted before he attempted to withdraw same, and that thereafter Hampton was appointed, took the oath of office, entered upon the discharge of the duties of the office, and with Martin and Barber transacted the business of the board of commissioners until the coming into office of the new board. We think that this evidence, if true, shows (1) that Hampton, upon his appointment and qualification, became a member of the board in place of Pruitt, and that he, Martin, and [306] Barber constituted a quorum for the transaction of its business; and (2) that, even if this were not true, Hampton was a de facto commissioner, and that his presence at meetings of the board with that of the other two commissioners was sufficient to constitute a quorum, so as to give validity to its proceedings.

The North Carolina statutes make no provision for resignations by members of the boards of county commissioners. A public officer, however, has at common law the right to resign his office, provided his resignation is accepted by the proper authority. Hoke v. Henderson, 15 N. C. 1, 25 Am. Dec. 677; U. S. v. Wright, Fed. Cas. No. 16,775; Rowe v. Tuck, 149 Ga. 88, 99 S. E. 303, 5 A. L. R. 113; Van Orsdall v. Hazard, 3 Hill (N. Y.) 243; Philadelphia v. Marcer, 8 Phila. (Pa.) 319; Gates v. Delaware County, 12 Iowa, 405; 22 R. C. L. 556, 557; note, 19 A. L. R. 39, and cases there cited. And, in the absence of statute regulating the matter, his resignation should be tendered to the tribunal or officer having power to appoint his successor. 22 R. C. L. 558; State v. Popejoy, 165 Ind. 177, 74 N. E. 994, 6 Ann. Cas. 687, and note; State ex rel. Conley v. Thompson, 100 W. Va. 253, 130 S. E. 456; State v. Huff, 172 Ind. 1, 87 N. E. 141, 139 Am. St. Rep. 355; State v. Augustine, 113 Mo. 21, 20 S. W. 651, 35 Am. St. Rep. 696. In the case last cited it is said:

"It is well-established law that, in the absence of express statutory enactment, the authority to accept the resignation of a public officer rests with the power to appoint a successor to fill the vacancy. The right to accept a resignation is said to be incidental to the power of appointment. 1 Dillon on Municipal Corporations (3d Ed.) § 224; Mechem on Public Offices, § 413; Van Orsdall v. Hazard, 3 Hill (N. Y.) 243; State v. Boecker, 56 Mo. 17."

In North Carolina, the officer having power to appoint the successor of a member of the board of county commissioners is the clerk of the superior court of the county. Consolidated Statutes of North Carolina, § 1294. It is clear, therefore, that, when Pruitt tendered his resignation to the clerk of the superior court, he tendered it to the proper authority.

The mere filing of the resignation with the clerk of the superior court did not of itself vacate the office of Pruitt, it was necessary that his resignation be accepted. Hoke v. Henderson, supra; Edwards v. U. S., 103 U. S. 471, 26 L. Ed. 314. But, after its acceptance, he had no power to withdraw it. Mimmack v. U. S., 97 U. S. 426, 24 L. Ed. 1067; Murray v. State, 115 Tenn. 303, 89 S. W. 101, 5 Ann. Cas. 687, and note; State v. Augustine, supra; Gates v. Delaware County, supra; 22 R. C. L. 559. If, as the offer of proof seems to indicate, the resignation of Pruitt was accepted by the clerk prior to his attempt to withdraw it, the appointment of Hampton was unquestionably valid, and the latter, with Martin and Barber, constituted a quorum of the board of commissioners, with the result that action taken by them in meetings of the board regularly held was action by the county.

But, irrespective of the validity of Hampton's appointment, we think that he must be treated as a de facto officer, and that the action taken by him, Martin, and Barber in meetings regularly held is binding upon the county and upon those dealing with it. Hampton was appointed by the lawful appointing power. He took the oath of office and entered upon the discharge of the duties of a commissioner. The only government which the county had for a period of nearly 10 months was that which he and his associates, Martin and Barber, administered. If their action respecting this contract is to be ignored, then, for the same reason, their tax levy for the year must be treated as void, and the many transactions carried through at their 25 meetings, which were not attended by Pruitt, Pratt, or McCollum, must be set aside. This cannot be the law. It ought not be the law anywhere; it certainly is not the law in North Carolina. Section 3204 of the Consolidated Statutes provides:

"3204. Persons admitted to office deemed to hold lawfully. Any person who shall, by the proper authority, be admitted and sworn into any office, shall be held, deemed, and taken, by force of such admission, to be rightfully in such office until, by judicial sentence, upon a proper proceeding, he shall be ousted therefrom, or his admission thereto be, in due course of law, declared void."

In the case of State v. Lewis, 107 N. C. 967, 12 S. E. 457, 458, 13 S. E. 247, 11 L. R. A. 105, the court quotes with approval the widely accepted definition and classification of de facto officers by Chief Justice Butler in the case of State v. Carroll, 38 Conn. 449, 9 Am. Rep. 409, as follows:

"An officer de facto is one whose acts, though not those of a lawful officer, the law, upon principles of policy and justice, will hold valid so far as they involve the interests of the public and third persons, where the duties of the office were exercised — First, without a known appointment or election, [307] but under such circumstances of reputation or acquiescence as were calculated to induce people, without inquiry, to submit to or invoke his action, supposing him to be the officer he assumed to be; second, under color of a known and valid appointment or election, but where the officer failed to conform to some precedent requirement or condition, as to take an oath, give a bond, or the like; third, under color of a known election or appointment, void because there was a want of power in the electing or appointing body, or by reason of some defect or irregularity in its exercise, such ineligibility, want of power, or defect being unknown to the public; fourth, under color of an election or appointment by or pursuant to a public unconstitutional law before the same is adjudged to be such."

It is clear that, if the appointment of Hampton be considered invalid, the case falls under the third class in the above classification; for Hampton was discharging the duties of a county commissioner under color of a known appointment, the invalidity of which, if invalid, arose from a want of power or irregularity unknown to the public. Other North Carolina cases supporting this conclusion are Burke v. Elliott, 26 N. C. 355, 42 Am. Dec. 142; Burton v. Patton, 47 N. C. 124, 62 Am. Dec. 194; Norfleet v. Staton, 73 N. C. 546, 21 Am. Rep. 479; Markham v. Simpson, 175 N. C. 135, 95 S. E. 106; State v. Harden, 177 N. C. 580, 98 S. E. 782; 22 R. C. L. 596, 597. This is not a case like Baker v. Hobgood, 126 N. C. 149, 35 S. E. 253, where there were rival boards, both attempting to discharge the duties of office; for, upon the appointment of Hampton, Pruitt attended no further meetings and left him in the unchallenged possession of the office.

The rule is well settled in North Carolina, as it is elsewhere, that the acts of a de facto officer will be held valid in respect to the public whom he represents and to third persons with whom he deals officially, notwithstanding there was a want of power to appoint him in the person or body which professed to do so. Norfleet v. Staton, supra; Markham v. Simpson, supra; 22 R. C. L. 601, 602, and cases cited.

Coming, then, to the third question — i. e., as to the measure of plaintiff's recovery — we do not think that, after the county had given notice, while the contract was still executory, that it did not desire the bridge built and would not pay for it, plaintiff could proceed to build it and recover the contract price. It is true that the county had no right to rescind the contract, and the notice given plaintiff amounted to a breach on its part; but, after plaintiff had received notice of the breach, it was its duty to do nothing to increase the damages flowing therefrom. If A enters into a binding contract to build a house for B, B, of course, has no right to rescind the contract without A's consent. But if, before the house is built, he decides that he does not want it, and notifies A to that effect, A has no right to proceed with the building and thus pile up damages. His remedy is to treat the contract as broken when he receives the notice, and sue for the recovery of such damages as he may have sustained from the breach, including any profit which he would have realized upon performance, as well as any other losses which may have resulted to him. In the case at bar, the county decided not to build the road of which the bridge was to be a part, and did not build it. The bridge, built in the midst of the forest, is of no value to the county because of this change of circumstances. When, therefore, the county gave notice to the plaintiff that it would not proceed with the project, plaintiff should have desisted from further work. It had no right thus to pile up damages by proceeding with the erection of a useless bridge.

The contrary view was expressed by Lord Cockburn in Frost v. Knight, L. R. 7 Ex. 111, but, as pointed out by Prof. Williston (Williston on Contracts, vol. 3, p. 2347), it is not in harmony with the decisions in this country. The American rule and the reasons supporting it are well stated by Prof. Williston as follows:

"There is a line of cases running back to 1845 which holds that, after an absolute repudiation or refusal to perform by one party to a contract, the other party cannot continue to perform and recover damages based on full performance. This rule is only a particular application of the general rule of damages that a plaintiff cannot hold a defendant liable for damages which need not have been incurred; or, as it is often stated, the plaintiff must, so far as he can without loss to himself, mitigate the damages caused by the defendant's wrongful act. The application of this rule to the matter in question is obvious. If a man engages to have work done, and afterwards repudiates his contract before the work has been begun or when it has been only partially done, it is inflicting damage on the defendant without benefit to the plaintiff to allow the latter to insist on proceeding with the contract. The work may be useless to the defendant, and yet he would be forced to pay the full contract price. On [308] the other hand, the plaintiff is interested only in the profit he will make out of the contract. If he receives this it is equally advantageous for him to use his time otherwise."

The leading case on the subject in this country is the New York case of Clark v. Marsiglia, 1 Denio (N. Y.) 317, 43 Am. Dec. 670. In that case defendant had employed plaintiff to paint certain pictures for him, but countermanded the order before the work was finished. Plaintiff, however, went on and completed the work and sued for the contract price. In reversing a judgment for plaintiff, the court said:

"The plaintiff was allowed to recover as though there had been no countermand of the order; and in this the court erred. The defendant, by requiring the plaintiff to stop work upon the paintings, violated his contract, and thereby incurred a liability to pay such damages as the plaintiff should sustain. Such damages would include a recompense for the labor done and materials used, and such further sum in damages as might, upon legal principles, be assessed for the breach of the contract; but the plaintiff had no right, by obstinately persisting in the work, to make the penalty upon the defendant greater than it would otherwise have been."

And the rule as established by the great weight of authority in America is summed up in the following statement in 6 R. C. L. 1029, which is quoted with approval by the Supreme Court of North Carolina in the recent case of Novelty Advertising Co. v. Farmers' Mut. Tobacco Warehouse Co., 186 N. C. 197, 119 S. E. 196, 198:

"While a contract is executory a party has the power to stop performance on the other side by an explicit direction to that effect, subjecting himself to such damages as will compensate the other party for being stopped in the performance on his part at that stage in the execution of the contract. The party thus forbidden cannot afterwards go on, and thereby increase the damages, and then recover such damages from the other party. The legal right of either party to violate, abandon, or renounce his contract, on the usual terms of compensation to the other for the damages which the law recognizes and allows, subject to the jurisdiction of equity to decree specific performance in proper cases, is universally recognized and acted upon."

This is in accord with the earlier North Carolina decision of Heiser v. Mears, 120 N. C. 443, 27 S. E. 117, in which it was held that, where a buyer countermands his order for goods to be manufactured for him under an executory contract, before the work is completed, it is notice to the seller that he elects to rescind his contract and submit to the legal measure of damages, and that in such case the seller cannot complete the goods and recover the contract price. See, also, Kingman & Co. v. Western Mfg. Co. (C. C. A. 8th) 92 F. 486; Davis v. Bronson, 2 N. D. 300, 50 N. W. 836, 16 L. R. A. 655 and note, 33 Am. St. Rep. 783, and note; Richards v. Manitowoc & Northern Traction Co., 140 Wis. 85, 121 N. W. 837, 133 Am. St. Rep. 1063.

We have carefully considered the cases of Roehm v. Horst, 178 U. S. 1, 20 S. Ct. 780, 44 L. Ed. 953, Roller v. George H. Leonard & Co. (C. C. A. 4th) 229 F. 607, and McCoy v. Justices of Harnett County, 53 N. C. 272, upon which plaintiff relies; but we do not think that they are at all in point. Roehm v. Horst merely follows the rule of Hockster v. De La Tour, 2 El. & Bl. 678, to the effect that where one party to any executory contract refuses to perform in advance of the time fixed for performance, the other party, without waiting for the time of performance, may sue at once for damages occasioned by the breach. The same rule is followed in Roller v. Leonard. In McCoy v. Justices of Harnett County the decision was that mandamus to require the justices of a county to pay for a jail would be denied, where it appeared that the contractor in building same departed from the plans and specifications. In the opinions in all of these some language was used which lends support to plaintiff's position, but in none of them was the point involved which is involved here, viz. whether, in application of the rule which requires that the party to a contract who is not in default do nothing to aggravate the damages arising from breach, he should not desist from performance of an executory contract for the erection of a structure when notified of the other party's repudiation, instead of piling up damages by proceeding with the work. As stated above, we think that reason and authority require that this question be answered in the affirmative. It follows that there was error in directing a verdict for plaintiff for the full amount of its claim. The measure of plaintiff's damage, upon its appearing that notice was duly given not to build the bridge, is an amount sufficient to compensate plaintiff for labor and materials expended and expense incurred in the part performance of the contract, prior to its repudiation, plus the profit which would have been realized if it had been carried out in accordance with its terms. See [309] Novelty Advertising Co. v. Farmers' Mut. Tobacco Warehouse Co., supra.

Our conclusion, on the whole case, is that there was error in failing to strike out the answer of Pruitt, Pratt, and McCollum, and in admitting same as evidence against the county, in excluding the testimony offered by the county to which we have referred, and in directing a verdict for plaintiff. The judgment below will accordingly be reversed, and the case remanded for a new trial.

Reversed.

IN THE COURTS OF EXCHEQUER

The first count of the declaration stated, that, before and at the time of the making by the defendants of the promises hereinafter mentioned, the plaintiffs carried on the business of millers and mealmen in copartnership, and were proprietors and occupiers of the City Steam-Mills, in the city of Gloucester, and were possessed of a steam-engine, by means of which they worked the said mills, and therein cleaned corn, and ground the same into meal, and dressed the same into flour, sharps, and bran, and a certain portion of the said steam-engine, to wit, the crank shaft of the said steam-engine, was broken and out of repair, whereby the said steam-engine was prevented from working, and the plaintiffs were desirous of having a new crank shaft made for the said mill, and had ordered the same of certain persons trading under the name of W. Joyce & Co., at Greenwich, in the country of Kent, who had contracted to make the said new shaft for the plaintiffs; but before they could complete the said new shaft it was necessary that the said broken shaft should be forwarded to their works at Greenwich, in order that the said new shaft might be made so as to fit the other parts of the said engine which were not injured, and so that it might be substituted for the said broken shaft; and the plaintiffs were desirous of sending the said broken shaft to the said W. Joyce & Co. for the purpose aforesaid; and the defendants, before and at the time of the making of the said promises, were common carriers of business of common carriers, under the name of "Pickford & Co."; and the plaintiffs, at the request of the defendants, delivered to them as such carriers the said broken shaft, to be conveyed by the defendants as such carriers from Gloucester to the said W. Joyce & Co., at Greenwich, and there to be delivered for the plaintiffs on the second day after the day of such delivery, for reward to the defendants; and in consideration thereof the defendants then promised the plaintiffs to convey the said broken shaft from Gloucester to Greenwich, and there on the said second day to deliver the same to the said W. Joyce & Co. for the plaintiffs. And although such second day elapsed before the commencement of this suit, yet the defendants did not nor would deliver the said broken shaft at Greenwich on the said second day, but wholly neglected and refused so to do for the space of seven days after the said shaft was so delivered to them as aforesaid.

The second count stated, that, the defendants being such carriers as aforesaid, the plaintiffs, at the request of the defendants, caused to be delivered to them as such carriers the said broken shaft, to be conveyed by the defendants from Gloucester aforesaid to the said W. Joyce & Co., at Greenwich, and there to be delivered by the defendants for the plaintiffs, within a reasonable time in that behalf, for reward to the defendants; and in consideration of the premises in this count mentioned, the defendants promised the plaintiffs to use due and proper care and diligence in and about the carrying and conveying the said broken shaft from Gloucester aforesaid to the said W. Joyce & Co., at Greenwich, and there delivering the same for the plaintiffs in a reasonable time then following for the carriage, conveyance, and delivery of the said broken shaft as aforesaid; and although such reasonable time elapsed long before the commencement of this suit, yet the defendants did not nor would use due or proper care or diligence in or about the carrying or conveying or delivering the said broken shaft as aforesaid, within such reasonable time as aforesaid, but wholly neglected and refused so to do; and by reason of the carelessness, negligence, and improper conduct of the defendants, the said broken shaft was not delivered for the plaintiffs to the said W. Joyce & Co., or at Greenwich, until the expiration of a long and unreasonable time after the defendants received the same as aforesaid, and after the time when the same should have been delivered for the plaintiffs; and by reason of the several premises, the completing of the said new shaft was delayed for five days, and the plaintiffs were prevented form working their said steam-mills, and from cleaning corn, and grinding the same into meal, and dressing the meal into flour, sharps, or bran, and from carrying on their said business as millers and mealmen for the space of five days beyond the time that they otherwise would have been prevented from so doing, and they thereby were unable to supply many of their customers with flour, sharps, and bran during that period, and were obliged to buy flour to supply some of their other customers, and lost the mans and opportunity of selling flour, sharps, and bran, and were deprived of gains and profits which otherwise would have accrued to them, and were unable to employ their workmen, to whom they were compelled to pay wages during that period, and were otherwise injured, and the plaintiffs claim 300l.

The defendants pleaded non assumpserunt to the first count; and to the second payment of 25l. into Court in satisfaction of the plaintiffs' claim under that count. The plaintiffs entered a nolle prosequi as to the first count; and as to the second plea, they replied that the sum paid into the Court was not enough to satisfy the plaintiffs' claim in respect thereof; upon which replication issue was joined.

At the trial before Crompton, J., at the last Gloucester Assizes, it appeared that the plaintiffs carried on an extensive business as millers at Gloucester; and that, on the 11^th of May, their mill was stopped by a breakage of the crank shaft by which the mill was worked. The steam-engine was manufactured by Messrs. Joyce & Co., the engineers, at Greenwich, and it became necessary to send the shaft as a pattern for a new one to Greenwich. The fracture was discovered on the 12^th, and on the 13^ththe plaintiffs sent one of their servants to the office of the defendants, who are the well-known carriers trading under the name of Pickford & Co., for the purpose of having the shaft carried to Greenwich. The plaintiffs' servant told the clerk that the mill was stopped, and that the shaft must be sent immediately; and in answer to the inquiry when the shaft would be taken, the answer was, that if it was sent up by twelve o'clock an day, it would be delivered at Greenwich on the following day. On the following day the shaft was taken by the defendants, before noon, for the purpose of being conveyed to Greenwich, and the sum of 2l. 4s. was paid for its carriage for the whole distance; at the same time the defendants' clerk was told that a special entry, if required, should e made to hasten its delivery. The delivery of the shaft at Greenwich was delayed by some neglect; and the consequence was, that the plaintiffs did not receive the new shaft for several days after they would otherwise have done, and the working of their mill was thereby delayed, and they thereby lost the profits they would otherwise have received.

On the part of the defendants, it was objected that these damages were too remote, and that the defendants were not liable with respect to them. The learned Judge left the case generally to the jury, who found a verdict with 25l. damages beyond the amount paid into Court.

Whateley, in last Michaelmas Term, obtained a rule nisi for a new trial, on the ground of misdirection.

