WPI 303.03 Contract—Measure of Damages—Direct Damages—Special Cases

Use this instruction, spelling out a specific measure of damages, with WPI 303.01 (Measure of Expectation Damages—Breach of Contract—No Counterclaim) or WPI 303.02 (Measure of Expectation Damages—Breach of Contract—Counterclaim), as appropriate. For specific measures of damages in various fact situations, see the Comment below.

Insert the appropriate party designation for the claimant whose measure of damages is being described.

As noted in the Comment to WPI 303.01 (Measure of Expectation Damages—Breach of Contract—No Counterclaim), the purpose of damages in a breach of contract action is “the awarding of a sum which is the equivalent of performance of the bargain—the attempt to place the plaintiff in the position he would be in if the contract had been fulfilled ….” Rathke v. Roberts, 33 Wn.2d 858, 865, 207 P.2d 716 (1949). On the other hand, recovery is “limited to the loss he has actually suffered by reason of the breach,” and the plaintiff is “not entitled to be placed in a better position than he would have been in if the contract had not been broken.” Rathke, 33 Wn.2d at 865.

Direct, or general, damages are those that flow from the breach of a contract “in the ordinary course of events.” Restatement (Second) of Contracts § 351(2)(a) (1981). A number of specific rules for measuring such damages in various typical contractual situations have evolved, and should be set forth as applicable, or adapted to similar situations.

Buyer's breach of contract to perform a service. When the contract was for hauling associated stores' merchandise from Seattle and Tacoma to Spokane, proper measure of damages was the lost net profit on the hauler's operation, defined as the difference between the costs of operation and the contract price for freight in the amount that the jury believed the hauler would have transported during the contract period. Bracy v. United Retail Merchs., 189 Wash. 162, 63 P.2d 491 (1937). When the service provider is an individual, the jury is to deduct from net profit the claimant's wages and earnings from other sources. Bracy, 189 Wash. at 168. Cf. Restatement (Second) of Contracts § 349 cmt. d (1981) (if injured party could have provided additional services, he is entitled to lost profits by virtue of lost volume).

The buyer of hauling services, which breached its agreement to keep the road in adequate repair, was liable for the difference between the actual cost of hauling and the cost of hauling if the road had been in the promised condition. Beeson Bros. v. Chambers, 155 Wash. 564, 285 P. 433 (1930).

Buyer's breach of contract to purchase and install special equipment. A seller is entitled to recover the net profit, i.e., the contract price minus the cost, of the sale and installation of special refrigeration equipment. Rathke, 33 Wn.2d at 865.

Contractor's breach of construction contract—Unfinished or defective construction. An owner may recover from a contractor for unfinished or defective construction, either (1) the reasonable cost of completion of the construction in accordance with the contract, unless such cost exceeds the remaining value of the contract, or (2) the difference between the value the construction would have had and the value of the performance received by the owner. Alpine Indus., Inc., v. Gohl, 30 Wn.App. 750, 758, 637 P.2d 998 (1981) (citing Restatement (First) of Contracts § 346 (1932)); see also Panorama Village Homeowners Ass'n v. Golden Rule Roofing, Inc., 102 Wn.App. 422, 427–28, 10 P.3d 417 (2000) (citing, inter alia, Restatement (Second) of Contracts §§ 347–48 (1981)).

This rule is consistent with the