Keating and Dowdeswell (Feb. 1) shewed cause. The plaintiffs are entitled to the amount awarded by the jury as damages. These damages are not too remote, for they are not only the natural and necessary consequence of the defendants' default, but they are the only loss which the plaintiffs have actually sustained. The principle upon which damages are assessed is founded upon that of rendering compensation to the injured party. The important subject is ably treated in Sedgwick on the Measure of Damages. And this particular branch of it is discussed in the third chapter, where, after pointing out the distinction between the civil and the French law, he says (page 64), "It is sometimes said, in regard to contracts, that the defendant shall be held liable for those damages only which both parties may fairly be supposed to have at the time contemplated as likely to result from the nature of the agreement, and this appears to be the rule adopted by the writers upon the civil law." In a subsequent passage he says, "In cases of fraud the civil law made a broad distinction" (page 66); and he adds, that "in such cases the debtor was liable for all consequences." It is difficult, however, to see what the ground of such principle is, and how the ingredient of fraud can affect the question. For instance, if the defendants had maliciously and fraudulently kept the shaft, it is not easy to see why they should have been liable for these damages, if they are not to be held so where the delay is occasioned by their negligence only. In speaking of the rule respecting the breach of a contract to transport goods to a particular place, and in actions brought on agreements for the sale and delivery of chattels, the learned author lays it down, that, "In the former case, the difference in value between the price at the point where the goods are and the place where they were to be delivered, is taken as the measure of damages, which, in fact, amounts to an allowance of profits; and in the latter case, a similar result is had by the application of the rule, which gives the vendee the benefit of the rise of the market price" (page 80). The several cases, English as well as American, are there collected and reviewed. If that rule is to be adopted, there was ample evidence in the present case of the defendants' knowledge of such a state of things as would necessarily result in the damage the plaintiffs suffered through the defendants' default. The authorities are in the plaintiffs' favour upon the general ground. In Nurse v. Barns (1 Sir T. Raym. 77) which was an action for breach of an agreement for the letting of certain iron mills, the plaintiff was held entitled to a sum of 500l., awarded by reason of loss of stock laid in, although he had only paid 10l. by way of consideration. InBorradaile v. Brunton (8 Taunt. 535, 2 B. Moo. 582), which was an action for the breach of the warranty of a chain cable that it should last two years as a substitute for a rope cable of sixteen inches, the plaintiff was held entitled to recover for the loss of the anchor, which was occasioned by the breaking of the cable within the specified time. These extreme cases, and the difficulty which consequently exists in the estimation of the true amount of damages, supports the view for which the plaintiffs contend, that the question is properly for the decision of a jury, and therefore that this matter could not properly have been withdrawn from their consideration. In Ingram v. Lawson (6 Bing. N.C. 212) the true principle was acted upon. That was an action for a libel upon the plaintiff, who was the owner and master of a ship, which he advertised to take passengers to the East Indies; and the libel imputed that the vessel was not seaworthy, and that Jews had purchased her to take out convicts. The Court held, that evidence shewing that the plaintiff's profits after the publication of the libel were 1500l below the usual average, was admissible, to enable the jury to form an opinion as to the nature of the plaintiff's business, and of his general rate of profit. Here, also, the plaintiffs have not sustained any loss beyond that which was submitted to the jury. Bodley v. Reynolds (8 Q. B. 779) and Kettle v. Hunt (Bull. N. P. 77) are similar in principle. In the latter, it was held that the loss of the benefit of trade, which a man suffers by the detention of his tools, is recoverable as special damage. The loss they had sustained during the time they were so deprived of their shaft, or until they could have obtained a new one. In Black v. Baxendale (1 Exch. 410), by reason of the defendant's omission to deliver the goods within a reasonable time at Bedford, the plaintiff's agent, who had been sent there to meet the goods, was put to certain additional expenses, and this Court held that such expenses might be given by the jury as damages. In Brandt v. Bowlby (2 B. & Ald. 932), which was an action of assumpsit against the defendants, as owners of a certain vessel, for not delivering a cargo of wheat shipped to the plaintiffs, the cargo reached the port of destination was held to be the true rule of damages." As between the parties in this cause," said Parke, J., "the plaintiffs are entitled to be put in the same situation as they would have been in, if the cargo had been delivered to their order at the time when it was delivered to the wrong party; and the sum it would have fetched at the time is the amount of the loss sustained by the non-performance of the defendants' contract." The recent decision of this Court, in Waters v. Towers (8 Ex. 401), seems to be strongly in the plaintiffs' favour. The defendants there had agreed to fit up the plaintiffs' mill within a reasonable time, but had not completed their contract within such time; and it was held that the plaintiffs were entitled to recover, by way of damages, the loss of profit upon a contract they had entered into with third parties, and which they were unable to fulfil by reason of the defendants' breach of contract. There was ample evidence that the defendants knew the purpose for which this shaft was sent, and that the result of its nondelivery in due time would be the stoppage of the mill; for the defendants' agent, at their place of business, was told that the mill was then stopped, that the shaft must be delivered immediately, and that if a special entry was necessary and natural result of their wrongful act. They also cited Ward v. Smith (11 Price, 19); and Parke, B., referred to Levy v. Langridge (4 M. & W. 337).

Whateley, Willes, and Phipson, in support of the rule (Feb. 2). It has been contended, on the part of the plaintiffs, that the damages found by the jury are a matter fit for their consideration; but still the question remains, in what way ought the jury to have been directed? It has been also urged, that, in awarding damages, the law gives compensation to the injured individual. But it is clear that complete compensation is not to be awarded; for instance, the non-payment of a bill of exchange might lead to the utter ruin of the holder, and yet such damage could not be considered as necessarily resulting from the breach of contract, so as to entitle the party aggrieved to recover in respect of it. Take the case of the breach of a contract to supply a rick-cloth, whereby and in consequence of bad weather the hay, being unprotected, is spoiled, that damage could not be recoverable. Many similar cases might be added. The true principle to be deduced form the authorities upon this subject is that which is embodied in the maxim: "In jure non remota cause sed proxima spectatur." Sedgwick says (page 38), "In regard to the quantum of damages, instead of adhering to the term compensation, it would be far more accurate to say, in the language of Domat, which we have cited above, 'that the object is discriminate between that portion of the loss which must be borne by the offending party and that which must be borne by the sufferer'. The law in fact aims not at the satisfaction but at a division of the loss." And the learned author also cites the following passage from Broom's Legal Maxims: "Every defendant," says Mr. Broom, "against whom an action is brought experiences some injury or inconvenience beyond what the costs will compensate him for."^[1] Again, at page 78, after referring to the case of Flureau v. Thornhill (2 W. Blac. 1078), he says, "Both the English and American Courts have generally adhered to this denial of profits as any part of the damages to be compensated and that whether in cases of contract or of tort. So, in a case of illegal capture, Mr. Justice Story rejected the item of profits on the voyage, and held this general language: 'Independent, however, of all authority, I am satisfied upon principle, that an allowance of damages upon the basis of a calculation of profits is inadmissible. The rule would be in the highest degree unfavourable to the interests of the community. The subject would be involved in utter uncertainty. The calculation would proceed upon contingencies, and would require acknowledge of foreign markets to an exactness, in point of time and value, which would sometimes present embarrassing obstacles; much would depend upon the length of the voyage, and the season of arrival, much upon the vigilance and activity of the master, and much upon the momentary demand. After all, it would be a calculation upon conjectures, and not upon facts; such a rule therefore has been rejected by Courts of law in ordinary cases, and instead of deciding upon the gains or losses of parties in particular cases, a uniform interest has been applied as the measure of damages for the detention of property." There is much force in that admirably constructed passage. We ought to pay all due homage in this country to the decisions of the American Courts upon this important subject, to which they appear to have given much careful consideration. The damages here are too remote. Several of the cases which were principally relied upon by the plaintiffs are distinguishable. In Waters v. Towers (1 Exch. 401) there was a special contract to do the work in a particular time, and the damage occasioned by the non-completion of the contract was that to which the plaintiffs were held to be entitled. In Borradale v. Brunton (8 Taunt. 535) there was a direct engagement that the cable should hold the anchor. So, in the case of taking away a workman's tools, the natural and necessary consequence is the loss of employment: Bodley v. Reynolds (8 Q. B. 779). The following cases may be referred to as decisions upon the principle within which the defendants contend that the present case falls: Jones v. Gooday (8 M. & W. 146), Walton v. Fothergill (7 Car. & P. 392), Boyce v. Bayliffe (1 Camp. 58) and Archer v. Williams (2. C. & K. 26). The rule, therefore, that the immediate cause is to be regarded in considering the loss, is applicable here. There was no special contract between these parties. A carrier has a certain duty cast upon him by law, and that duty is not to be enlarged to an indefinite extent in the absence of a special contract, or of fraud or malice. The maxim "dolus circuitu non purgatur", does not apply. The question as to how far liability may be affected by reason of malice forming one of the elements to be taken into consideration, was treated of by the Court of Queen's Bench in Lumley v. Gye (2 E. & B. 216). Here the declaration is founded upon the defendants' duty as common carriers, and indeed there is no pretence for saying that they entered into a special contract to bear all the consequences of the non-delivery of the article in question. They were merely bound to carry it safely, and to deliver it within a reasonable time. The duty of the clerk, who was in attendance at the defendants' office, was to enter the article, and to take the amount of the carriage; but a mere notice to him, such as was here given, could not make the defendants, as carriers, liable as upon a special contract. Such matters, therefore, must be rejected from the consideration of the question. If carriers are to be liable in such a case as this, the exercise of a sound judgment would not suffice, but they ought to be gifted also with a spirit of prophecy. "I have always understood," said Patterson, J., in Kelly v. Partington (5 B. & Ad. 651), "that the special damage must be the natural result of the thing done." That sentence presents the true test. The Court of Queen's Bench acted upon that rule in Foxall v. Barnett (2 E. & B. 928). This therefore is a question of law, and the jury ought to have been told that these damages were too remote; and that, in the absence of the proof of any other damage, the plaintiffs were entitled to nominal damages only: Tindall v. Bell (11 M. & W. 232). Siordet v. Hall (4 Bing. 607) and De Vaux v. Salvador (4 A. & E. 420) are instances of cases where the Courts appear to have gone into the opposite extremes: in the one case of unduly favouring the carrier, in the other of holding them liable for results which would appear too remote. If the defendants should be held responsible for the damages awarded by the jury, they would be in a better position if they confined their business to the conveyance of gold. They cannot be responsible for results which, at the time the goods are delivered for carriage, and beyond all human foresight. Suppose a manufacturer were to contract with a coal merchant or min owner for the delivery of a boat load of coals, no intimation being given that the coals were required for immediate use, the vendor in that case would not be liable for the stoppage of the vendee's business for want of the article which he had failed to deliver: for the vendor has no knowledge that the goods are not to go to the vendee's general stock. Where the contracting party is shewn to be acquainted with all the consequences that must of necessity follow from a breach on his part of the contract, it may be reasonable to say that he takes the risk of such consequences. If, as between vendor and vendee, this species of liability has no existence, a fortiori, the carrier is not to be burthened with it. In cases of personal injury to passengers, the damage to which the sufferer has been held entitled is the direct and immediate consequence of the wrongful act.

Cur. adv. vult.

The judgment of the Court was now delivered by

ALDERSON, B. We think that there ought to be a new trial in this case; but, in so doing, we deem it to be expedient and necessary to state explicitly the rule which the Judge, at the next trial, ought, in our opinion, to direct the jury to be governed by when they estimate the damages.

It is. Indeed, of the last importance that we should do this; for, if the jury are left without any definite rule to guide them, it will, in such cases as these, manifestly lead to the greatest injustice. The Courts have done this on several occasions; and in Blake v. Midland Railway Company (18 Q. B. 93), the Court granted a new trial on this very ground, that the rule had not been definitely laid down to the jury by the learned Judge at Nisi Prius.

"There are certain establishing rules", this Court says, in Alder v. Keighley (15 M. & W. 117), "according to which the jury ought to find". And the Court, in that case, adds: "and here there is a clear rule, that the amount which would have been received if the contract had been kept, is the measure of damages if the contract is broken."

Now we think the proper rule in such a case as the present is this:-- Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract.  For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case; and of this advantage it would be very unjust to deprive them. Now the above principles are those by which we think the jury ought to be guided in estimating the damages arising out of any breach of contract. It is said, that other cases such as breaches of contract in the nonpayment of money, or in the not making a good title of land, are to be treated as exceptions from this, and as governed by a conventional rule. But as, in such cases, both parties must be supposed to be cognizant of that well-known rule, these cases may, we think, be more properly classed under the rule above enunciated as to cases under known special circumstances, because there both parties may reasonably be presumed to contemplate the estimation of the amount of damages according to the conventional rule. Now, in the present case, if we are to apply the principles above laid down, we find that the only circumstances here communicated by the plaintiffs to the defendants at the time of the contract was made, were, that the article to be carried was the broken shaft of a mill, and that the plaintiffs were the millers of the mill.

But how do these circumstances shew reasonably that the profits of the mill must be stopped by an unreasonable delay in the delivery of the broken shaft by the carrier to the third person? Suppose the plaintiffs had another shaft in their possession put up or putting up at the time, and that they only wished to send back the broken shaft to the engineer who made it; it is clear that this would be quite consistent with the above circumstances, and yet the unreasonable delay in the delivery would have no effect upon the intermediate profits of the mill. Or, again, suppose that, at the time of the delivery to the carrier, the machinery of the mill had been in other respects defective, then, also, the same results would follow. Here it is true that the shaft was actually sent back to serve as a model for the new one, and that the want of a new one was the only cause of the stoppage of the mill, and that the loss of profits really arose from not sending down the new shaft in proper time, and that this arose from the delay in delivering the broken one to serve as a model. But it is obvious that, in the great multitude of cases of millers sending off broken shafts to third persons by a carrier under ordinary circumstances, such consequences would not, in all probability, have occurred; and these special circumstances were here never communicated by the plaintiffs to the defendants. It follows therefore, that the loss of profits here cannot reasonably be considered such a consequence of the breach of contract as could have been fairly and reasonably contemplated by both the parties when they made this contract. For such loss would neither have flowed naturally from the breach of this contract in the great multitude of such cases occurring under ordinary circumstances, nor were the special circumstances, which, perhaps, would have made it a reasonable and natural consequence of such breach of contract, communicated to or known by the defendants. The Judge ought, therefore, to have told the jury that upon the facts then before them they ought not to take the loss of profits into consideration at all in estimating the damages. There must therefore be a new trial in this case.

Rule absolute.

[107] Paul J. Chitwood, Dallas, Tex., for plaintiff-appellant.

Howard P. Newton, San Antonio, Tex., for defendant-appellee.

Before WISDOM, HILL and VANCE, Circuit Judges.

Rehearing and Rehearing En Banc Denied December 20, 1979.

VANCE, Circuit Judge:

Martinez appeals the trial court's dismissal of his claim under 49 U.S.C. § 20(11) (Carmack Amendment to the Interstate Commerce Act) for losses resulting from delay and damage in transportation by carrier Southern Pacific. The district court granted Southern Pacific's motion under Rule 12(b)(6) to dismiss the claim for delay damages. It held that such damages are special and Martinez failed to allege that the carrier had any notice of the possibility that such damages would accrue upon a breach of the contract between the parties. We reverse and remand for trial on the claim for some but not all of the damages sought.

Martinez's agent delivered a 2400 Lima Dragline, Model 66, to the Penn Central Railroad, the origin carrier, on February 11, 1974, for shipment from New Philadelphia, Ohio to Eagle Pass, Texas. The dragline was loaded onto five separate railroad cars. A single uniform bill of lading, which described the dragline as "used strip mining machinery and parts," was issued by Penn Central, listing Martinez's agent in Eagle Pass as the consignee.

The last of the five cars, which were shipped separately, arrived in Eagle Pass on April 2, 1974. Martinez had to make reasonable repairs in the amount of $14,467.00 because the dragline was damaged in transit. These repairs were not completed until June 20, 1974. Martinez also alleges delay damages in the amount of $117,600.00 because the dragline could not be used from March 1, when he contends that the last of the cars should have arrived, until June 20. The claimed sum represents the dragline's fair rental value during this period.

After filing a claim as prescribed by the bill of lading, Martinez sued Southern Pacific, which as delivering carrier is liable for all recoverable damages. Martinez framed his original complaint to allege three separate claims under the Carmack Amendment. First, Martinez sought recovery of the cost of repairing the damage to the [108] dragline. Second, he sought the refund of certain demurrage or storage charges assessed by Southern Pacific and paid at the time of delivery. Third, Martinez sought compensation for wrongful deprivation of the dragline's use during the periods of delay in transit and of repair.

Martinez and Southern Pacific had already settled the first two of these claims, when Southern Pacific filed its Rule 12(b)(6) motion to dismiss the third claim for loss of use. Southern Pacific argues that, because such damages are special, they are not recoverable under the Carmack Amendment absent notice of the possibility of such damages. The trial court denied this motion upon condition that Martinez amend his complaint to allege such notice. When Martinez refused, the district court granted Southern Pacific's motion under Rule 12(b)(6). This ruling, which had the effect of dismissing all that remained of Martinez's suit, is the basis of this appeal.

Martinez's delay claim involves two very different items. Lost use during the period of March 1 until April 2 resulted from a delay in transit. Lost use from April 2 until June 20 resulted from repair of the damaged goods. Neither the parties nor the district court have focused on the full import of this distinction. Martinez's claimed loss during repair is not severable from the physical damage to the dragline but is a part of the same legal claim. Thus Martinez necessarily settled his claim regarding damages for the repair period when he settled his first claim for damages to the dragline. The surviving issue is the appropriate measure of damages for the claimed loss resulting from Southern Pacific's unreasonable delay in transportation.

The Carmack Amendment^[1] governs Martinez's claim for damages resulting from the delay in transit. That amendment incorporates common law principles for damages. F. J. McCarty Co. v. Southern Pacific Co., 428 F.2d 690, 693 (9th Cir. 1970); L. E. Whitlock Truck Service, Inc. v. Regal Drilling Co., 333 F.2d 488, 491 (10th Cir. 1964); J & H Flyer Inc. v. Pennsylvania Rr., 316 F.2d 203, 205 (2d Cir. 1963). In applying that statute, we first examine the extent to which the innocent party actually has been injured by the alleged breach. This inquiry assists in determining how the innocent party can be restored to the position in which he would have been had the contract been fully performed. See Liberty Navigation & Trading Co. v. Kinoshita & Co., 285 F.2d 343, 350 (2d Cir. 1960) (Lumbard, C. J., concurring in relevant part), cert. denied, 366 U.S. 949, 81 S.Ct. 1904, 6 L.Ed.2d 1242 (1961); 11 Williston on Contracts § 1338, at 198 (3d ed. W. Jaeger 1968).

Normally, the remedy is an award of money damages to the aggrieved party as compensation for his economic injury.^[2] This rule in effect protects the innocent party's expectation interest, giving him the "benefit of the bargain."^[3] Martinez's alleged injury in this case was deprivation of the dragline's use between March 1, when it should have been delivered, and April 2. [109] Besides compensating the injured plaintiff, the common law also seeks to protect the defendant from unforeseeable large losses to the plaintiff.^[4] This limitation makes good sense. An award of full compensation for all of the plaintiff's losses due to the breach, no matter how unforeseeable or bizarre these losses are, would simply be unfair to the defendant as well as possibly paralyzing to commerce.

We next assess the reasonable foreseeability of the plaintiff's actual injury at the time of entry into the contract—here the bill of lading. Globe Refining Co. v. Landa Cotton Oil Co., 190 U.S. 540, 544, 23 S.Ct. 754, 47 L.Ed. 1171 (1903); De Fore v. United States, 145 F.Supp. 484, 491 (M.D. Ga.1956), aff'd sub nom. Georgia Kaolin Co. v. United States, 249 F.2d 148 (5th Cir. 1957). Our analysis on this point begins with Hadley v. Baxendale, 9 Ex. 341, 156 Eng.Rep. 145 (1854). There, mill operators were forced to close operations to ship a broken shaft for repairs, and the carrier negligently delayed shipment. The carrier, however, had not been informed of the situation at the mill. The court refused to award profits lost during the period of delay because such damages were not in the contemplation of the parties. The court articulated the rules, still almost universally followed,^[5] that general damages are awarded only if injury were foreseeable to a reasonable man and that special damages are awarded only if actual notice were given the carrier of the possibility of injury.^[6] Damage is foreseeable by the carrier if it is the proximate and usual consequence of the carrier's action. 11 Williston on Contracts, supra § 1344, at 226.

Martinez asserts that his loss resulting from the delay in shipment was reasonably foreseeable when he entered the contract to transport his dragline. Hadley held that the damages arising from an inoperative mill were not foreseeable results of delayed shipment of a shaft, without specific notice. It was not obvious that the shaft in Hadley was an indispensable element of a mill. In the instant case, however, it was obvious that the dragline is a machine which of itself has a use value. Some cases after Hadley have suggested that the injury resulting from loss of a machine's use are not foreseeable results of delayed transport, because it is not a usual consequence although it is a proximate consequence. See 11 Williston on Contracts, supra § 1344, at 226-27. These decisions are unwarranted extensions of Hadley and employ arbitrary and inflexible definitions of foreseeability. Capital goods such as machinery have a use value, which may equal the rental value of the equipment or may be an interest value. The latter is ordinarily interest at the market rate on the value of the machine. It might be quite foreseeable that deprivation of the machine's use because of a carriage delay will cause a loss of rental value or interest value during the delay period.^[7] [110] See generally F. Kessler & G. Gilmore, Contracts 1042 (2d ed. 1970). We must not lose sight of the basic common law rule, enunciated in Hadley, of damages for foreseeable loss. The amount of damages that was reasonably foreseeable involves a fact question that Martinez is entitled to present to a jury.

Southern Pacific replies that it was as foreseeable that the goods were to be sold as that they were to be used. This contention proves too much because Hadley allows recovery for harms that should have been foreseen. The general rule does not require the plaintiff to show that the actual harm suffered was the most foreseeable of possible harms. He need only demonstrate that his harm was not so remote as to make it unforeseeable to a reasonable man at the time of contracting. Even if the dragline were being shipped for sale it does not follow that delay in shipment would cause no recoverable loss.

Southern Pacific argues that, because only market value damages are foreseeable under common law, damages for lost rental value must be special and therefore require notice by Martinez. This argument confuses one common law method for computing damages with the underlying common law rule of awarding reasonable compensation for foreseeable injury from a contract's breach.

The common law employs a number of methods for computing damages recoverable for unreasonable delay in shipment. One of these is the market value test that measures damages by the diminution in the goods' value between the time of dispatch and the time of actual delivery. See 11 Williston on Contracts, supra § 1342, at 223. That test, however, "is merely a method," and it "is not applied in cases where . . . another rule will better compute actual damages." Great Atlantic & Pacific Tea Co. v. Atchison, T. & Ste. F. Ry., 333 F.2d 705, 708 (7th Cir. 1964), cert. denied, 379 U.S. 967, 85 S.Ct. 661, 13 L.Ed.2d 560 (1965). Accord, Olsen v. Railway Express Agency, Inc., 295 F.2d 358, 359 (10th Cir. 1961). Cf. Illinois Cent. Ry. v. Crail, 281 U.S. 57, 64-65, 50 S.Ct. 180, 74 L.Ed. 699 (1930) (Cummins Amendment). Lost rental value is frequently an appropriate measure of damages from a delay in shipment of machinery.^[8]See Resolute Ins. Co. v. Percy Jones, Inc., 198 F.2d 309, 312 (10th Cir. 1952). E. g., Burlington Northern Inc. v. United States, 462 F.2d 526, 529-30, 199 Ct.Cl. 143 (1972); New Orleans & N. E. R. v. J. H. Miner Saw Mfg. Co., 117 Miss. 646, 78 So. 577, 578 (1918). In deciding which measure of damage to apply, courts look to the actual loss suffered by the plaintiff and the common law rule of compensating that loss.

There is only one rule, of universal application, . . . and that is to give compensation for the loss suffered. Frequently, this ideal is found impossible of complete attainment; perhaps generally the market value rule is found to be the nearest approach to reaching the actual loss. But the market value rule is inapplicable when, on the facts, it is not the nearest practicable approach to an ascertainment of the actual loss. Each case must be governed by its own facts. [111] United States v. Palmer & Parker Co., 61 F.2d 455, 459 (1st Cir. 1932). The Carmack Amendment, in compensating the aggrieved party's "full actual loss," does not restrict the measure of damages solely to the diminution in value of the goods involved. Great Atlantic & Pacific Tea Co. v. Atchison, T. & Ste. F. Ry., 333 F.2d at 708-09.^[9]

Martinez has stated a claim for damages resulting from the delay in shipment. We reverse the district court's order of dismissal on this point, and remand for trial. We affirm, however, the district court's decision to dismiss Martinez's claim for damages resulting from the delay during repair.

REVERSED AND REMANDED IN PART; AFFIRMED IN PART.

[1] The Carmack Amendment, 49 U.S.C. § 20(11), provides that any common carrier subject to the provisions of the Interstate Commerce Act, such as Southern Pacific, who receives property for transportation in interstate commerce shall be liable for damages it causes in the amount of "the full actual loss, damage or injury" suffered. Federal law controls our determination of liability and the measure of damages, Dublin Co. v. Ryder Truck Lines, Inc., 417 F.2d 777, 778 (5th Cir. 1969), although it adopts common law principles.

[2] In some situations in which money damages cannot adequately compensate the innocent party, the court may order specific performance of the contract.

[3] Damages may be awarded for the expectation interest, the reliance interest, or the restitution interest of the aggrieved party. Fuller & Perdue, The Reliance Interest in Contract Damages (pts. 1-2), 46 Yale L.J. 52, 373 (1936-1937); J. Calamari & J. Perillo, Contracts § 205, at 328-29 (1970). If it is impossible to calculate a plaintiff's expectation interest, courts award damages to protect his reliance interest, to restore him to his position before the contract was entered. If reliance damages do not represent a fair measure of recovery, courts calculate damages on the basis of the restitution interest, to restore the benefit received from the plaintiff's performance.

[4] In addition to the foreseeability limitation, damages may also be limited because of uncertainty, e. g., United States v. Huff, 175 F.2d 678, 680 (5th Cir. 1949), or because of failure to mitigate damages, e. g., De Fore v. United States, 145 F.Supp. 484, 493 (M.D.Ga.1956), aff'd sub nom. Georgia Kaolin Co. v. United States, 249 F.2d 148 (5th Cir. 1957).

[5] J. Calamari & J. Perillo, supra note 3, at 329. As Professor Gilmore admonished, Hadley "has meant all things to all men." G. Gilmore, The Death of Contract 50 (1974).

[6] There are two tests for determining special damages. The more restrictive test requires proof both that notice was given of special circumstances and that the defendant impliedly or expressly assented to bearing the risk of these damages. Globe Refining Co. v. Landa Cotton Oil Co., 190 U.S. 540, 23 S.Ct. 754, 47 L.Ed. 1171 (1903). The more common test rejects the added showing of a tacit agreement for special damages. E. g., L. E. Whitlock Truck Svc., Inc. v. Regal Drilling Co., 333 F.2d at 492; U.C.C. § 2-715, Comment 2.

[7] Unlike loss of use, Martinez would have had to plead notice had he sought to recover for a variety of damages that could not have been foreseeable here such as lost profits, the cost of idle labor hired to operate the dragline, the cost of idle equipment that had been rented to be used with the dragline, or the daily royalties Martinez was paying for the land on which he planned to run his dragline. Cf. Texas Instruments, Inc. v. Branch Motor Express Co., 308 F.Supp. 1228, 1230 (D.Mass.), aff'd, 432 F.2d 564 (1st Cir. 1970) (unforeseeable consequences of delay due to total destruction of machinery in transit). Thus Martinez may recover for lost use of the machine but not for the costs of the mining operations in which the machine was to be involved. Similarly, Hadley held that one cannot equate a shaft with the operation of an entire mill unless notice of the shaft's use had been given to the carrier. The result in Hadley might have been different had the plaintiff sought to recover solely for the loss of use of the shaft.

[8] Diminution in market value is a proper measure of damages from a delay in carriage of food and other non-rentable goods. E. g., Gulf, C., & Ste. F. Ry. v. Texas Packing Co., 244 U.S. 31, 37, 37 S.Ct. 487, 61 L.Ed. 970 (1917) (poultry); Fort Worth & D. Ry. v. United States, 242 F.2d 702, 705 (5th Cir. 1957) (livestock feed); Reider v. Thompson, 197 F.2d 158, 160 (5th Cir. 1952) (sheepskins). However, this test is generally not as accurate a measure of injury from a delay in transport of capital goods, with an ascertainable rental value for the machinery or interest value of the invested sum. Otherwise, a carrier could breach its contractual duties with impunity as long as the market value of the equipment did not drop, even though the shipper might lose a substantial use value or pay high installment purchase costs.

[9] This holding should hardly surprise Southern Pacific. F. J. McCarty Co. v. Southern Pacific Co., 428 F.2d 690 (9th Cir. 1970) (rejecting Southern Pacific's arguments for market value test and against "special damages").

Law Offices of Joseph A. Golden (by Joseph A. Golden and Patricia A. Stamler) for the plaintiff.

Garan, Lucow, Miller, Seward, Cooper & Becker, P.C. (by Milton Lucow), and Gromek, Bendure & Thomas (by Daniel J. Wright), of counsel, for the defendant.

Amici Curiae:

The Fishman Group (by Steven J. Fishman and Malcolm D. Brown) for Michigan State Chamber of Commerce.

Stark & Gordon (by Sheldon J. Stark) for Michigan Trial Lawyers Association.

LEVIN, J.

Sharon Valentine seeks to recover mental distress damages arising out of the alleged breach of an employment contract. Valentine claims that, under the contract, she was entitled to [258] job security and the peace of mind that is associated with job security. Because an employment contract providing for job security has a personal element, and breach of such a contract can be expected to result in mental distress, Valentine argues that she should be able to recover mental distress damages. She also asks for exemplary damages.

The Court of Appeals affirmed the decision of the trial court dismissing the claims for mental distress and exemplary damages.^[1] We affirm.

I

In Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich 579; 292 NW2d 880 (1980), this Court held that an employment contract providing that an employee would not be terminated except for cause was enforceable although no definite term of employment was stated.

Toussaint makes employment contracts which provide that an employee will not be dismissed except for cause enforceable in the same manner as other contracts. It did not recognize employment as a fundamental right or create a new "special" right. The only right held in Toussaint to be enforceable was the right that arose out of the promise not to terminate except for cause.

Employers and employees remain free to provide, or not to provide, for job security. Absent a contractual provision for job security, either the employer or the employee may ordinarily terminate [259] an employment contract at any time for any, or no, reason.^[2] The obligation which gave rise to this action is based on the agreement of the parties;^[3] it is not an obligation imposed on the employer by law. This is an action for breach of contract and not a tort action.

II

Valentine may not recover mental distress damages for breach of the employment contract, although such damages may have been foreseeable and she might not be "made whole" absent an award of mental distress damages.

Valentine relies on the rule of Hadley v Baxendale, 9 Exch 341; 156 Eng Rep 145 (1854), which provides that damages recoverable for a breach of contract are those that "may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it."^[4]

Although courts frequently begin analysis with a reference to the rule stated in Hadley v Baxendale,^[5] that rule has not been applied scrupulously. As stated by Professor Dobbs in his treatise on [260] remedies, a "difficulty in the Hadley type case is that the test of foreseeability [i.e., whether damages `arise naturally'^[6]] has little or no meaning. The idea is so readily subject to expansion or contraction that it becomes in fact merely a technical way in which the judges can state their conclusion."^[7]

Under the rule of Hadley v Baxendale, literally applied, damages for mental distress would be recoverable for virtually every breach of contract. Professor Dobbs said:

"When a defendant breaches a contract, this may and often does cause pecuniary loss to the other party, at least temporarily. It is a common experience of mankind that pecuniary loss almost invariably causes some form and degree of mental distress."^[8]

In Stewart v Rudner, 349 Mich 459, 470; 84 NW2d 816 (1957), this Court said that "all breaches of contract do more or less" cause "vexation and annoyance"; similarly, see Kewin v Massachusetts Mutual Life Ins Co, 409 Mich 401, 417; 295 NW2d 50 (1980).^[9]

Yet the general rule, with few exceptions, is to "uniformly den[y]" recovery for mental distress damages although they are "foreseeable within the rule of Hadley v Baxendale."^[10] The rule barring recovery of mental distress damages — a gloss on the generality of the rule stated in Hadley v [261] Baxendale — is fully applicable to an action for breach of an employment contract.^[11]

The denial of mental distress damages, although the result is to leave the plaintiff with less than a full recovery, has analogy in the law. The law does not generally compensate for all losses suffered.^[12] Recovery is denied for attorney's fees,^[13] for mental anguish not accompanied by physical manifestation,^[14] and "make-whole" or full recovery has been denied where the cost of performance exceeds the value to the promisee.^[15] The courts have not, despite "make whole" generalizations regarding the damages recoverable,^[16] attempted to provide compensation for all losses. Instead, specific rules have been established that provide for the calculation of the damages recoverable in particular kinds of actions.^[17] In contract actions, the market price is the general standard.^[18]

In determining what damages are recoverable, the courts of this state have qualified the general [262] rule, pursuant to which mental distress damages for breach of contract are not recoverable, with a narrow exception. Rather than look to the foreseeability of loss to determine the applicability of the exception, the courts have considered whether the contract "has elements of personality"^[19] and whether the "damage suffered upon the breach of the agreement is capable of adequate compensation by reference to the terms of the contract."^[20]

The narrow scope of those verbal formulas appears on consideration of the limited situations in which this Court has allowed the recovery of mental distress damages for breach of contract. In Vanderpool v Richardson, 52 Mich 336; 17 NW 936 (1883), recovery was allowed for breach of a promise to marry. In Stewart v Rudner, 349 Mich 459; 84 NW2d 816 (1957), a doctor who failed to fulfill his promise to deliver a child by caesarean section was required to pay mental distress damages. In Miholevich v Mid-West Mutual Auto Ins Co, 261 Mich 495; 246 NW 202 (1933), the plaintiff, who was jailed for failure to pay a liability judgment, recovered mental distress damages from an insurer who had failed to pay the judgment.^[21]

Loss of a job is not comparable to the loss of a marriage or a child and generally results in estimable monetary damages. In Miholevich, the breach resulted in a deprivation of personal liberty.^[22]

[263] An employment contract will indeed often have a personal element. Employment is an important aspect of most persons' lives, and the breach of an employment contract may result in emotional distress. The primary purpose in forming such contracts, however, is economic and not to secure the protection of personal interests. The psychic satisfaction of the employment is secondary.

Mental distress damages for breach of contract have not been awarded where there is a market standard by which damages can be adequately determined. Valentine's monetary loss can be estimated with reasonable certainty according to the terms of the contract and the market for, or the market value of, her service. Mental distress damages are not awarded an employee found to have been wrongfully discharged in violation of a collective-bargaining agreement.^[23]

We conclude, because an employment contract is not entered into primarily to secure the protection of personal interests and pecuniary damages can be estimated with reasonable certainty, that a person discharged in breach of an employment contract may not recover mental distress damages.

III

Valentine has not separately argued her exemplary damage claim. In Kewin, supra, pp 420-421, this Court said that "absent allegation and proof of tortious conduct existing independent of the breach, * * * exemplary damages may not be awarded in common-law actions brought for breach of a commercial contract." Valentine failed to plead the requisite purposeful tortious conduct, [264] and therefore she may not recover exemplary damages.

Affirmed.

WILLIAMS, C.J., and KAVANAGH, RYAN, BRICKLEY, CAVANAGH, and BOYLE, JJ., concurred with LEVIN, J.

[1] On April 11, 1980, Valentine filed an action alleging breach of a contract of employment and intentional infliction of mental distress. She sought mental distress damages and exemplary damages. On June 1, 1981, the trial court granted defendant General American Credit's motion for partial summary judgment on the issues of mental distress damages and exemplary damages. The Court of Appeals, dividing two-to-one, affirmed. Valentine v General American Credit, Inc, 123 Mich App 521; 332 NW2d 591 (1983).

[2] See Suchodolski v Michigan Consolidated Gas Co, 412 Mich 692, 694-695; 316 NW2d 710 (1982), and Clifford v Cactus Drilling Corp, 419 Mich 356, 360; 353 NW2d 469 (1984).

[3] McIntosh v Groomes, 227 Mich 215, 218; 198 NW 954 (1924); Lichnovsky v Ziebart Int'l Corp, 414 Mich 228, 241, fn 23; 324 NW2d 732 (1982); Prosser & Keeton, Torts (5th ed), § 92, pp 655-656; 17 Am Jur 2d, Contracts, § 1, p 333.

[4] Hadley, supra, p 354.

[5] See Frederick v Hillebrand, 199 Mich 333, 341; 165 NW 810 (1917); 1 Restatement Contracts, § 330, p 509; 3 Restatement Contracts, 2d, § 351, p 135; 5 Corbin, Contracts, § 1007, p 70; Grismore, Contracts (rev ed), § 196, p 302.

[6] See 5 Corbin, Contracts, § 1007, p 70.

[7] Dobbs, Remedies, § 12.3, p 814. See also Dobbs, § 12.3, p 804; 5 Corbin, Contracts, § 1007, pp 70-71.

[8] Dobbs, Remedies, § 12.4, p 819.

[9] In Kewin, supra, p 417, this Court said that the breach of "almost any agreement, results in some annoyance and vexation."

[10] Grismore, Contracts (rev ed), § 203, p 320. See also Kewin, supra, p 414; Dobbs, Remedies, § 12.4, p 819.

[11] McCormick, Damages, § 163, pp 637-638, and cases cited therein. See also Paxson v Cass County Road Comm, 325 Mich 276, 278-279; 38 NW2d 315 (1949) (Court noted that the trial court had ordered a remittitur of mental distress damages, but did not address the question); Fisher v General Telephone Co of the Northwest, Inc, 510 F Supp 347 (ED Mich, 1980); Isagholian v Carnegie Institute of Detroit, Inc, 51 Mich App 220; 214 NW2d 864 (1974).

[12] See Dobbs, Remedies, § 1.1, pp 1, 5 and § 3.2, p 146.

[13] Bullock v Taylor, 39 Mich 137, 140 (1878); Dobbs, Remedies, § 3.8, p 194; 5 Corbin, Contracts, § 1037, pp 225-227. Cf. Friedman v Dozorc, 412 Mich 1, 32, 42; 312 NW2d 585 (1981).

[14] Manie v Matson Oldsmobile-Cadillac Co, 378 Mich 650, 658; 148 NW2d 779 (1967) (tort action); 1 Restatement Contracts, § 341, p 559; 5 Corbin, Contracts, § 1076, p 427.

[15] Grismore, Contracts (rev ed), § 195, p 299, citing Sandy Valley & Elkhorn R Co v Hughes, 175 Ky 320; 194 SW 344 (1917).

[16] See, e.g., Hammond v Hannin, 21 Mich 374, 384 (1870); Grismore, Contracts (rev ed), § 195, pp 298-300.

[17] See McCormick, Damages, and the separate chapters stating the damages recoverable for breach of employment contracts (ch 25), construction contracts (ch 26), sales of personal property (ch 27), and land sale contracts (ch 28).

[18] Id.

[19] Stewart, supra, p 471. In Stewart, supra, p 471, the Court also said that mental distress damages are recoverable in cases "where a contract is made to secure relief from a particular inconvenience or annoyance, or to confer a particular enjoyment." (Emphasis supplied.) See also Kewin, supra, p 416, in which the Court emphasized that, for mental distress damages to be recoverable, the parties must have formed "a contract meant to secure [the] protection" of personal interests. (Emphasis supplied.)

[20] Kewin, supra, p 417. See also Stewart, supra, p 470.

[21] Humphrey v Michigan United R Co, 166 Mich 645; 132 NW 447 (1911), concerned the duty of a common carrier to a passenger. This duty is imposed by law without regard to contract.

[22] See Friedman, fn 13 supra, pp 32, 42.

[23] See 2 Morris, The Developing Labor Law (2d ed), ch 33, pp 1658-1659; Gorman, Labor Law, pp 138-139.

[639] Morris D. Rosen, Charleston, S. C. (George B. Bishop, Moncks Corner, S. C., on brief) for appellant.

[640] Herman H. Hamilton, Jr., Montgomery, Ala., and Ben Scott Whaley, Charleston, S. C. (Nathaniel L. Barnwell, Charleston, S. C., on brief) for appellees.

Before HAYNSWORTH, Chief Judge, BRYAN, Senior Circuit Judge, and CRAVEN, Circuit Judge.

CRAVEN, Circuit Judge:

May a subcontractor, who justifiably ceases work under a contract because of the prime contractor's breach, recover in quantum meruit the value of labor and equipment already furnished pursuant to the contract irrespective of whether he would have been entitled to recover in a suit on the contract? We think so, and, for reasons to be stated, the decision of the district court will be reversed.

The subcontractor, Coastal Steel Erectors, Inc., brought this action under the provisions of the Miller Act, 40 U.S.C.A. § 270a et seq., in the name of the United States against Algernon Blair, Inc., and its surety, United States Fidelity and Guaranty Company. Blair had entered a contract with the United States for the construction of a naval hospital in Charleston County, South Carolina. Blair had then contracted with Coastal to perform certain steel erection and supply certain equipment in conjunction with Blair's contract with the United States. Coastal commenced performance of its obligations, supplying its own cranes for handling and placing steel. Blair refused to pay for crane rental, maintaining that it was not obligated to do so under the subcontract. Because of Blair's failure to make payments for crane rental, and after completion of approximately 28 percent of the subcontract, Coastal terminated its performance. Blair then proceeded to complete the job with a new subcontractor. Coastal brought this action to recover for labor and equipment furnished.

The district court found that the subcontract required Blair to pay for crane use and that Blair's refusal to do so was such a material breach as to justify Coastal's terminating performance. This finding is not questioned on appeal. The court then found that under the contract the amount due Coastal, less what had already been paid, totaled approximately $37,000. Additionally, the court found Coastal would have lost more than $37,000 if it had completed performance. Holding that any amount due Coastal must be reduced by any loss it would have incurred by complete performance of the contract, the court denied recovery to Coastal. While the district court correctly stated the "`normal' rule of contract damages,"^[1] we think Coastal is entitled to recover in quantum meruit.^[2]

In United States for Use of Susi Contracting Co. v. Zara Contracting Co., 146 F.2d 606 (2d Cir. 1944), a Miller Act action, the court was faced with a situation similar to that involved here—the prime contractor had unjustifiably breached a subcontract after partial performance by the subcontractor. The court stated:

For it is an accepted principle of contract law, often applied in the case of construction contracts, that the promisee upon breach has the option to forego any suit on the contract and claim only the reasonable value of his performance.

146 F.2d at 610. The Tenth Circuit has also stated that the right to seek recovery under quantum meruit in a Miller [641] Act case is clear.^[3] Quantum meruit recovery is not limited to an action against the prime contractor but may also be brought against the Miller Act surety, as in this case.^[4] Further, that the complaint is not clear in regard to the theory of a plaintiff's recovery does not preclude recovery under quantum meruit. Narragansett Improvement Co. v. United States, 290 F.2d 577 (1st Cir. 1961). A plaintiff may join a claim for quantum meruit with a claim for damages from breach of contract.^[5]

In the present case, Coastal has, at its own expense, provided Blair with labor and the use of equipment. Blair, who breached the subcontract, has retained these benefits without having fully paid for them. On these facts, Coastal is entitled to restitution in quantum meruit.

The "restitution interest," involving a combination of unjust impoverishment with unjust gain, presents the strongest case for relief. If, following Aristotle, we regard the purpose of justice as the maintenance of an equilibrium of goods among members of society, the restitution interest presents twice as strong a claim to judicial intervention as the reliance interest, since if A not only causes B to lose one unit but appropriates that unit to himself, the resulting discrepancy between A and B is not one unit but two.

Fuller & Perdue, The Reliance Interest in Contract Damages, 46 Yale L.J. 52, 56 (1936).^[6]

The impact of quantum meruit is to allow a promisee to recover the value of services he gave to the defendant irrespective of whether he would have lost money on the contract and been unable to recover in a suit on the contract. Scaduto v. Orlando, 381 F.2d 587, 595 (2d Cir. 1967). The measure of recovery for quantum meruit is the reasonable value of the performance, Restatement of Contracts § 347 (1932); and recovery is undiminished by any loss which would have been incurred by complete performance. 12 Williston on Contracts § 1485, at 312 (3d ed. 1970). While the contract price may be evidence of reasonable value of the services, it does not measure the value of the performance or limit recovery.^[7] Rather, the standard for measuring the reasonable value of the services rendered is the amount for which such services could have been purchased from one in the plaintiff's position at the time and place the services were rendered.^[8]

[642] Since the district court has not yet accurately determined the reasonable value of the labor and equipment use furnished by Coastal to Blair, the case must be remanded for those findings.^[9] When the amount has been determined, judgment will be entered in favor of Coastal, less payments already made under the contract. Accordingly, for the reasons stated above, the decision of the district court is

Reversed and remanded with instructions.

[1] Fuller & Perdue, The Reliance Interest in Contract Damages, 46 Yale L.J. 52 (1936); Restatement of Contracts § 333 (1932).

[2] Where there is a distinction between federal and state substantive law, federal law controls in actions under the Miller Act. United States for Use and Benefit of Astro Cleaning & Packaging Co. v. Jamison Co., 425 F.2d 1281, 1282 n. 1 (6th Cir. 1970). But in this case the result would be the same, we think, under either state or federal law. Compare United States for Use of Susi Contracting Co. v. Zara Contracting Co., 146 F.2d 606 (2d Cir. 1944), with Gantt v. Morgan, 199 S.C. 138, 18 S.E.2d 672 (1942).

[3] Southern Painting Co. v. United States, 222 F.2d 431, 433 (10th Cir. 1955). See also Great Lakes Constr. Co. v. Republic Creosoting Co., 139 F.2d 456 (8th Cir. 1943) (dealing with a prior statute).

[4] Central Steel Erection Co. v. Will, 304 F.2d 548, 552 (9th Cir. 1962); Zara Contracting, 146 F.2d at 612. This is consistent with the liberal construction which is given to the Miller Act to effectuate its protective purposes. See United States ex rel. Sherman v. Carter, 353 U.S. 210, 216-217, 77 S.Ct. 793, 1 L.Ed.2d 776 (1957).

[5] North Am. Graphite Corp. v. Allan, 87 U.S.App.D.C. 154, 184 F.2d 387, 389 (1950); 12 Williston on Contracts § 1469, at 210 (3d ed. 1970).

[6] This case also comes within the requirements of the Restatements for recovery in quantum meruit. Restatement of Restitution § 107 (1937); Restatement of Contracts §§ 347-357 (1932).

[7]Scaduto v. Orlando, 381 F.2d 587, 595-596 (2d Cir. 1967); St. Paul-Mercury Indem. Co. v. United States ex rel. Jones, 238 F.2d 917, 924 (10th Cir. 1956); United States for Use of Susi Contracting Co. v. Zara Contracting Co., 146 F.2d 606, 610-611 (2d Cir. 1944).

It should be noted, however, that in suits for restitution there are many cases permitting the plaintiff to recover the value of benefits conferred on the defendant, even though this value exceeds that of the return performance promised by the defendant. In these cases it is no doubt felt that the defendant's breach should work a forfeiture of his right to retain the benefits of an advantageous bargain.

Fuller & Perdue, supra at 77.

[8] See United States for Use of F. E. Robinson Co. v. Alpha-Continental, 273 F.Supp. 758, 777 (E.D.N.C.1967), aff'd 404 F.2d 343 (4th Cir. 1968), and aff'd sub nom. Ling Elec., Inc. v. Federal Ins. Co., 406 F.2d 561 (4th Cir.), cert. denied, 395 U.S. 922, 89 S.Ct. 1774, 23 L.Ed.2d 239 (1969), and the cases cited in note 7, supra.

[9] Under the view of the case taken by the district court it was unnecessary to precisely appraise the value of services and materials rendered; an approximation was thought to suffice because the hypothetical loss had the contract been fully performed was greater in amount.

6 N.H. 481

BRITTON
versus
TURNER.

July Term, 1834.

Where a party undertakes to pay, upon a special contract for the performance of labour, he is not liable to be charged upon such special contract, until the money is earned according to the terms of the agreement; and where the parties have made an express contract, the law will not imply and raise a contract different from that which the parties have entered into, except upon some farther transaction between them.

In case of a failure to perform such special contract, by the default of the party contracting to do the service, if the money is not due by the terms of the special agreement, and the nature of the contract be such that the employer can reject what has been done, and refuse to receive any benefit from the part performance, he is entitled so to do, unless he have before assented to and accepted of what has been done, and in such case the party performing the labor is not entitled to recover however much he may have done.

But if, upon a contract of such a character, a party actually receives useful labor, and thereby derives a benefit and advantage, over and above the damage which has resulted from a breach of the contract by the other party, the labor actually done, and the value received, furnish a new consideration, and the law thereupon raises a promise to pay to the extent of the reasonable worth of the excess. And the rule is the same, whether the labor was received and accepted, by the assent of the party prior to the breach, and under a contract, by which, from its nature, the party was to receive the labour from time to time until the completion of the whole contract, or whether it was received and accepted by an assent subsequent to the performance of all which was in fact done.

In case such contract is broken, by the fault of the party employed after part performance has been received, the employer is entitled, if he so elect, to put the breach of the contract in defence, for the purpose of reducing the damages, or showing that nothing is due, and the benefits for which he is liable to be charged, in that case, is the amount of value which he has received, if any, beyond the amount of the damage—and the implied promise which the law will raise, is, to pay such amount of the stipulated price for the whole labour, as remains after deducting what it would cost to procure a completion of the whole service, and also any damage which has been sustained by reason of the non fulfilment of the contract.

If in such case it be found that the damages are equal to, or greater than the amount of the value of the labour performed, so that the employer, having a right to the performance of the whole contract, has not upon the whole case received a beneficial service, the plaintiff cannot recover.

[482] If the employer elects to permit himself to be charged for the value of the labor, without interposing the damages in defence, he is entitled to do so, and may have an action to recover his damages for the non performance of the contract.

If he elects to have the damages considered in the action against him, he must be understood as conceding that they are not to be extended beyond the amount of what he has received, and he cannot therefore afterwards sustain an action for further damages.

ASSUMPSIT for work and labour, performed by the plaintiff, in the service of the defendant, from March 9th, 1831, to December 27, 1831.

The declaration contained the common counts, and among them a count in quantum meruit, for the labor, averring it to be worth one hundred dollars.

At the trial in the C. C. Pleas, the plaintiff proved the performance of the labor as set forth in the declaration.

The defence was that it was performed under a special contract—that the plaintiff agreed to work one year, from some time in March, 1831, to March 1832, and that the defendant was to pay him for said year's labor the sum of one hundred and twenty dollars; and the defendant offered evidence tending to show that such was the contract under which the work was done.

Evidence was also offered to show that the plaintiff left the defendant's service without his consent, and it was contended by the defendant that the plaintiff had no good cause for not continuing in his employment.

There was no evidence offered of any damage arising from the plaintiffs departure, farther than was to be inferred from his non fulfilment of the entire contract.

The court instructed the jury, that if they were satisfied from the evidence that the labor was performed, under a contract to labor a year, for the sum of one hundred and twenty dollars, and if they were satisfied that the plaintiff labored only the time specified in the declaration, and then left the defendant's service, against his consent, and without any good cause, yet the plaintiff was entitled to recover, under his quantum meruit count, [483] as much as the labor he performed was reasonably worth, and under this direction the jury gave a verdict for the plaintiff for the sum of $95.

The defendant excepted to the instructions thus given to the jury.

Handerson for the defendant.

The general principle established by all the old cases, is, that where the contract is entire, as where A agrees to do a certain thing, for which B is to make a certain compensation, the doing of the tiling by A is a condition precedent, and he has no remedy until he has fully performed his part.

There are several leading cases relating to the subject. Cutter Adr. v. Powell, 6 D. & E. 320; McMillen v. Vanderlip, 12 Johns. 165; Hudson v. Swift, 20 Johns. 24; Lantry v. Parks, 8 Cowen, 63; Ellis v. Hamlin, 4 Taunt. 52; 11 Com. Law Rep. 251; 17 ditto, 340; Faxon v. Mansfield and Holbrook, Trustee, 2 Mass. Rep. 147; Stark v. Parker, 2 Pick. 267; Mores v. Stevens, 2 Pick. 332.

Hayward v. Leonard, 7 Pick. 181, was a contract to build a house on the plaintiffs land, at a certain price, and in a particular manner. The first count was upon the contract, the second quantum meruit for work and labor, and materials found. The court there decided that the count in quantum meruit might be sustained, and refer with approbation to 14 Mass. 282, and 2 Pick. 267. They say, the defendant saw the work go on from day to day, and found no fault, either with the work or materials, and may be presumed to have agreed to receive the work as it was done, &c.

The case of Wadleigh v. Sutton, an'e 15, is like the case in the 7th Pickering, and may be sustained without affecting the case under consideration.

On a full examination of the decisions upon this subject, no doubt it will be found, that in modern times courts have, to a certain extent, relaxed from the strict rules [484] formerly adopted, and have sustained a count in quantum meruit in cases where the plaintiff had not fully performed his contract. But all the cases where it has been so held may be distinguished from this case—none have gone the length of maintaining the present action.

Take the cases of contracts to build a house, a bridge, or highway, and all the variety of cases where the agreement consists in certain labor to be done, and materials provided—the contract is not fulfilled according to its terms—the house, or bridge, or highway are built, but not so well done as agreed. No action, therefore, will lie upon the contract. But the court in those cases say when the party for whose benefit the materials are furnished, and the labor done, sees the work from day to day, as it proceeds, sees also the materials, and suffers the building to go on without objection, or without putting an end to the work, it shall be considered that he accepts it—that he in fact consents to abandon the strict terms of the contract, and makes a new one, which is to pay what the labor and materials are reasonably worth.

So also in another class of cases, where an agreement is made for the sale and delivery of articles estimated by weight or measure—Suppose A agrees to deliver me 150 bushels of wheat, at $1,50 per bushel, to be paid when it is all delivered, but he delivers only fifty. If I keep the fifty bushels I make a new contract, and agree to pay what the fifty bushels are worth. But if I decline keeping it, and request A to take it away, he cannot force it upon me nolens, volens, and compel me to pay for it against my consent.

In the foregoing cases the person with whom the contract is made, it is presumed from his conduct, has consented, in the one case to receive less than the whole amount agreed to be delivered, and in the other to receive the labor and materials of a different kind, or in a different form and manner, from that stipulated. He has in short made a new contract, and abandoned the old, [485] and it is on this ground, and this only, that those decisions can be sustained.

But the case before the court is different from those where it hits been held a quantum meruit lies. It cannot be contended that the defendant consented to receive a part of the labor, and be accountable for such part; no contract to this effect can be implied. He had it not in his power to prevent this part execution, as in the case of building the house, bridge, &c. nor could he deliver back the labor done. If any contract is fastened upon him, it is put upon him against his consent. He made a contract for an entire year's work. He has never consented to receive and pay for any time less than a year. No such consent can be implied.

The cases before cited, in 2 Mass. 147; 2 Pick. 267; 12 Johns. 165; and 8 Cowen, 63; are as fully in point as if made for the occasion; and although courts in modern times may have succeeded in getting around the old law, in sundry cases, it is believed that the decisions last referred to yet stand, having never been overruled, bat remain in full force, and they seem fully to support this defence.

To hold out inducements to men to violate their contracts, when fairly entered into, is of immoral tendency, and whether the decisions have not gone quite far enough, and held out inducements enough to men disposed to disregard their engagements, may perhaps deserve consideration.

Wilson, for the plaintiff.

PARKER, J. delivered the opinion of the court.

It may be assumed, that the labor performed by the plaintiff, and for which he seeks to recover a compensation in this action, was commenced under a special contract to labor for the defendant the term of one year, for the sum of one hundred and twenty dollars, and that the [486] plaintiff has labored but a portion of that time, and has voluntarily failed to complete the entire contract.

It is clear, then, that he is not entitled to recover upon the contract itself, because the service, which was to entitle him to the sum agreed upon, has never been performed.

But the question arises, can the plaintiff, under these circumstances, recover a reasonable sum for the service he has actually performed, under the count in quantum meruit.

Upon this, and questions of a similar nature, the decisions to be found in the books are not easily reconciled.

It has been held, upon contracts of this kind for labor to be performed at a specified price, that the party who voluntarily fails to fulfil the contract by performing the whole labor contracted for, is not entitled to recover any thing for the labor actually performed, however much he may have done towards the performance, and this has been considered the settled rule of law upon this subject.

2 Pick. 267, Stark v. Parker; 2 Mass. 147, Faxon v. Mansfield; 12 Johns. 165, McMillen v. Vanderclip; 13 Johns. 94, Jennings v. Camp; 19 Johns, 337, Reab v. Moor; 8 Cowen, 63, Lantry v. Parks; 9 Barn. & Cres. 92, Sinclair v. Bowles; 2 Stark. Rep. 256, Spain v. Arnott.

That such rule in its operation may be very unequal, not to say unjust, is apparent.

A party who contracts to perform certain specified labor, and who breaks his contract in the first instance, without any attempt to perform it, can only be made liable to pay the damages which the other party has sustained by reason of such non performance, which in many instances may be trifling—whereas a party who in good faith has entered upon the performance of his contract, and nearly completed it, and then abandoned the further performance—although the other party has had the full benefit of all that has been done, and has perhaps sustained no actual damage—is in fact subjected to [487] a loss of all which has been performed, in the nature of damages for the non fulfilment of the remainder, upon the technical rule, that the contract must be fully performed in order to a recovery of any part of the compensation.

By the operation of this rule, then, the party who attempts performance may be placed in a much worse situation than he who wholly disregards his contract, and the other party may receive much more, by the breach of the contract, than the injury which he has sustained by such breach, and more than he could be entitled to were he seeking to recover damages by an action.

The case before us presents an illustration. Had the plaintiff in this case never entered upon the performance of his contract, the damage could not probably have been greater than some small expense and trouble incurred in procuring another to do the labor which he had contracted to perform. But having entered upon the performance, and labored nine and a half months, the value of which labor to the defendant as found by the jury is $95, if the defendant can succeed in this defence, he in fact receives nearly five sixths of the value of a whole year's labor, by reason of the breach of contract by the plaintiff a sum not only utterly disproportionate to any probable, not to say possible damage which could have resulted from the neglect of the plaintiff to continue the remaining two and an half months, but altogether beyond any damage which could have been recovered by the defendant, had the plaintiff done nothing towards the fulfillment of his contract.

Another illustration is furnished in Lantry v. Parks, 8 Cowen, 83. There the defendant hired the plaintiff for a year, at ten dollars per month. The plaintiff worked ten and an half months, and then left saying he would work no more for him. This was on Saturday—on Monday the plaintiff returned, and offered to resume his work, but the defendant said he would employ him no longer. [488] The court held that the refusal of the defendant on Saturday was a violation of his contract, and that he could recover nothing for the labor performed.

There are other cases, however, in which principles have been adopted leading to a different result.

It is said, that where a party contracts to perform certain work, and to furnish materials, as, for instance, to build a house, and the work is done, but with some variations from the mode prescribed by the contract, yet if the other party has the benefit of the labor and materials he should be bound to pay so much as they are reasonably worth. 2 Stark. Ev. 97, 98; 7 Pick. 181, Hayward v. Leonard; 8 Pick. 178, Smith v. First Cong. Meeting House in Lowell; 4 Cowen, 564, Jewell v. Schroeppel; 7 Green. 78, Hayden v. Madison; Bull. N. P. 139; 4 Bos. & Pul. 355; 10 Johns. 36; 13 Johns. 97; 7 East, 479.

A different doctrine seems to have been holden in Ellis v. Hamlen, 3 Taunt. 52, and it is apparent, in such cases, that if the house has not been built in the manner specified in the contract, the work has not been done. The party has no more performed what he contracted to perform, than he who has contracted to labor for a certain period, and failed to complete the time.

It is in truth virtually conceded in such cases that the work has not been clone, for if it had been, the party performing it would be entitled to recover upon the contract itself, which it is held he cannot do.

Those cases arc not to be distinguished, in principle, from the present, unless it be in the circumstance, that where the party has contracted to furnish materials, and do certain labor, as to build a house in a specified manner, if it is not done according to the contract, the party for whom it is built may refuse to receive it—elect to take no benefit from what has been performed—and therefore if he does receive, he shall be bound to pay the value—whereas in a contract for labor, merely, from day to day, the party is continually receiving the benefit of the con [489] tract under an expectation that it will be fulfilled, and  cannot, upon the breach of it, have an election to refuse to receive what has been done, and thus discharge himself from payment.

But we think this difference in the nature of the contracts does not justify the application of a different rule in relation to them.

The party who contracts for labor merely, for a certain period, does so with full knowledge that he must, from the nature of the case, be accepting part performance from day to day, if the other party commences the performance, and with knowledge also that the other may eventually fail of completing the entire term.

If under such circumstances he actually receives a benefit from the labor performed, over and above the damage occasioned by the failure to complete, there is as much reason why lie should pay the reasonable worth of what has thus been done for his benefit, as there is when he enters and occupies the house which has been built for him, but not according to the stipulations of the contract, and which he perhaps enters, not because he is satisfied with what has been done, but because circumstances compel him to accept it such as it is, that he should pay for the value of the house.

Where goods are sold upon a special contract as to their nature, quality, and price, and have been used before their inferiority has been discovered, or other circumstances have occurred which have rendered it impracticable or inconvenient for the vendee to rescind the contract in toto, it seems to have been the practice formerly to allow the vendor to recover the stipulated price, and the vendee recovered by a cross action damages for the breach of the contract.

"But according to the later and more convenient practice, the vendee in such case is allowed, in an action for the price, to give evidence of the inferiority of the goods in reduction of damages, and the plaintiff who has broken his contract is not entitled [490] to recover more than the value of the benefits which the Turner, defendant has actually derived from the goods; and where the latter has derived no benefit, the plaintiff cannot recover at all."

2 Stark. Ev. 640, 642; 1 Starkie's Rep. 107, Okell v. Smith.

So where a person contracts for the purchase of a quantity of merchandize, at a certain price, and receives a delivery of part only, and lie keeps that part, without any offer of a return, it has been held that he must pay the value of it. 5 Barn. & Cres. Shipton v. Casson; Com. Dig. Action F. Baker v. Sutton; 1 Camp. 55, note.

A different opinion seems to have been entertained, 5 Bos. & Pul. 61, Waddington v. Oliver, and a different decision was had, 2 Stark. Rep. 281, Walker v. Dixon.

There is a close analogy between all these classes of cases, in which such diverse decisions have been made.

If the party who has contracted to receive merchandize, takes a part and uses it, in expectation that the whole will be delivered, which is never done, there seems to be no greater reason that he should pay for what he has received, than there is that the party who has received labor in part, under similar circumstances, should pay the value of what has been done for his benefit.

It is said, that in those cases where the plaintiff has been permitted to recover there was an acceptance of what had been done. The answer is, that where the contract is to labor from clay to day, for a certain period, the party for whom the labor is done in truth stipulates to receive it from day to day, as it is performed, and although the other may not eventually do all he has contracted to do, there has been, necessarily, an acceptance of what has been done in pursuance of the contract, and the party must have understood when he made the contract that there was to be such acceptance.

If then the party stipulates in the outset to receive part performance from time to time, with a knowledge that the whole may not be completed, we see no reason [491] why he should not equally he holden to pay for the amount of value received, as where lie afterwards takes  the benefit of what has been done, with a knowledge that the whole which was contracted for has not been performed.

In neither case has the contract been performed. In neither can an action be sustained on the original contract.

In both the party has assented to receive what is done. The only difference is, that in the one case the assent is prior, with a knowledge that all may not be performed, in the other it is subsequent, with a knowledge that the whole has not been accomplished.

We have no hesitation in holding that the same rule should be applied to both classes of cases, especially, as the operation of the rule will be to make the party who has failed to fulfil his contract, liable to such amount of damages as the other party has sustained, instead of subjecting him to an entire loss for a partial failure, and thus making the amount received in many cases wholly disproportionate to the injury. 1 Saund. 320, c; 2 Stark. Evid. 643.

It is as "hard upon the plaintiff to preclude him from recovering at all, because he has failed as to part of his entire undertaking," where his contract is to labor for a certain period, as it can be in any other description of contract, provided the defendant has received a benefit and value from the labor actually performed.

We, hold then, that where a party undertakes to pay upon a special contract for the performance of labor, or the furnishing of materials, he is not to be charged upon, such special agreement until the money is earned according to the terms of it, and where the parties have made an express contract the law will not imply and raise a contract different from that which the parties have entered into, except upon some farther transaction between the parties.

[492] In case of a failure to perform such special contract, by the default of the party contracting to do the service, if the money is not due by the terms of the special agreement he is not entitled to recover for his labor, or for the materials furnished, unless the other party receives what has been done, or furnished, and upon the whole case derives a benefit from it. 14 Mass. 282, Taft v. Montague; 2 Stark. Ev. 644.

But if, where a contract is made of such a character, a party actually receives labor, or materials, and thereby derives a benefit and advantage, over and above the damage which has resulted from the breach of the contract by the other party, the labor actually done, and the value received, furnish a new consideration, and the law thereupon raises a promise to pay to the extent of the reasonable worth of such excess. This may be considered as making a new case, one not within the original agreement, and the party is entitled to "recover on his new case, for the work done, not as agreed, but yet accepted by the defendant." 1 Dane's Abr. 224.

If on such failure to perform the whole, the nature of the contract be such that the employer can reject what has been done, and refuse to receive any benefit from the part performance, he is entitled so to do, and in such case is not liable to be charged, unless he has before assented to and accepted of what has been done, however much the other party may have done towards the performance, lie has in such case received nothing, and having contracted to receive nothing but the entire matter contracted for, he is not bound to pay, because his express promise was only to pay on receiving the whole, and having actually received nothing the law cannot and plight not to raise an implied promise to pay. But where the party receives value—takes and uses the materials, or has advantage from the labor, he is liable to pay the reasonable worth of what he has received. 1 Camp. 38, Farnsworth v. Garrard. And the rule is the same wheth [493] er it was received and accepted by the assent of the party prior to the breach, under a contract by which, from its nature, he was to receive labor, from time to time until the completion of the whole contract; or whether it was received and accepted by an assent subsequent to the performance of all which was in fact done. If he received it under such circumstances as precluded him from rejecting it afterwards, that does not alter the case—it has still been received by his assent.

In fact we think the technical reasoning, that the performance of the whole labor is a condition precedent, and the right to recover any thing dependent upon it—that the contract being entire there can be no apportionment—and that there being an express contract no other can be implied, even upon the subsequent performance of service—is not properly applicable to this species of contract, where a beneficial service has been actually performed; for we have abundant reason to believe, that the general understanding of the community is, that the hired laborer shall be entitled to compensation for the service actually performed, though he do not continue the entire term contracted for, and such contracts must be presumed to be made with reference to that understanding, unless an express stipulation shows the contrary.

Where a beneficial service has been performed and received, therefore, under contracts of this kind, the mutual agreements cannot be considered as going to the whole of the consideration, so as to make them mutual conditions, the one precedent to the other, without a specific proviso to that effect. 1 H. Black. 273, note, Boone v. Eyre; 6 D. & E. 570, Campbell v. Jones; 10 East, 295, Ritchie v. Atkinson; 4 Taunt. 745, Burn v. Miller.

It is easy, if parties so choose, to provide by an express agreement that nothing shall be earned, if the laborer leaves his employer without having performed the whole service contemplated, and then there can be no [494] pretence for a recovery if he voluntarily deserts the service before the expiration of the time.

The amount, however, for which the employer ought to be charged, where the laborer abandons his contract, is only the reasonable worth, or the amount of advantage lie receives upon the whole transaction, (ante 15, Wadleigh v. Sutton,) and, in estimating the value of the labor, the contract price for the service cannot be exceeded. 7 Green. 78; 4 Wendell, 285, Dubois v. Delaware & Hudson Canal Company; 7 Wend. 121, Koon v. Greenman.

If a person makes a contract fairly he is entitled to have it fully performed, and if this is not done he is entitled to damages. He may maintain a suit to recover the amount of damage sustained by the non performance.

The benefit and advantage which the party takes by the labor, therefore, is the amount of value which he receives, if any, after deducting the amount of damage; and if he elects to put this in defence he is entitled so to do, and the implied promise which (he law will raise, in such case, is to pay such amount of the stipulated price for the whole labor, as remains after deducting what it would cost to procure a completion of the residue of the service, and also any damage which has been sustained by reason of the non fulfilment of the contract.

If in such case it be found that the damages are equal to, or greater than the amount of the labor performed so that the employer, having a right to the full performance of the contract, has not upon the whole case received a beneficial service, the plaintiff cannot recover.

This rule, by binding the employer to pay the value of the service he actually receives, and the laborer to answer in damages where lie docs not complete the entire contract, will leave no temptation to the former lo drive the laborer from his service, near the close of his term, by ill treatment, in order to escape from payment; nor to the latter in desert his service before the stipulated time, without a sufficient  reason; and it will be in most in [495] stances settle the whole controversy in one action, and prevent a multiplicity of suits and cross actions.

There may be instances, however, where the damage occasioned is much greater than the value of the labor performed, and if the party elects to permit himself to be charged for the value of the labor, without interposing the damages in defence, he is entitled to do so, and may have an action to recover his damages for the nonperformance, whatever, they may be. 1 Mason's Rep. Crowninshield v. Robinson.

And he may commence such action at any time after the contract is broken, notwithstanding no suit has been instituted against him; but if he elects to have the damages considered in the action against him, he must be understood as conceding that they are not to be extended beyond the amount of what he has received, and he cannot afterwards sustain an action for farther damages.

Applying the principles thus laid down, to this case, the plaintiff is entitled to judgment on the verdict.

The defendant sets up a mere breach of the contract in defence of the action, but this cannot avail him. He does not appear to have offered evidence to show that he was damnified by such breach, or to have asked that a deduction should be made upon that account. The direction to the jury was therefore correct, that the plaintiff was entitled to recover as much as the labor performed was reasonably worth, and the jury appear to have allowed a pro rata compensation, for the time which the plaintiff labored in the defendant's service.

As the defendant has not claimed or had any adjustment of damages, for the breach of the contract, in this action, if he has actually sustained damage he is still entitled to a suit to recover the amount.

Whether it is not necessary, in cases of this kind, that notice should be given to the employer that the contract is abandoned, with an otter of adjustment and demand of payment; and whether the laborer must not wait until [496] the time when the money would have been due according to the contract, before commencing an action, (5 B. & P. 61) are questions not necessary to be settled in this case, no objections of that nature having been taken here.

Judgment on the verdict.

COTTER, C. J., BOGDANSKI, PETERS, HEALEY and PARSKEY, JS.

[502] Walter A. Stewart, Jr., for the appellant (defendant).

Joel Schlossberg, for the appellees (plaintiffs).

PETERS, J.

This case concerns the right of purchasers of real property, after their own default, to recover moneys paid at the time of execution of a valid contract of sale. The plaintiffs, Euel D. Vines and his wife Etta Vines, contracted, on July 11, 1973, to buy Unit No. 10, Orchard Hills Condominium, New Canaan, from the defendant Orchard Hills, Inc. for $78,800. On or before that date, they had paid the defendant $7880 as a down payment toward the purchase. Alleging that the sale of the property was never consummated, the plaintiffs sought to recover their down payment. The trial court, I. Levine, J., overruled the defendant's demurrer to the plaintiffs' amended complaint; subsequently, after a hearing, the trial court, Novack, J., rendered judgment for the plaintiffs for $7880 plus interest. The defendant's appeal [503] maintains that its demurrer should have been sustained, that its liquidated damages clause should have been enforced, and that evidence of the value of the property at the time of the trial should have been excluded.

The facts underlying this litigation are straightforward and undisputed. When the purchasers contracted to buy their condominium in July, 1973, they paid $7880, a sum which the contract of sale designated as liquidated damages.^[1] The purchasers decided not to take title to the condominium because Euel D. Vines was transferred by his employer to New Jersey; the Vines so informed the seller by a letter dated January 4, 1974. There has never been any claim that the seller has failed, in any respect, to conform to his obligations under the contract, nor does the complaint allege that the purchasers are legally excused from their performance under the contract. In short, it is the purchasers and not the seller whose breach precipitated the present cause of action.

In the proceedings below, the purchasers established that the value of the condominium that they had agreed to buy for $78,800 in 1973 had, by the time of the trial in 1979, a fair market value of $160,000. The trial court relied on this figure to conclude that, because the seller had gained what it characterized as a windfall of approximately $80,000, the purchasers were entitled to recover their down payment of $7880. Neither the purchasers nor the seller proffered any evidence at the [504] trial to show the market value of the condominium at the time of the purchasers' breach of their contract or the damages sustained by the seller as a result of that breach.

The seller's principal argument on this appeal is that the trial court improperly disregarded the parties' valid liquidated damages clause. That claim is pursued both by a renewal of the seller's position that the purchasers' complaint was demurrable and by an argument on the merits of the evidence presented at the trial. As to the demurrer, now denominated a motion to strike by Practice Book, 1978, § 152, we find no error. Whether a party may recover payments made despite its own default and despite its agreement to a liquidated damages clause is a question that presents issues of fact which transcend the legal sufficiency of the complaint, as the trial itself demonstrated. Putnam, Coffin & Burr, Inc. v. Halpern, 154 Conn. 507, 517, 227 A.2d 83 (1967); 1 Stephenson, Conn. Civ. Proc. § 119b (1970). The trial court was, however, in error in its conclusion that the evidence before it was sufficient to sustain a judgment in favor of the purchasers.

The ultimate issue on this appeal is the enforceability of a liquidated damages clause as a defense to a claim of restitution by purchasers in default on a land sale contract. Although the parties, both in the trial court and here, have focused on the liquidated damages clause per se, we must first consider when, if ever, purchasers who are themselves in breach of a valid contract of sale may affirmatively invoke the assistance of judicial process to recover back moneys paid to, and withheld by, their seller.

[505] I

The right of a contracting party, despite his default, to seek restitution for benefits conferred and allegedly unjustly retained has been much disputed in the legal literature and in the case law. See 5A Corbin, Contracts §§ 1122-1135 (1964); Dobbs, Remedies § 12.14 (1973); 1 Palmer, Restitution, c. 5 (1978); 12 Williston, Contracts §§ 1473 through 1478 (3d Ed. 1970); 5 Williston, Contracts § 791 (3d Ed. 1961); Lee, "The Plaintiff in Default," 19 Vand. L. Rev. 1023 (1965-66); Talbott, "Restitution for the Defaulting Buyer," 9 W. Res. L. Rev. 445 (1958); annot., "Vendee's Recovery of Purchase Money," 31 A.L.R.2d, pp. 8-131 (1953). Although earlier cases often refused to permit a party to bring an action that could be said to be based on his own breach; see, e.g., Hansbrough v. Peck, 72 U.S. (5 Wall.) 497, 506, 18 L. Ed. 520 (1867); Wheeler v. Mather, 56 Ill. 241, 246-47 (1870); Miller v. Snedeker, 257 Minn. 204, 217-18, 101 N.W.2d 213 (1960); Ketchum & Sweet v. Evertson, 13 Johns. 359, 365 (N.Y. 1816); Dluge v. Whiteson, 292 Pa. 334, 335-36, 141 A. 230 (1928); many of the more recent cases support restitution in order to prevent unjust enrichment and to avoid forfeiture. See, e.g., Hook v. Bomar, 320 F.2d 536, 541 (5th Cir. 1963); Amtorg Trading Corporation v. Miehle Printing Press & Mfg. Co., 206 F.2d 103, 108 (2d Cir. 1953); Honey v. Henry's Franchise Leasing Corporation, 64 Cal. 2d 801, 803, 415 P.2d 833 (1966); Freedman v. Rector, Wardens & Vestrymen of St. Matthias Parish, 37 Cal. 2d 16, 20, 230 P.2d 629 (1951); Haas v. Crisp Realty Co., 65 So. 2d 765, 768 (Fla. 1953); Nichols v. Knowles, 87 Idaho 550, 556, 394 P.2d 630 (1964); Graves v. Cupic, 75 [506] Idaho 451, 456-59, 272 P.2d 1020 (1954); Woodliff v. Al Parker Securities Co., 233 Mich. 154, 156, 206 N.W. 499 (1925); Newcomb v. Ray, 99 N.H. 463, 467, 114 A.2d 882 (1955); Massey v. Love, 478 P.2d 948, 950-51 (Okla. 1971); DeLeon v. Aldrete, 398 S.W.2d 160, 163-64 (Tex. 1966); Perkins v. Spencer, 121 Utah 468, 475-77, 243 P.2d 446 (1952); Schwartz v. Syver, 264 Wis. 526, 531, 533, 59 N.W.2d 489 (1953); and see Restatement (Second), Contracts § 388 (Tent. Draft No. 14, 1979).

A variety of considerations, some practical and some theoretical, underlie this shift in attitude toward the plaintiff in breach. As Professor Corbin pointed out in his seminal article, "The Right of a Defaulting Vendee to the Restitution of Instalments Paid," 40 Yale L.J. 1013 (1931), the anomalous result of denying any remedy to the plaintiff in breach is to punish more severely the person who has partially performed, often in good faith, than the person who has entirely disregarded his contractual obligations from the outset. Only partial performance triggers a claim for restitution, and partial performance will not, in the ordinary course of events, have been more injurious to the innocent party than total nonperformance. Recognition of a claim in restitution is, furthermore, consistent with the economic functions that the law of contracts is designed to serve. See Kessler & Gilmore, Contracts, pp. 4-6 (1970). The principal purpose of remedies for the breach of contract is to provide compensation for loss; see Restatement (Second), Contracts, c. 16, Introductory Note (Tent. Draft No. 14, 1979); Farnsworth, "Legal Remedies for Breach of Contract," 70 Colum. L. Rev. 1145 (1970); and therefore a party injured by breach [507] of contract is entitled to retain nothing in excess of that sum which compensates him for the loss of his bargain. Indeed, there are those who argue that repudiation of contractual obligations is socially desirable, and should be encouraged, whenever gain to the party in breach exceeds loss to the party injured by breach. Birmingham, "Breach of Contract, Damage Measures, and Economic Efficiency," 24 Rut. L. Rev. 273, 284 (1970); Posner, Economic Analysis of Law § 4.9, pp. 89-90 (2d Ed. 1977). To assign such primacy to inferences drawn from economic models requires great confidence that the person injured by breach will encounter no substantial difficulties in establishing the losses for which he is entitled to be compensated. It is not necessary to push the principle of compensatory damages that far, or to disregard entirely the desirability of maintaining some incentives for the performance of promises. A claim in restitution, although legal in form, is equitable in nature, and permits a trial court to balance the equities, to take into account a variety of competing principles to determine whether the defendant has been unjustly enriched. "Even though we adhere to the rule that only compensatory damages are to be awarded, there are other important questions of policy to be considered. One is whether aid is to be given to one who breaches his contract, particularly when the breach is deliberate and without moral justification. Another is whether restitution can be administered without leaving the innocent party with uncompensated damages." 1 Palmer, Restitution § 5.1, p. 574 (1978).

Recognition that there are circumstances under which a defaulting purchaser may be entitled to restitution for benefits conferred upon the innocent [508] seller of land is consistent with parallel developments elsewhere in the law of contracts. Judicial resistance to enforcement of forfeitures has of course long been a commonplace, particularly with regard to contract clauses purporting to liquidate damages. See 5 Corbin, Contracts § 1058 (1964); 5 Williston, Contracts § 788 (3d Ed. 1961). Despite the deference afforded by nineteenth-century courts to freedom of contract in other areas; see Weisbrod, The Boundaries of Utopia, pp. 165-67, 210-11 (1980); clauses that might impose forfeitures were invariably carefully scrutinized and frequently denounced as penal. Contract clauses permitting retention of partial payments pursuant to contracts of conditional sale temporarily escaped this obloquy, on the theory that a seller's retention of a property interest in his goods entitled him, upon any default by the buyer, both to retake his goods and to retain any moneys paid. See 1 Gilmore, Security Interests in Personal Property § 3.2 (1965); 3 Jones, Chattel Mortgages and Conditional Sales §§ 1378, 1382 (6th Ed. 1933); Glenn, "The Conditional Sale at Common Law and as a Statutory Security," 25 Va. L. Rev. 559, 572 (1939). The law of conditional sales contracts came, however, in this century, to recognize that avoidance of forfeiture was more important than retention of title, so that conditional sales, like chattel mortgages, were enforced in such a way as to preserve the debtor's equity. See 1 Gilmore, supra, 68; Glenn, supra, 580. In a similar vein, in real property transactions courts have long protected a debtor's equity from forfeiture by allowing the debtor to show by parol evidence that a deed although absolute on its face was actually intended to be a mortgage. See Osborne, Mortgages §§ 72-73 (1970).

[509] In this state, at the turn of the century, in Pierce v. Staub, 78 Conn. 459, 466, 62 A. 760 (1906), this court acknowledged the equitable claim of a purchaser in breach to recover moneys paid under a contract to purchase real property. Pierce v. Staub is distinguishable from the case before us, because the court there found (p. 465) that the parties had, after the buyer's breach, rescinded the contracts in question. In view of this rescission, the purchaser's widow was held to be entitled to a return of the $60,000 paid on the purchase price of $150,000. Pierce v. Staub was thereafter relied upon in another case involving rescission after termination of a contract, Remington Arms U.M.C. Co. v. Gaynor Mfg. Co., 98 Conn. 721, 734-35, 120 A. 572 (1923), and has, since then, been cited for the proposition that courts of law may, on suitable occasions, afford equitable relief from forfeiture. Menzies v. Fisher, 165 Conn. 338, 357, 334 A.2d 452 (1973); Elberton Cotton Mills, Inc. v. Indemnity Ins. Co., 108 Conn. 707, 714, 145 A. 33 (1929); Baurer v. Devenis, 99 Conn. 203, 216, 121 A. 566 (1923). Apart from Pierce v. Staub, we have never directly decided whether a purchaser of real estate may, despite his breach, recover payments made to his seller. But Pierce v. Staub is an impressive, and an impressively early, guidepost toward permitting such a cause of action. The court's narrow reliance on the possibly artificial conclusion of mutual rescission should not obscure the breadth of its language deploring forfeiture. Pierce v. Staub, supra, 466. We therefore conclude that a purchaser whose breach is not willful has a restitutionary claim to recover moneys paid that unjustly enrich his seller. In this case, no one has alleged that the purchasers' breach, arising out of a transfer to a more distant [510] place of employment, should be deemed to have been willful. The trial court was therefore not in error in initially overruling the seller's demurrer and entertaining the purchasers' cause of action.

II

The purchaser's right to recover in restitution requires the purchaser to establish that the seller has been unjustly enriched. The purchaser must show more than that the contract has come to an end and that the seller retains moneys paid pursuant to the contract. To prove unjust enrichment, in the ordinary case, the purchaser, because he is the party in breach, must prove that the damages suffered by his seller are less than the moneys received from the purchaser. Schwasnick v. Blandin, 65 F.2d 354, 358 (2d Cir. 1933); Kitchin v. Mori, 437 P.2d 865, 866 (Nev. 1968). It may not be easy for the purchaser to prove the extent of the seller's damages, it may even be strategically advantageous for the seller to come forward with relevant evidence of the losses he has incurred and may expect to incur on account of the buyer's breach. Nonetheless, only if the breaching party satisfies his burden of proof that the innocent party has sustained a net gain may a claim for unjust enrichment be sustained. Dobbs, Remedies § 12.14 (1973); 1 Palmer, Restitution § 5.4 (1978).

In the case before us, the parties themselves stipulated in the contract of sale that the purchasers' down payment of 10 percent of the purchase price represents the damages that would be likely to flow from the purchasers' breach. The question then becomes whether the purchasers have demonstrated the seller's unjust enrichment in the face of the liquidated damages clause to which they agreed.

[511] This is not a suitable occasion for detailed review of the checkered history of liquidated damages clauses. Despite the judicial resistance that such clauses have encountered in the past; 5 Corbin, Contracts § 1066 (1964); 5 Williston, Contracts § 788 (3d Ed. 1961); Goetz & Scott, "Liquidated Damages, Penalties and the Just Compensation Principle: Some Notes on an Enforcement Model and a Theory of Efficient Breach," 77 Colum. L. Rev. 554-56 (1977); Macneil, "Power of Contract and Agreed Remedies," 47 Cornell L. Q. 495, 507-508 (1962); this court has recognized the principle that there are circumstances that justify private agreements to supplant judicially determined remedies for breach of contract. Berger v. Shanahan, 142 Conn. 726, 731-32, 118 A.2d 311 (1955); King Motors v. Delfino, 136 Conn. 496, 498, 72 A.2d 233 (1950); cf. General Statutes § 42a-2-718 (1); and Restatement (Second), Contracts § 370 (Tent. Draft No. 14, 1979). This court has however refused to enforce an otherwise valid liquidated damages clause upon a finding that no damages whatsoever ensued from the particular breach of contract that actually occurred. Norwalk Door Closer Co. v. Eagle Lock & Screw Co., 153 Conn. 681, 689, 220 A.2d 263 (1966).

Most of the litigation concerning liquidated damages clauses arises in the context of an affirmative action by the party injured by breach to enforce the clause in order to recover the amount therein stipulated. In such cases, the burden of persuasion about the enforceability of the clause naturally rests with its proponent. See, e.g., Norwalk Door Closer Co. v. Eagle Lock & Screw Co., supra, 688. In the case before us, by contrast, where the plaintiffs are themselves in default, the plaintiffs bear [512] the burden of showing that the clause is invalid and unenforceable. See Frank Towers Corporation v. Laviana, 140 Conn. 45, 53-54, 97 A.2d 567 (1953); 5A Corbin, Contracts § 1132, p. 64 (1964); Macneil, supra, 517. It is not unreasonable in these circumstances to presume that a liquidated damages clause that is appropriately limited in amount bears a reasonable relationship to the damages that the seller has actually suffered. See Restatement (Second), Contracts § 388, esp. subsection (2) (Tent. Draft No. 14, 1979).^[2] The seller's damages, as Professor Palmer points out, include not only his expectation damages suffered through loss of his bargain, and his incidental damages such as broker's commissions, but also less quantifiable costs arising out of retention of real property beyond the time of the originally contemplated sale. 1 Palmer, Restitution §§ 5.4, 5.8 (1978). See also Goetz & Scott, supra, 577. A liquidated damages clause allowing the seller to retain 10 percent of the contract price as earnest money is presumptively a reasonable allocation of the risks associated with default. See Wilkins v. Birnbaum, 278 A.2d 829, 831 (Del. 1971); [513] Oliver v. Lawson, 92 N.J. Super. 331, 336, 223 A.2d 355 (1966); 1 Palmer, supra, § 5.1, p. 587.^[3]

The presumption of validity that attaches to a clause liquidating the seller's damages at 10 percent of the contract price in the event of the purchaser's unexcused nonperformance is, like most other presumptions, rebuttable. The purchaser, despite his default, is free to prove that the contract, or any part thereof, was the product of fraud or mistake or unconscionability. Cf. Hamm v. Taylor, 180 Conn. 491, 495-96, 429 A.2d 946 (1980). In the alternative, the purchaser is free to offer evidence that his breach in fact caused the seller no damages or damages substantially less than the amount stipulated as liquidated damages. See Norwalk Door Closer Co. v. Eagle Lock & Screw Co., supra, 689.

The trial court concluded that the plaintiff purchasers had successfully invoked the principle of Norwalk Door Closer Co. v. Eagle Lock & Screw Co. by presenting evidence of increase in the value of the real property between the date of the contract of sale and the date of the trial. That conclusion was in error. The relevant time at which to measure the seller's damages is the time of breach. Zirinsky v. Sheehan, 413 F.2d 481, 489 (8th Cir. 1969); Gordon v. Indusco Management Corporation, 164 Conn. 262, 274, 320 A.2d 811 (1973). Benefits to the seller that are attributable to a rising market subsequent to breach rightfully accrue to the seller. Beckley v. Munson, 22 Conn. 299, 313 [514] (1853); Baffa v. Johnson, 35 Cal. 2d 36, 39-40, 216 P.2d 13 (1950). There was no evidence before the court to demonstrate that the seller was not injured at the time of the purchasers' breach by their failure then to consummate the contract. Neither the seller's status as a developer of a condominium project nor the absence of willfulness on the part of the purchasers furnishes a justification for disregarding the liquidated damages clause, although these factors may play some role in the ultimate determination of whether the seller was in fact unjustly enriched by the down payment he retained.

Because the availability of, and the limits on, restitutionary claims by a plaintiff in default have not previously been clearly spelled out in our cases, it is appropriate to afford to the purchasers herein another opportunity to proffer evidence to substantiate their claim. What showing the purchasers must make cannot be spelled out with specificity in view of the sparsity of the present record. The purchasers may be able to demonstrate that the condominium could, at the time of their breach, have been resold at a price sufficiently higher than their contract price to obviate any loss of profits and to compensate the seller for any incidental and consequential damages. Alternatively, the purchasers may be able to present evidence of unconscionability or of excuse, to avoid the applicability of the liquidated damages clause altogether. The plaintiffs' burden of proof is not an easy one to sustain, but they are entitled to their day in court.

There is error, the judgment is set aside, and the case is remanded for further proceedings in conformity with this opinion.

In this opinion the other judges concurred.

[1] Paragraph 9 of the contract of sale provided: "DEFAULT: In the event Purchaser fails to perform any of the obligations herein imposed on the Purchaser, the Seller performing all obligations herein imposed on the Seller, the Seller shall retain all sums of money paid under this Contract, as liquidated damages, and all rights and liabilities of the parties hereto shall be at an end."

[2]Section 388 of the Restatement (Second) of Contracts (Tent. Draft No. 14, 1979) provides: "RESTITUTION IN FAVOR OF PARTY IN BREACH. (1) Subject to the rule stated in Subsection (2), if a party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by the other party's breach, the party in breach is entitled to restitution for any benefit that he has conferred on the injured party by way of part performance or reliance.

(2) To the extent that, under the manifested assent of the parties, a party's performance is to be retained in the case of breach, that party is not entitled to restitution if the value of the performance as liquidated damages is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss."

[3] We have, in another context, viewed 10 percent as a reasonable cutoff point to determine presumptively what inferences are to be drawn from ambiguous commercial undertakings. See Granite Equipment Leasing Corporation v. Acme Pump Co., 165 Conn. 364, 368, 335 A.2d 294 (1973).

Anthony T. Antinozzi, Corporation Counsel, for appellant.

Sidney Advocate for Public Service Mutual Insurance Company, respondent.

Frank H. Connelly for remaining respondents.

Judges JASEN, GABRIELLI, JONES, WACHTLER and STEVENS concur; Judge RABIN taking no part.

[471] Chief Judge BREITEL.

In this action to recover on a surety bond given to secure timely completion of some six buildings, the City of Rye, as obligee under the bond, seeks to recover the face amount of $100,000. The surety and the developers are defendants. Special Term denied the city's motion for summary judgment, and a divided Appellate Division affirmed the denial. In his concurring opinion at the Appellate Division, [472] Mr. Justice SHAPIRO reasoned that the bond was penal in nature and therefore not enforceable. The dissenters, in an opinion by Mr. Justice HOPKINS, would have sustained the city's contention that, as a governmental entity pursuing its governmental responsibilities, it had the power, without violating any public policy, to exact a substantial bond to secure performance of obligations imposed on a developer by the zoning ordinance and action taken under it.

The order of the Appellate Division denying plaintiff city's motion for summary judgment should be affirmed. The bond of $100,000 posted by the developers with the city to ensure completion of the remaining six "peripheral" buildings by a date certain did not reflect a reasonable estimate of probable monetary harm or damages to the city, but a penalty, and, in the absence of statutory authority for the penal bond, may not be recovered upon.

The developers, under a plan approved by the City Planning Commission, had constructed six luxury co-operative apartment buildings and were to construct six more. In order to obtain certificates of occupancy for the six completed buildings the developers were required to post a bond with the city to ensure completion of the remaining six buildings. By letter agreement with the city in the fall of 1967, they agreed to post a $100,000 bond and to pay $200 per day for each day after April 1, 1971 that the six remaining buildings were not completed, up to the aggregate amount of the bond. More than 500 days have passed without the additional buildings having been completed within the time limit. The city seeks to recover the entire $100,000 amount of the bond.

Concededly, no statute authorizes the city to exact a penalty or forfeiture from the developers. If there were such a statute, the statutory penalty would undoubtedly be upheld (see, e.g., Lyman v. Perlmutter, 166 N.Y. 410, 413-415; Clark v. Barnard, 108 U. S. 436, 461; see, also, United States v. Zerbey, 271 U. S. 332, 340, and cases cited). Hence, general principles of contract law governing the enforceability of liquidated damage clauses should apply (cf. Priebe & Sons v. United States, 332 U. S. 407, 411; see 5 Williston, Contracts [3d ed.], § 775B, at p. 664). The sole issue, then, becomes whether the agreement exacted from the developers and the conditional bond supplied provide for a [473] penalty or for liquidated damages. If the agreement provides for a penalty or forfeiture without statutory authority, it is unenforceable. Where, however, damages flowing from a breach are difficult to ascertain, a provision fixing the damages in advance will be upheld if the amount is a reasonable measure of the anticipated probable harm (Ward v. Hudson Riv. Bldg. Co., 125 N.Y. 230, 235; Restatement, Contracts, § 339; 5 Corbin, Contracts, §§ 1059, 1063). If, on the other hand, the amount fixed is grossly disproportionate to the anticipated probable harm or if there were no anticipatable harm, the provision will not be enforced.

The harm which the city contends it would suffer by delay in construction is minimal, speculative, or simply not cognizable. The city urges that its inspectors and employees will be required to devote more time to the project than anticipated because it has taken extra years to complete. It also urges that it will lose tax revenues for the years the buildings are not completed. It contends, too, that it is harmed by a continuing violation of the height restrictions of its zoning ordinance. This is entailed because the 12 buildings in the entire complex vary in height between two and four stories; the ordinance sets a maximum average height of 30 feet for the complex; and the taller buildings, those higher than the allowable average, were built first. Only after all of the structures in the complex are built will the project comply with the average height requirement of the ordinance.

The most serious disappointments in expectation suffered by the city are not pecuniary in nature and therefore not measurable in monetary damages. The effect on increased inspectorial services or on tax revenue are not likely to be substantial and, in any event, are not developed in the record on summary judgment. There is nothing to show that either the sum of $200 per day or the aggregate amount of the bond bear any reasonable relationship to the pecuniary harm likely to be suffered or in fact suffered.

There is, as noted, no statutory authority for the city to exact harsh penal bonds from developers who are perforce dependent on approvals by local officials at the various stages of construction, and after construction for certificates of occupancy. For [474] municipalities, without statutory authorization or restriction, to condition perhaps arbitrarily the grant of building permits or certificates of occupancy on large penalty bonds raises potential for grave abuse. A developer, especially an outside developer, is rarely in a position to bargain on an equal basis with local officials, after completion of buildings rendered useless and an economic drain without a certificate of occupancy. Whether, and under what circumstances, the drastic remedy of penal bonds may be exacted is a matter best left to legislated authority, standards, and limitations.

There is no suggestion in this case that the developers' delay was purposeful. Apparently, the mortgage market "dried up" and the developers could not obtain additional financing for the remaining six buildings in the time planned. (The court is informed by the developers in their brief that, while this litigation has been pending, the remaining six buildings have almost been completed.)

Developers ask not only that the denial of summary judgment to the city be affirmed, but that summary judgment be granted to defendants dismissing the city's complaint. Since the city by this action sought, not actual damages, but only to recover the face amount of the bond, for the reasons discussed above, defendants perhaps might have been entitled to judgment dismissing the complaint. In denying the city's motion for summary judgment, the motion court and perhaps the Appellate Division, could have, but did not, grant summary judgment for defendants (see CPLR 3212, subd. [b]). Defendants, however, took no appeal from that determination. This court has no power to grant defendants, respondents on this appeal, affirmative relief (People v. Consolidated Edison Co. of N. Y., 34 N Y 2d 646, 648).

Accordingly, the order of the Appellate Division should be affirmed, without costs, and the question certified by that court answered in the affirmative.

Order affirmed, etc.

M. MULDOON ET AL., Respondents,

v.

MARGARET LYNCH, Appelant. 

No. 8,729.

March 23, 1885. 

BUILDING CONTRACT — DELAY IN COMPLETION—PENALTY — FORFEITURE— LIQUIDATED DAMAGES.—A clause in a contract for the erection of a marble tomb, requiring its completion by the contractor within a stated time under forfeiture of $10 per day for each and every day's delay beyond such time, provides for the payment of a penalty, and not liquidated damages, since it was evidently intended as a spur, there being no actual damage.

APPEAL from a judgment of the Superior Court of the-city and county of San Francisco, and from an order refusing a new trial.

Action to enforce a contract. The facts are sufficiently stated in the opinion of the court.

Gunnison & Booth, and Charles F. Hanlon, for Appellant.

The actual damage that would have resulted from a breach of the contract by the plaintiff was impossible to be determined. Consequently, the parties had a right to agree upon a definite sum as liquidated damages. (Civil Code, § 1671; Fletcher v. [537] Dycke, 2 T. R. 32; Huband v. Grattan, 1 Al. & N. 389; Pettis v. Bloomer, 21 How. Pr. 317; Pearson y. Williams, 24 Wend. 245; Smith v. Smith, 4 Wend. 468; Cothad v. Talmage, 9 N. Y. 551; Bagley v. Peddie, 16 N. Y. 469; Streeter v. Bush, 25 Cal. 71; Green v. Price, 13 M. & W. 696; Hosmer v. True, 19 Barb. 106; Mundy v. Culver, 18 Barb. 336; Knapp v. Maltby, 13 Wend. 587; Coffee v. Meiggs, 9 Cal. 363; People v. Love, 19 Cal. 677; Holmes v. Holmes, 12 Barb. 147; Dakin v. Williams, 17 Wend. 447.) If the intention of the parties is to assess the amount, the mere use of the word “penalty” is no obstruction to the enforcement of the obligation. (2 Greenl. Ev., §§ 257, 259; People v. Love, 19 Cal. 677; Tayloe v. Sandiford, 7 Wheat. 13.)

A. N. Drown, for Respondents.

The forfeiture of ten dollars a day is merely a penalty, and not a provision for liquidated damages. (1 Sutherland on Damages, 480; White v. Arlith, 1 Bond, 319; Myers v. Hart, 40 Mich. 517; Robeson v. Whiteside, 16 S. & E. 320.) The actual damages are not impracticable, or extremely difficult to fix. (Nash v. Hermosella, 9 Cal. 584; Van Buren v. Digges, 11 How. 461; Malone v. Hawley, 46 Cal. 409.) The expressed intention of the parties determines the sum as a penalty, and not as liquidated damages. ( White v. Arleth, 1 Bond. 325; Esmona v. Van Benschoten, 12 Barb. 375; Van Buren v. Digges, 11 How. 461; Stearns v. Barrett, 1 Pick. 443; Salters v. Ralph, 15 Abb. Pr. 273; Colwell v. Lawrence, 38 N. Y. 71.)

MYRICK, J.

The question involved in this appeal is whether a sum named in a contract as a forfeiture is to be regarded as liquidated damages or as a penalty. The plaintiffs and defendant executed a written contract, by which the plaintiffs were to furnish and complete certain improvements on the cemetery lot of defendant in a cemetery in San Francisco, viz., grading, brick-work, stone-work, monument, sarcophagus, etc., in which lot the remains of defendant's deceased husband had been interred. The monument was to be of the best article of hard Ravaccioni Italian marble. The amount to be paid for the whole was $18,788,—four installments, of $1,725 each, to be paid as the work progressed to the point of being ready for the reception of the monument, and the balance, $11,887, on the completion of the whole. The contract contained the following clause:

‘All the work, with the exception of monument, to be completed within four months from date of contract, and the balance in twelve months from the date of this contract, under forfeiture of ten dollars per day for each and every day beyond the stated time for completion.’

The monument was procured in Italy, but was delayed nearly two years in reaching the point of destination for the following reason: The monument was of four large blocks of marble; one of them was of the weight of 20 tons. The marble was transported from the quarry to a sea-port in Italy for shipment, and was there delayed waiting for a vessel. As one of the plaintiffs testified:

‘We had to wait until we got a ship. We got the Ottilio. It was the first vessel that left there for two years for this port. Owing to the size of the blocks the only way to bring them here was by ships directly from Italy; the largest block would not have been allowed on a railroad car.’

As soon as the marble reached San Francisco it was set up, and everything was according to the contract, without question being made, except as to the matter of time; that was the only point of controversy. The plaintiffs claim that defendant is indebted to them in the sum of $11,887, with interest from the day of the completion of the monument, and that the sum of $10 per day mentioned in the contract as a forfeiture is a penalty, and not matter of defense or setoff without proof of actual damage; while the defendant claims that the said sum of $10 per day is to be taken as liquidated damages, and, the same amounting to $7,820, is to be deducted from the sum of $11,887, leaving defendant indebted in the sum of $4,067 only. There is no doubt that parties to a contract may agree upon the amount which shall constitute the damage for its breach. It is declared in section 3301, Civil Code, that ‘no damages can be recovered for a breach of contract which are not clearly ascertainable in both their nature and origin;’ but section 1671 of the same Code declares that ‘the parties to a contract [538] may agree therein upon an amount which shall be presumed to be the amount of damages sustained by a breach thereof, when, from the nature of the case, it would be impracticable, or extremely difficult, to fix the actual damage.’ When parties have endeavored to contract with reference to damages,—when they have explicitly declared that a sum named by them shall be taken as stipulated damages,—it may be that such declaration would be taken as conclusive, and that courts would not attempt to relieve the losing party from his unfortunate or ill-advised engagement. But where it appears on the face of the contract that the sum named was intended by the parties to be considered as a penalty,—a spur,—courts will not enforce another construction, especially when the result would be the payment of a sum largely disproportionate to any reasonable idea of actual damage. The contract reads, ‘under forfeiture of ten dollars per day for each and every day beyond the stated time for completion.’ The general rule is that damages are and ought to be purely compensatory; they should be commensurate with the injury, neither more nor less. There is nothing in this case to indicate that the defendant has suffered any actual damage which can be measured or compensated by money. It is true, she had the right to contract to have the monument erected in memory of her deceased husband, and to have it at a certain time; and possibly the agreement might have been so drawn that her disappointment should have received adequate compensation; but, referring to the words used by the parties, we are not prepared to say that either had thought of compensation as such. The word ‘forfeiture’ is the equivalent of the word ‘penalty;’ it imports a penalty. (Van Buren v. Digges, 11 How. 461; Stearns v. Barrett, 1 Pick. 443; Salters v. Ralph, 15 Abb. Pr. 273.)

It has been held that in an agreement to convey land, and on default to pay a certain sum of money, or where the contractor agreed to do certain work, with a provision to pay a certain sum for each day's delay beyond the day fixed, or an agreement not to carry on a certain business at a named place, with a promise to pay a sum in case of violation of the agreement, (Streeter v. Rush, 25 Cal. 67,) if it appears that the parties intended the sum named to be considered liquidated damages, [540] courts will not interfere with the contract, even if it might seem to have been an improvident agreement. But where it appears that the parties intended the sum named to be a forfeiture or penalty, it has been generally held that the party in whose favor the penalty or forfeiture exists must prove his damage. In the case before us there is no claim of special damage. It might have been quite difficult for the defendant to show any damage of a pecuniary nature for the non-completion of the monument at the time specified, though its completion might have been of great comfort and consolation to her affectionate remembrance.

Upon the subject of liquidated damages and a penalty, we quote from 1 Suth. Dam. 480, as a clear statement of the result of the various decisions:

‘The intention of parties on this subject, under the artificial rules that have been adopted, is determined by very latitudinary construction. To be potential and controlling that a stated sum is liquidated damage, that sum must be fixed as the basis of compensation, and substantially limited to it; for just compensation is recognized as the universal measure of damages not punitory, parties may liquidate the amount by previous agreement. But when a stipulated sum is evidently not based on that principle, the intention to liquidate damages will either be found not to exist, or will be disregarded, and the stated sum treated as a penalty. Contracts are not made to be broken; and hence, when parties provide for consequences of a breach, they proceed with less caution than if that event was certain, and they were fixing a sum actually to be paid. The intention in all such cases is material, but to prevent a stated sum from being treated as a penalty, the intention should be apparent to liquidate damages in the sense of making just compensation; it is not enough that the parties express the intention that the stated sum shall be paid in case of a violation of the contract. A penalty is not converted into liquidated damages by the intention that it be paid; it is intrinsically a different thing, and the intention that it be paid cannot alter its nature. A bond, literally construed, imports an intention that the penalty shall be paid if there be default in the performance of the condition, and formerly that was the legal effect; courts of law [541] now, however, administer the same equity to relieve from penalties in other forms of contract as from those in bonds. The evidence of an intention to measure the damages, therefore, is seldom satisfactory when the amount stated varies materially from a just estimate of the actual loss finally sustained.’

For these reasons we are of opinion that the sum named is to be regarded as a penalty, and that the plaintiffs were entitled to recover the whole of the balance unpaid.

Judgment and order affirmed.

SHARPSTEIN, J. and  THORNTON, J. concurred

Hearing in Bank denied.

[1285] [1286] Glen H. Kanwit, Hopkins & Sutter, Chicago, Ill., for defendant-appellant-cross-appellee.

Michael R. Turoff, Arnstein, Gluck, Lehr, Barron & Milligan, Chicago, Ill., for plaintiff-appellee-cross-appellant.

Before ESCHBACH and POSNER, Circuit Judges, and GIBSON, Senior Circuit Judge.^[1]

POSNER, Circuit Judge.

This diversity suit between Lake River Corporation and Carborundum Company requires us to consider questions of Illinois commercial law, and in particular to explore the fuzzy line between penalty clauses and liquidated-damages clauses.

Carborundum manufactures "Ferro Carbo," an abrasive powder used in making steel. To serve its midwestern customers better, Carborundum made a contract with Lake River by which the latter agreed to provide distribution services in its warehouse in Illinois. Lake River would receive Ferro Carbo in bulk from Carborundum, "bag" it, and ship the bagged product to Carborundum's customers. The Ferro Carbo would remain Carborundum's property until delivered to the customers.

Carborundum insisted that Lake River install a new bagging system to handle the contract. In order to be sure of being able to recover the cost of the new system ($89,000) and make a profit of 20 percent of the contract price, Lake River insisted on the following minimum-quantity guarantee:

In consideration of the special equipment [i.e., the new bagging system] to be acquired and furnished by LAKE-RIVER for handling the product, CARBORUNDUM shall, during the initial three-year term of this Agreement, ship to LAKE-RIVER for bagging a minimum quantity of [22,500 tons]. If, at the end of the three-year term, this minimum quantity shall not have been shipped, LAKE-RIVER shall invoice CARBORUNDUM at the then prevailing rates for the difference between the quantity bagged and the minimum guaranteed.

If Carborundum had shipped the full minimum quantity that it guaranteed, it would have owed Lake River roughly $533,000 under the contract.

After the contract was signed in 1979, the demand for domestic steel, and with it the demand for Ferro Carbo, plummeted, and Carborundum failed to ship the guaranteed amount. When the contract expired late in 1982, Carborundum had shipped only 12,000 of the 22,500 tons it had guaranteed. Lake River had bagged the 12,000 tons and had billed Carborundum for this bagging, and Carborundum had paid, but by virtue of the formula in the minimum-guarantee clause Carborundum still owed Lake River $241,000 — the contract price of $533,000 if the full amount of Ferro Carbo had been shipped, minus what Carborundum had paid for the bagging of the quantity it had shipped.

When Lake River demanded payment of this amount, Carborundum refused, on the ground that the formula imposed a penalty. At the time, Lake River had in its warehouse 500 tons of bagged Ferro Carbo, having a market value of $269,000, which it refused to release unless Carborundum paid the $241,000 due under the formula. Lake River did offer to sell the bagged product and place the proceeds in escrow until its dispute with Carborundum over the enforceability of the formula was resolved, but Carborundum rejected the offer and trucked in bagged Ferro Carbo from the East to serve its customers in Illinois, at an additional cost of $31,000.

Lake River brought this suit for $241,000, which it claims as liquidated damages. Carborundum counterclaimed for the value of the bagged Ferro Carbo when Lake River impounded it and the additional cost of serving the customers affected by the impounding. The theory of the counterclaim is that the impounding was a conversion, and not as Lake River contends the assertion of a lien. The district judge, after a [1287] bench trial, gave judgment for both parties. Carborundum ended up roughly $42,000 to the good: $269,000 + $31,000-$241,000-$17,000, the last figure representing prejudgment interest on Lake River's damages. (We have rounded off all dollar figures to the nearest thousand.) Both parties have appealed.

The only issue that is not one of damages is whether Lake River had a valid lien on the bagged Ferro Carbo that it refused to ship to Carborundum's customers — that, indeed, it holds in its warehouse to this day. Although Ferro Carbo does not deteriorate with age, the domestic steel industry remains in the doldrums and the product is worth less than it was in 1982 when Lake River first withheld it. If Lake River did not have a valid lien on the product, then it converted it, and must pay Carborundum the $269,000 that the Ferro Carbo was worth back then.

It might seem that if the minimum-guarantee clause was a penalty clause and hence unenforceable, the lien could not be valid, and therefore that we should discuss the penalty issue first. But this is not correct. If the contractual specification of damages is invalid, Lake River still is entitled to any actual damages caused by Carborundum's breach of contract in failing to deliver the minimum amount of Ferro Carbo called for by the contract. The issue is whether an entitlement to damages, large or small, entitles the victim of the breach to assert a lien on goods that are in its possession though they belong to the other party.

Lake River has not been very specific about the type of lien it asserts. We think it best described as a form of artisan's lien, the "lien of the bailee, who does work upon or adds materials to chattels...." Restatement of Security § 61, comment on clause (a), at p. 165 (1941). Lake River was the bailee of the Ferro Carbo that Carborundum delivered to it, and it did work on the Ferro Carbo — bagging it, and also storing it (storage is a service, too). If Carborundum had refused to pay for the services that Lake River performed on the Ferro Carbo delivered to it, then Lake River would have had a lien on the Ferro Carbo in its possession, to coerce payment. Cf. National Bank of Joliet v. Bergeron Cadillac, Inc., 66 Ill.2d 140, 143-44, 5 Ill.Dec. 588, 589, 361 N.E.2d 1116, 1117 (1977). But in fact, when Lake River impounded the bagged Ferro Carbo, Carborundum had paid in full for all bagging and storage services that Lake River had performed on Ferro Carbo shipped to it by Carborundum. The purpose of impounding was to put pressure on Carborundum to pay for services not performed, Carborundum having failed to ship the Ferro Carbo on which those services would have been performed.

Unlike a contractor who, having done the work contracted for without having been paid, may find himself in a box, owing his employees or suppliers money he does not have — money he was counting on from his customer — Lake River was the victim of a breach of a portion of the contract that remained entirely unexecuted on either side. Carborundum had not shipped the other 10,500 tons, as promised; but on the other hand Lake River had not had to bag those 10,500 tons, as it had promised. It is not as if Lake River had bagged those tons, incurring heavy costs that it expected to recoup from Carborundum, and then Carborundum had said, "Sorry, we won't pay you; go ahead and sue us."

A lien is strong medicine; it clogs up markets, as the facts of this case show. Its purpose is to provide an effective self-help remedy for one who has done work in expectation of payment and then is not paid. The vulnerable position of such a person gives rise to "the artisan's privilege of holding the balance for work done in the past." United States v. Toys of the World Club, Inc., 288 F.2d 89, 94 (2d Cir.1961) (Friendly, J.) (emphasis added). A lien is thus a device for preventing unjust enrichment — not for forcing the other party to accede to your view of a contract dispute. "The right to retain possession of the property to enforce a possessory lien continues until such time as the charges [1288] for such materials, labor and services are paid." Bull v. Mitchell, 114 Ill.App.3d 177, 181, 70 Ill.Dec. 138, 141, 448 N.E.2d 1016, 1019 (1983); cf. Ill.Rev.Stat. ch. 82, § 40. Since here the charges were paid before the lien was asserted, the lien was no good.

Lake River tries to compare its position to that of a conventional lien creditor by pointing out that it made itself particularly vulnerable to a breach of contract by buying specialized equipment at Carborundum's insistence, to the tune of $89,000, before performance under the contract began. It says it insisted on the minimum guarantee in order to be sure of being able to amortize this equipment over a large enough output of bagging services to make the investment worthwhile. But the equipment was not completely useless for other contracts — Lake River having in fact used it for another contract; it was not the major cost of fulfilling the contract; and Lake River received almost $300,000 during the term of the contract, thus enabling it to amortize much of the cost of the special equipment. Although Lake River may have lost money on the contract (but as yet there is no proof it did), it was not in the necessitous position of a contractor who completes his performance without receiving a dime and then is told by his customer to sue for the price. The recognition of a lien in such a case is based on policies akin to those behind the rule that a contract modification procured by duress will not be enforced. See, e.g., Selmer Co. v. Blakeslee-Midwest Co., 704 F.2d 924 (7th Cir.1983). When as a practical matter the legal remedy may be inadequate because it operates too slowly, self-help is allowed. But we can find no case recognizing a lien on facts like these, no ground for thinking that the Illinois Supreme Court would be the first court to recognize such a lien if this case were presented to it, and no reason to believe that the recognition of such a lien would be a good thing. It would impede the marketability of goods without responding to any urgent need of creditors.

Conrow v. Little, 115 N.Y. 387, 393, 22 N.E. 346, 347 (1889), on which Lake River relies heavily because the lien allowed in that case extended to "money expended in the preparation of instrumentalities," is not in point. The plaintiffs, dealers in paper, had made extensive deliveries to the defendants for which they had received no payment. See id. at 390-91, 22 N.E. at 346. If Lake River had bagged several thousand tons of Ferro Carbo without being paid anything, it would have had a lien on the Ferro Carbo; and maybe — if Conrow is good law in Illinois, a question we need not try to answer — the lien would have included not only the contract price for the Ferro Carbo that Lake River had bagged but also the unreimbursed, unsalvageable cost of the special bagging system that Lake River had installed. But that is not this case. Carborundum was fully paid up and Lake River has made no effort to show how much if any money it stood to lose because the bagging system was not fully amortized. The only purpose of the lien was to collect damages which would have been unrelated to — and certainly exceeded — the investment in the bagging system.

It is no answer that the bagging system should be presumed to have been amortized equally over the life of the contract, and therefore to have been only half amortized when Carborundum broke the contract. Amortization is an accounting device; it need not reflect cash flows. There is no evidence that when the contract was broken, Lake River was out of pocket a cent in respect of the bagging system, especially when we consider that the bagging system was still usable, and was used to fulfill another contract.

The hardest issue in the case is whether the formula in the minimum-guarantee clause imposes a penalty for breach of contract or is merely an effort to liquidate damages. Deep as the hostility to penalty clauses runs in the common law, see Loyd, Penalties and Forfeitures, 29 Harv.L.Rev. 117 (1915), we still might be inclined to question, if we thought ourselves free to do so, whether a modern court should refuse to enforce a penalty clause where the signator [1289] is a substantial corporation, well able to avoid improvident commitments. Penalty clauses provide an earnest of performance. The clause here enhanced Carborundum's credibility in promising to ship the minimum amount guaranteed by showing that it was willing to pay the full contract price even if it failed to ship anything. On the other side it can be pointed out that by raising the cost of a breach of contract to the contract breaker, a penalty clause increases the risk to his other creditors; increases (what is the same thing and more, because bankruptcy imposes "deadweight" social costs) the risk of bankruptcy; and could amplify the business cycle by increasing the number of bankruptcies in bad times, which is when contracts are most likely to be broken. But since little effort is made to prevent businessmen from assuming risks, these reasons are no better than makeweights.

A better argument is that a penalty clause may discourage efficient as well as inefficient breaches of contract. Suppose a breach would cost the promisee $12,000 in actual damages but would yield the promisor $20,000 in additional profits. Then there would be a net social gain from breach. After being fully compensated for his loss the promisee would be no worse off than if the contract had been performed, while the promisor would be better off by $8,000. But now suppose the contract contains a penalty clause under which the promisor if he breaks his promise must pay the promisee $25,000. The promisor will be discouraged from breaking the contract, since $25,000, the penalty, is greater than $20,000, the profits of the breach; and a transaction that would have increased value will be forgone.

On this view, since compensatory damages should be sufficient to deter inefficient breaches (that is, breaches that cost the victim more than the gain to the contract breaker), penal damages could have no effect other than to deter some efficient breaches. But this overlooks the earlier point that the willingness to agree to a penalty clause is a way of making the promisor and his promise credible and may therefore be essential to inducing some value-maximizing contracts to be made. It also overlooks the more important point that the parties (always assuming they are fully competent) will, in deciding whether to include a penalty clause in their contract, weigh the gains against the costs — costs that include the possibility of discouraging an efficient breach somewhere down the road — and will include the clause only if the benefits exceed those costs as well as all other costs.

On this view the refusal to enforce penalty clauses is (at best) paternalistic — and it seems odd that courts should display parental solicitude for large corporations. But however this may be, we must be on guard to avoid importing our own ideas of sound public policy into an area where our proper judicial role is more than usually deferential. The responsibility for making innovations in the common law of Illinois rests with the courts of Illinois, and not with the federal courts in Illinois. And like every other state, Illinois, untroubled by academic skepticism of the wisdom of refusing to enforce penalty clauses against sophisticated promisors, see, e.g., Goetz & Scott, Liquidated Damages, Penalties and the Just Compensation Principle, 77 Colum.L.Rev. 554 (1977), continues steadfastly to insist on the distinction between penalties and liquidated damages. See, e.g., Bauer v. Sawyer, 8 Ill.2d 351, 359-61, 134 N.E.2d 329, 333-34 (1956); Stride v. 120 West Madison Bldg. Corp., 132 Ill.App.3d 601, 605-06, 87 Ill.Dec. 790, 793, 477 N.E.2d 1318, 1321 (1985); Builder's Concrete Co. v. Fred Faubel & Sons, Inc., 58 Ill.App.3d 100, 107, 15 Ill.Dec. 517, 524, 373 N.E.2d 863, 869 (1978). To be valid under Illinois law a liquidation of damages must be a reasonable estimate at the time of contracting of the likely damages from breach, and the need for estimation at that time must be shown by reference to the likely difficulty of measuring the actual damages from a breach of contract after the breach occurs. If damages would be easy to determine then, or if the estimate greatly exceeds a reasonable upper estimate [1290] of what the damages are likely to be, it is a penalty. See, e.g., M.I.G. Investments, Inc. v. Marsala, 92 Ill.App.3d 400, 405-06, 47 Ill.Dec. 265, 270, 414 N.E.2d 1381, 1386 (1981).

The distinction between a penalty and liquidated damages is not an easy one to draw in practice but we are required to draw it and can give only limited weight to the district court's determination. Whether a provision for damages is a penalty clause or a liquidated-damages clause is a question of law rather than fact, Weiss v. United States Fidelity & Guaranty Co., 300 Ill. 11, 16, 132 N.E. 749, 751 (1921); M.I.G. Investments, Inc. v. Marsala, supra, 92 Ill.App.3d 400, 406, 47 Ill.Dec. 265, 270, 414 N.E.2d 1381, 1386, and unlike some courts of appeals we do not treat a determination by a federal district judge of an issue of state law as if it were a finding of fact, and reverse only if persuaded that clear error has occurred, though we give his determination respectful consideration. See, e.g., Morin Bldg. Products Co. v. Baystone Construction, Inc., 717 F.2d 413, 416-17 (7th Cir.1983); In re Air Crash Disaster Near Chicago, 701 F.2d 1189, 1195 (7th Cir.1983); 19 Wright, Miller & Cooper, Federal Practice and Procedure § 4507, at pp. 106-110 (1982).

Mindful that Illinois courts resolve doubtful cases in favor of classification as a penalty, see, e.g., Stride v. 120 West Madison Bldg. Corp., supra, 132 Ill.App.3d at 605, 87 Ill.Dec. at 793, 477 N.E.2d at 1321; Pick Fisheries, Inc. v. Burns Electronic Security Services, Inc., 35 Ill.App.3d 467, 472, 342 N.E.2d 105, 108 (1976), we conclude that the damage formula in this case is a penalty and not a liquidation of damages, because it is designed always to assure Lake River more than its actual damages. The formula — full contract price minus the amount already invoiced to Carborundum — is invariant to the gravity of the breach. When a contract specifies a single sum in damages for any and all breaches even though it is apparent that all are not of the same gravity, the specification is not a reasonable effort to estimate damages; and when in addition the fixed sum greatly exceeds the actual damages likely to be inflicted by a minor breach, its character as a penalty becomes unmistakable. See M.I.G. Investments, Inc. v. Marsala, supra, 92 Ill.App.3d at 405-06, 47 Ill.Dec. at 270, 414 N.E.2d at 1386; cf. Arduini v. Board of Educ., 93 Ill.App.3d 925, 931-33, 49 Ill.Dec. 460, 465-66, 418 N.E.2d 104, 109-10 (1981), rev'd on other grounds, 92 Ill.2d 197, 65 Ill.Dec. 281, 441 N.E.2d 73 (1982); 5 Corbin on Contracts § 1066 (1964). This case is within the gravitational field of these principles even though the minimum-guarantee clause does not fix a single sum as damages.

Suppose to begin with that the breach occurs the day after Lake River buys its new bagging system for $89,000 and before Carborundum ships any Ferro Carbo. Carborundum would owe Lake River $533,000. Since Lake River would have incurred at that point a total cost of only $89,000, its net gain from the breach would be $444,000. This is more than four times the profit of $107,000 (20 percent of the contract price of $533,000) that Lake River expected to make from the contract if it had been performed: a huge windfall.

Next suppose (as actually happened here) that breach occurs when 55 percent of the Ferro Carbo has been shipped. Lake River would already have received $293,000 from Carborundum. To see what its costs then would have been (as estimated at the time of contracting), first subtract Lake River's anticipated profit on the contract of $107,000 from the total contract price of $533,000. The difference — Lake River's total cost of performance — is $426,000. Of this, $89,000 is the cost of the new bagging system, a fixed cost. The rest ($426,000-$89,000 = $337,000) presumably consists of variable costs that are roughly proportional to the amount of Ferro Carbo bagged; there is no indication of any other fixed costs. Assume, therefore, that if Lake River bagged 55 percent of the contractually agreed quantity, it incurred in doing so 55 percent of its variable costs, or $185,000. [1291] When this is added to the cost of the new bagging system, assumed for the moment to be worthless except in connection with the contract, the total cost of performance to Lake River is $274,000. Hence a breach that occurred after 55 percent of contractual performance was complete would be expected to yield Lake River a modest profit of $19,000 ($293,000-$274,000). But now add the "liquidated damages" of $241,000 that Lake River claims, and the result is a total gain from the breach of $260,000, which is almost two and a half times the profit that Lake River expected to gain if there was no breach. And this ignores any use value or salvage value of the new bagging system, which is the property of Lake River — though admittedly it also ignores the time value of money; Lake River paid $89,000 for that system before receiving any revenue from the contract.

To complete the picture, assume that the breach had not occurred till performance was 90 percent complete. Then the "liquidated damages" clause would not be so one-sided, but it would be one-sided. Carborundum would have paid $480,000 for bagging. Against this, Lake River would have incurred its fixed cost of $89,000 plus 90 percent of its variable costs of $337,000, or $303,000. Its total costs would thus be $392,000, and its net profit $88,000. But on top of this it would be entitled to "liquidated damages" of $53,000, for a total profit of $141,000 — more than 30 percent more than its expected profit of $107,000 if there was no breach.

The reason for these results is that most of the costs to Lake River of performing the contract are saved if the contract is broken, and this saving is not reflected in the damage formula. As a result, at whatever point in the life of the contract a breach occurs, the damage formula gives Lake River more than its lost profits from the breach — dramatically more if the breach occurs at the beginning of the contract; tapering off at the end, it is true. Still, over the interval between the beginning of Lake River's performance and nearly the end, the clause could be expected to generate profits ranging from 400 percent of the expected contract profits to 130 percent of those profits. And this is on the assumption that the bagging system has no value apart from the contract. If it were worth only $20,000 to Lake River, the range would be 434 percent to 150 percent.

Lake River argues that it would never get as much as the formula suggests, because it would be required to mitigate its damages. This is a dubious argument on several grounds. First, mitigation of damages is a doctrine of the law of court-assessed damages, while the point of a liquidated-damages clause is to substitute party assessment; and that point is blunted, and the certainty that liquidated-damages clauses are designed to give the process of assessing damages impaired, if a defendant can force the plaintiff to take less than the damages specified in the clause, on the ground that the plaintiff could have avoided some of them. It would seem therefore that the clause in this case should be read to eliminate any duty of mitigation, that what Lake River is doing is attempting to rewrite the clause to make it more reasonable, and that since actually the clause is designed to give Lake River the full damages it would incur from breach (and more) even if it made no effort to find a substitute use for the equipment that it bought to perform the contract, this is just one more piece of evidence that it is a penalty clause rather than a liquidated-damages clause. See Northwest Collectors, Inc. v. Enders, 74 Wash.2d 585, 594, 446 P.2d 200, 206 (1968).

But in any event mitigation would not mitigate the penal character of this clause. If Carborundum did not ship the guaranteed minimum quantity, the reason was likely to be — the reason was — that the steel industry had fallen on hard times and the demand for Ferro Carbo was therefore down. In these circumstances Lake River would have little prospect of finding a substitute contract that would yield it significant profits to set off against the full contract price, which is the method by which it proposes to take account of mitigation. At argument Lake River suggested that it [1292] might at least have been able to sell the new bagging equipment to someone for something, and the figure $40,000 was proposed. If the breach occurred on the first day when performance under the contract was due and Lake River promptly sold the bagging equipment for $40,000, its liquidated damages would fall to $493,000. But by the same token its costs would fall to $49,000. Its profit would still be $444,000, which as we said was more than 400 percent of its expected profit on the contract. The penal component would be unaffected.

With the penalty clause in this case compare the liquidated-damages clause in Arduini v. Board of Education, supra, which is representative of such clauses upheld in Illinois. The plaintiff was a public school teacher whose contract provided that if he resigned before the end of the school year he would be docked 4 percent of his salary. This was a modest fraction of the contract price. And the cost to the school of an untimely resignation would be difficult to measure. Since that cost would be greater the more senior and experienced the teacher was, the fact that the liquidated damages would be greater the higher the teacher's salary did not make the clause arbitrary. Even the fact that the liquidated damages were the same whether the teacher resigned at the beginning, the middle, or the end of the school year was not arbitrary, for it was unclear how the amount of actual damages would vary with the time of resignation. Although one might think that the earlier the teacher resigned the greater the damage to the school would be, the school might find it easier to hire a replacement for the whole year or a great part of it than to bring in a replacement at the last minute to grade the exams left behind by the resigning teacher. Here, in contrast, it is apparent from the face of the contract that the damages provided for by the "liquidated damages" clause are grossly disproportionate to any probable loss and penalize some breaches much more heavily than others regardless of relative cost.

We do not mean by this discussion to cast a cloud of doubt over the "take or pay" clauses that are a common feature of contracts between natural gas pipeline companies and their customers. Such clauses require the customer, in consideration of the pipeline's extending its line to his premises, to take a certain amount of gas at a specified price — and if he fails to take it to pay the full price anyway. The resemblance to the minimum-guarantee clause in the present case is obvious, but perhaps quite superficial. Neither party has mentioned take-or-pay clauses, and we can find no case where such a clause was even challenged as a penalty clause — though in one case it was argued that such a clause made the damages unreasonably low. See National Fuel Gas Distribution Corp. v. Pennsylvania Public Utility Comm'n, 76 Pa.Commw. 102, 126-27 n. 8, 464 A.2d 546, 558 n. 8 (1983). If, as appears not to be the case here but would often be the case in supplying natural gas, a supplier's fixed costs were a very large fraction of his total costs, a take-or-pay clause might well be a reasonable liquidation of damages. In the limit, if all the supplier's costs were incurred before he began supplying the customer, the contract revenues would be an excellent measure of the damages from breach. But in this case, the supplier (Lake River, viewed as a supplier of bagging services to Carborundum) incurred only a fraction of its costs before performance began, and the interruption of performance generated a considerable cost saving that is not reflected in the damage formula.

The fact that the damage formula is invalid does not deprive Lake River of a remedy. The parties did not contract explicitly with reference to the measure of damages if the agreed-on damage formula was invalidated, but all this means is that the victim of the breach is entitled to his common law damages. See, e.g., Restatement, Second, Contracts § 356, comment a (1981). In this case that would be the unpaid contract price of $241,000 minus the costs that Lake River saved by not having to complete the contract (the variable costs on the other 45 percent of the Ferro Carbo [1293] that it never had to bag). The case must be remanded to the district judge to fix these damages.

Two damage issues remain. The first concerns Carborundum's expenses of delivering bagged Ferro Carbo to its customers to replace that impounded by Lake River. The district judge gave Carborundum the full market value of the bagged Ferro Carbo. Lake River argues that it should not have to pay for Carborundum's expense of selling additional Ferro Carbo — additional in the sense that Carborundum is being given credit for the full retail value of the product that Lake River withheld. To explain, suppose that Carborundum had an order for $1,000 worth of bagged Ferro Carbo, which Lake River was supposed to deliver; and because it refused, Carborundum incurred a transportation cost of $100 to make a substitute shipment of bagged Ferro Carbo to the customer. Carborundum would still get $1,000 from the customer, and if that price covered the transportation cost it would still make a profit. In what sense, therefore, is that cost a separate item of damage, of loss? On all Ferro Carbo (related to this case) sold by Carborundum in the Midwest, Carborundum received the full market price, either from its customers in the case of Ferro Carbo actually delivered to them, or from Lake River in the case of the Ferro Carbo that Lake River refused to deliver. Having received a price designed to cover all expenses of sale, a seller cannot also get an additional damage award for any of those expenses.

If, however, the additional Ferro Carbo that Carborundum delivered to its midwestern customers in substitution for Ferro Carbo previously delivered to, and impounded by, Lake River would have been sold in the East at the same price but lower cost, Carborundum would have had an additional loss, in the form of reduced profits, for which it could recover additional damages. But it made no effort to prove such a loss. Maybe it had no unsatisfied eastern customers, and expanded rather than shifted output to fulfill its midwestern customers' demand. The damages on the counter-claim must be refigured also.

Finally, Lake River argues that Carborundum failed to mitigate its damages by accepting Lake River's offer to deliver the bagged product and place the proceeds in escrow. But a converter is not entitled to retain the proceeds of the conversion even temporarily. Lake River had an opportunity to limit its exposure by selling the bagged product on Carborundum's account and deducting what it claimed was due it on its "lien." Its failure to follow this course reinforces our conclusion that the assertion of the lien was a naked attempt to hold Carborundum hostage to Lake River's view — an erroneous view, as it has turned out — of the enforceability of the damage formula in the contract.

The judgment of the district court is affirmed in part and reversed in part, and the case is returned to that court to redetermine both parties' damages in accordance with the principles in this opinion. The parties may present additional evidence on remand, and shall bear their own costs in this court. Circuit Rule 18 shall not apply on remand.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

[1] Hon. Floyd R. Gibson of the Eighth Circuit, sitting by designation.

296 N.E.2d 183
363 Mass. 579, 99 A.L.R.3d 294

Alice SULLIVAN
v.
James H. O'CONNOR.

Supreme Judicial Court of Massachusetts, Suffolk.
Argued March 6, 1973.
Decided May 9, 1973.

[296 N.E.2d 184] John F. Finnerty, Boston, for defendant.

Francis C. Newton, Jr., Boston, for plaintiff.

Before TAURO, C.J., and REARDON, QUIRICO, KAPLAN and WILKINS, JJ.

KAPLAN, Justice.

The plaintiff patient secured a jury verdict of $13,500 against the defendant surgeon for breach of contract in respect to an operation upon the plaintiff's nose. The substituted consolidated bill of exceptions presents questions about the correctness of the judge's instructions on the issue of damages.

The declaration was in two counts. In the first count, the plaintiff alleged that she, as patient, entered into a contract with the defendant, a surgeon, wherein the defendant promised to perform plastic surgery on her nose [363 Mass. 580] and thereby to enhance her beauty and improve her appearance; that he performed the surgery but failed to achieve the promised result; rather the result of the surgery was to disfigure and deform her nose, to cause her pain in body and mind, and to subject her to other damage and expense. The second count, based on the same transaction, was in the conventional form for malpractice, charging that the defendant had been guilty of negligence in performing the surgery. Answering, the defendant entered a general denial.

On the plaintiff's demand, the case was tried by jury. At the close of the evidence, the judge put to the jury, as special questions, the issues of liability under the two counts, and instructed them accordingly. The jury returned a verdict for the plaintiff on the contract count, and for the defendant on the negligence count. The judge then instructed the jury on the issue of damages.

As background to the instructions and the parties' exceptions, we mention certain facts as the jury could find them. The plaintiff was a professional entertainer, [296 N.E.2d 185] and this was known to the defendant. The agreement was as alleged in the declaration. More particularly, judging from exhibits, the plaintiff's nose had been straight, but long and prominent; the defendant undertook by two operations to reduce its prominence and somewhat to shorten it, thus making it more pleasing in relation to the plaintiff's other features. Actually the plaintiff was obliged to undergo three operations, and her appearance was worsened. Her nose now had a concave line to about the midpoint, at which it became bulbous; viewed frontally, the nose from bridge to midpoint ws flattened and broadened, and the two sides of the tip had lost symmetry. This configuration evidently could not be improved by further surgery. The plaintiff did not demonstrate, however, that her change of appearance had resulted in loss of employment. Payments by the plaintiff covering the defendant's fee and hospital expenses were stipulated at $622.65.

The judge instructed the jury, first, that the plaintiff [363 Mass. 581] was entitled to recover her out-of-pocket expenses incident to the operations. Second, she could recover the damages flowing directly, naturally, proximately, and foreseeably from the defendant's breach of promise. These would comprehend damages for any disfigurement of the plaintiff's nose—that is, any change of appearance for the worse—including the effects of the consciousness of such disfigurement on the plaintiff's mind, and in this connection the jury should consider the nature of the plaintiff's profession. Also consequent upon the defendant's breach, and compensable, were the pain and suffering involved in the third operation, but not in the first two. As there was no proof that any loss of earnings by the plaintiff resulted from the breach, that element should not enter into the calculation of damages.

By his exceptions the defendant contends that the judge erred in allowing the jury to take into account anything but the plaintiff's out-of-pocket expenses (presumably at the stipulated amount). The defendant excepted to the judge's refusal of his request for a general charge to that effect, and, more specifically, to the judge's refusal of a charge that the plaintiff could not recover for pain and suffering connected with the third operation or for impairment of the plaintiff's appearance and associated mental distress.^[1]

The plaintiff on her part excepted to the judge's refusal of a request to charge that the plaintiff could recover the difference in value between the nose as promised and the nose as it appeared after the operations. However, the plaintiff in her brief expressly waives this exception and others made by her in case this court overrules the defendant's exceptions; thus she would be content to hold the jury's verdict in her favor.

We conclude that the defendant's exceptions should be overruled.

It has been suggested on occasion that agreements [363 Mass. 582] between patients and physicians by which the physician undertakes to effect a cure or to bring about a given result should be declared unenforceable on grounds of public policy. See Guilmet v. Campbell, 385 Mich. 57, 76, 188 N.W.2d 601 (dissenting opinion). But there are many decisions recognizing and enforcing such contracts, see annotation, 43 A.L.R.3d 1221, 1225, 1229-1233, and the law of Massachusetts has treated them as valid, although we have had no decision meeting head on the contention that they should be denied legal sanction. Small v. Howard, 128 Mass. 131; Gabrunas v. Miniter, 289 Mass. 20, 193 N.E. 551; Forman v. Wolfson, 327 Mass. 341, 98 N.E.2d 615. These causes of action are, however, considered a little suspect, and thus we find courts straining sometimes to read the pleadings as sounding only in tort for negligence, and not in contract for breach of promise, [296 N.E.2d 186] despite sedulous efforts by the pleaders to pursue the latter theory. See Gault v. Sideman, 42 Ill.App.2d 96, 191 N.E.2d 436; annotation, supra, at 1225, 1238-1244.

It is not hard to see why the courts should be unenthusiastic or skeptical about the contract theory. Considering the uncertainties of medical science and the variations in the physical and psychological conditions of individual patients, doctors can seldom in good faith promise specific results. Therefore it is unlikely that physicians of even average integrity will in fact make such promises. Statements of opinion by the physician with some optimistic coloring are a different thing, and may indeed have therapeutic value. But patients may transform such statements into firm promises in their own minds, especially when they have been disappointed in the event, and testify in that sense to sympathetic juries.^[2] If actions for breach of promise can be readily maintained, doctors, [363 Mass. 583] so it is said, will be frightened into practising "defensive medicine." On the other hand, if these actions were outlawed, leaving only the possibility of suits for malpractice, there is fear that the public might be exposed to the enticements of charlatans, and confidence in the profession might ultimately be shaken. See Miller, The Contractual Liability of Physicians and Surgeons, 1953 Wash.L.Q. 413, 416-423. The law has taken the middle of the road position of allowing actions based on alleged contract, but insisting on clear proof. Instructions to the jury may well stress this requirement and point to tests of truth, such as the complexity or difficulty of an operation as bearing on the probability that a given result was promised. See annotation, 43 A.L.R.3d 1225, 1225-1227.

If an action on the basis of contract is allowed, we have next the question of the measure of damages to be applied where liability is found. Some cases have taken the simple view that the promise by the physician is to be treated like an ordinary commercial promise, and accordingly that the successful plaintiff is entitled to a standard measure of recovery for breach of contract—"compensatory" ("expectancy") damages, an amount intended to put the plaintiff in the position he would be in if the contract had been performed, or, presumably, at the plaintiff's election, "restitution" damages, an amount corresponding to any benefit conferred by the plaintiff upon the defendant in the performance of the contract disrupted by the defendant's breach. See Restatement: Contracts § 329 and comment a, §§ 347, 384(1). Thus in Hawkins v. McGee, 84 N.H. 114, 146 A. 641, the defendant doctor was taken to have promised the plaintiff to convert his damaged hand by means of an operation into a good or perfect hand, but the doctor so operated as to damage the hand still further. The court, following the usual expectancy formula, would have asked the jury to estimate and award to the plaintiff the difference between the value of a good or perfect hand, as promised, and the value of the hand after the operation. (The same formula [363 Mass. 584] would apply, although the dollar result would be less, if the operation had neither worsened nor improved the condition of the hand.) If the plaintiff had not yet paid the doctor his fee, that amount would be deducted from the recovery. There could be no recovery for the pain and suffering of the operation, since that detriment would have been incurred even if the operation had been successful; one can say that this detriment was not "caused" by the breach. But where the plaintiff by reason of the operation was put to more pain that he would have had to endure, had the doctor [296 N.E.2d 187] performed as promised, he should be compensated for that difference as a proper part of his expectancy recovery. It may be noted that on an alternative count for malpractice the plaintiff in the Hawkins case had been nonsuited; but on ordinary principles this could not affect the contract claim, for it is hardly a defence to a breach of contract that the promisor acted innocently and without negligence. The New Hampshire court further refined the Hawkins analysis in McQuaid v. Michou, 85 N.H. 299, 157 A. 881, all in the direction of treating the patient-physician cases on the ordinary footing of expectancy. See McGee v. United States Fid. & Guar. Co., 53 F.2d 953 (1st Cir.) (later development in the Hawkins case); Cloutier v. Kasheta, 105 N.H. 262, 197 A.2d 627; Lakeman v. LaFrance, 102 N.H. 300, 305, 156 A.2d 123.

Other cases, including a number in New York, without distinctly repudiating the Hawkins type of analysis, have indicated that a different and generally more lenient measure of damages is to be applied in patient-physician actions based on breach of alleged special agreements to effect a cure, attain a stated result, or employ a given medical method. This measure is expressed in somewhat variant ways, but the substance is that the plaintiff is to recover any expenditures made by him and for other detriment (usually not specifically described in the opinions) following proximately and foreseeably upon the defendant's failure to carry out his promise. Robins v. Finestone, 308 N.Y. 543, 546, 127 N.E.2d 330; Frankel v. Wolper, 181 App.Div. 485, 488, 169 N.Y.S. 15, affd., 228 N.Y. 582, 127 N.E. 913; [363 Mass. 585] Frank v. Maliniak, 232 App.Div. 278, 280, 249 N.Y.S. 514; Colvin v. Smith, 276 App.Div. 9, 10, 92 N.Y.S.2d 794;^[3] Stewart v. Rudner, 349 Mich. 459, 465-473, 84 N.W.2d 816. Cf. Carpenter v. Moore, 51 Wash.2d 795, 322 P.2d 125. This, be it noted, is not a "restitution" measure, for it is not limited to restoration of the benefit conferred on the defendant (the fee paid) but includes other expenditures, for example, amounts paid for medicine and nurses; so also it would seem according to its logic to take in damages for any worsening of the plaintiff's condition due to the breach. Nor is it an "expectancy" measure, for it does not appear to contemplate recovery of the whole difference in value between the condition as promised and the condition actually resulting from the treatment. Rather the tendency of the formulation is to put the plaintiff back in the position he occupied just before the parties entered upon the agreement, to compensate him for the detriments he suffered in reliance upon the agreement. This kind of intermediate pattern of recovery for breach of contract is discussed in the suggestive article by Fuller and Perdue, The Reliance Interest in Contract Damages, 46 Yale L.J. 52, 373, where the authors show that, although not attaining the currency of the standard measures, a "reliance" measure has for special reasons been applied by the courts in a variety of settings, including noncommercial settings. See 46 Yale L.J. at 396-401.^[4]

For breach of the patient-physician agreements under consideration, a recovery limited to restitution seems plainly too meager, if the agreements are to be enforced at all. On the other hand, an expectancy recovery may well be excessive. The factors, already mentioned, which have made the cause of action somewhat suspect, also suggest moderation as to the breadth of the recovery that [363 Mass. 586] should be permitted. Where, as in the case at bar and [296 N.E.2d 188] in a number of the reported cases, the doctor has been absolved of negligence by the trier, an expectancy measure may be thought harsh. We should recall here that the fee paid by the patient to the doctor for the alleged promise would usually be quite disproportionate to the putative expectancy recovery. To attempt, moreover, to put a value on the condition that would or might have resulted, had the treatment succeeded as promised, may sometimes put an exceptional strain on the imagination of the fact finder. As a general consideration, Fuller and Perdue argue that the reasons for granting damages for broken promises to the extent of the expectancy are at their strongest when the promises are made in a business context, when they have to do with the production or distribution of goods or the allocation of functions in the market place; they become weaker as the context shifts from a commercial to a noncommercial field. 46 Yale L.J. at 60-63.

There is much to be said, then, for applying a reliance measure to the present facts, and we have only to add that our cases are not unreceptive to the use of that formula in special situations. We have, however, had no previous occasion to apply it to patient-physician cases.^[5]

[363 Mass. 587] The question of recovery on a reliance basis for pain and suffering or mental distress requires further attention. We find expressions in the decisions that pain and suffering (or the like) are simply not compensable in actions for breach of contract. The defendant seemingly espouses this proposition in the present case. True, if the buyer under a contract for the purchase of a lot of merchandise, in suing for the seller's breach, should claim damages for mental anguish caused by his disappointment in the transaction, he would not succeed; he would be told, perhaps, that the asserted psychological injury was not fairly foreseeable by the defendant as a probable consequence of the breach of such a business contract. See Restatement: Contracts, § 341, and comment a. But there is no general rule barring such items of damage in actions for breach of contract. [296 N.E.2d 189] It is all a question of the subject matter and background of the contract, and when the contract calls for an operation on the person of the plaintiff, psychological as well as physical injury may be expected to figure somewhere in the recovery, depending on the particular circumstances. The point is explained in Stewart v. Rudner, 349 Mich. 459, 469, 84 N.W.2d 816. Cf. Frewen v. Page, 238 Mass. 499, 131 N.E. 475; McClean v. University Club. 327 Mass. 68, 97 N.E.2d 174. Again, it is said in a few of the New York cases, concerned with the classification of actions for statute of limitations purposes, that the absence of allegations demanding recovery for pain and suffering is characteristic of a contract claim by a patient against a physician, that such allegations rather belong in a claim for malpractice. See Robins v. Finestone, 308 N.Y. 543, [363 Mass. 588] 547, 127 N.E.2d 330; Budoff v. Kessler, 2 A.D.2d 760, 153 N.Y.S.2d 654. These remarks seem unduly sweeping. Suffering or distress resulting from the breach going beyond that which was envisaged by the treatment as agreed, should be compensable on the same ground as the worsening of the patient's condition because of the breach. Indeed it can be argued that the very suffering or distress "contracted for"—that which would have been incurred if the treatment achieved the promised result1should also be compensable on the theory underlying the New York cases. For that suffering is "wasted" if the treatment fails. Otherwise stated, compensation for this waste is arguably required in order to complete the restoration of the status quo ante.^[6]

In the light of the foregoing discussion, all the defendant's exceptions fail: the plaintiff was not confined to the recovery of her out-of-pocket expenditures; she was entitled to recover also for the worsening of her condition,^[7] and for the pain and suffering and mental distress involved in the third operation. These items were compensable [363 Mass. 589] on either an expectancy or a reliance view. We might have been required to elect between the two views if the pain and suffering connected with the first two operations contemplated by the agreement, or the whole difference in value between the present and the promised conditions, were being claimed as elements of damage. But the plaintiff waives her possible claim to the former element, and to so much of the latter as represents the [296 N.E.2d 190] difference in value between the promised condition and the condition before the operations.

Plaintiff's exceptions waived.

Defendant's exceptions overruled.

[1] The defendant also excepted to the judge's refusal to direct a verdict in his favor, but this exception is not pressed and could not be sustained.

[2] Judicial skepticism about whether a promise was in fact made derives also from the possibility that the truth has been tortured to give the plaintiff the advantage of the longer period of limitations sometimes available for actions on contract as distinguished from those in tort or for malpractice. See Lillich, The Malpractice Statute of Limitations in New York and Other Jurisdictions, 47 Cornell L.Q. 339; annotation, 80 A.L.R.2d 368.

[3] See Horowitz v. Bogart, 218 App.Div. 158, 160, 217 N.Y.S. 881; Monahan v. Devinny, 223 App.Div. 547, 548, 229 N.Y.S. 60; Keating v. Perkins, 250 App.Div. 9, 10, 293 N.Y.S. 197 and comment in 5 U. of Chicago L.Rev. 156.

[4] Some of the exceptional situations mentioned where reliance may be preferred to expectancy are those in which the latter measure would be hard to apply or would impose too great a burden; performance was interfered with by external circumstances; the contract was indefinite. See 46 Yale L.J. at 373-386; 394-396.

[5] In Mt. Pleasant Stable Co. v. Steinberg, 238 Mass. 567, 131 N.E. 295, the plaintiff company agreed to supply teams of horses at agreed rates as required from day to day by the defendant for his business. To prepare itself to fulfill the contract and in reliance on it, the plaintiff bought two "Cliest" horses at a certain price. When the defendant repudiated the contract, the plaintiff sold the horses at a loss and in its action for breach claimed the loss as an element of damages. The court properly held that the plaintiff was not entitled to this item as it was also claiming (and recovering) its lost profits (expectancy) on the contract as a whole. Cf. Noble v. Ames Mfg. Co., 112 Mass. 492. (The loss on sale of the horses is analogous to the pain and suffering for which the patient would be disallowed a recovery in Hawkins v. McGee, 84 N.H. 114, 146 A. 641, because he was claiming and recovering expectancy damages.) The court in the Mt. Pleasant case referred, however, to Pond v. Harris, 113 Mass. 114, as a contrasting situation where the expectancy could not be fairly determined. There the defendant had wrongfully revoked an agreement to arbitrate a dispute with the plaintiff (this was before such agreements were made specifically enforceable). In an action for the breach, the plaintiff was held entitled to recover for his preparations for the arbitration which had been rendered useless and a waste, including the plaintiff's time and trouble and his expenditures for counsel and witnesses. The context apparently was commercial but reliance elements were held compensable when there was no fair way of estimating an expectancy. See, generally, annotation, 17 A.L.R.2d 1300. A noncommercial example is Smith v. Sherman, 4 Cush. 408, 413-414, suggesting that a conventional recovery for breach of promise of marriage included a recompense for various efforts and expenditures by the plaintiff preparatory to the promised wedding. See Garfield p Proctor Coal Co. v. Pennsylvania Coal & Coke Co., 199 Mass. 22, 43, 84 N.E. 1020; Narragansett Amusement Co. v. Riverside Park Amusement Co., 260 Mass. 265, 279-281, 157 N.E. 532. Cf. Johnson v. Arnold, 2 Cush. 46, 47; Greany v. McCormick, 273 Mass. 250, 253, 173 N.E. 411. But cf. Irwin v. Worcester Paper Box Co., 246 Mass. 453, 141 N.E. 286.

[6] Recovery on a reliance basis for breach of the physician's promise tends to equate with the usual recovery for malpractice, since the latter also looks in general to restoration of the condition before the injury. But this is not paradoxical, especially when it is noted that the origins of contract lie in tort. See Farnsworth, The Past of Promise: An Historical Introduction to Contract, 69 Col.L.Rev. 576, 594-596; Breitel, J. in Stella Flour & Feed Corp. v. National City Bank, 285 App.Div. 182, 189, 136 N.Y.S.2d 139 (dissenting opinion). A few cases have considered possible recovery for breach by a physician of a promise to sterlize a patient, resulting in birth of a child to the patient and spouse. If such an action is held maintainable, the reliance and expectancy measures would, we think, tend to equate, because the promised condition was preservation of the family status quo. See Custodio v. Bauer, 251 Cal.App.2d 303, 59 Cal.Rptr. 463; Jackson v. Anderson, 230 So.2d 503 (Fla.App.). Cf. Troppi v. Scarf, 31 Mich.App. 240, 187 N.W.2d 511. But cf. Ball v. Mudge, 64 Wash.2d 247, 391 P.2d 201; Doerr v. Villate, 74 Ill.App.2d 332, 220 N.E.2d 767; Shaheen v. Knight, 11 Pa.D. & C.2d 41. See also annotation, 27 A.L.R.3d 906.

It would, however, be a mistake to think in terms of strict "formulas." For example, a jurisdiction which would apply a reliance measure to the present facts might impose a more severe damage sanction for the wilful use by the physician of a method of operation that he undertook not to employ.

[7] That condition involves a mental element and appraisal of it properly called for consideration of the fact that the plaintiff was an entertainer. Cf. McQuaid v. Michou, 85 N.H. 299, 303-304, 157 A. 881 (discussion of continuing condition resulting from physician's breach).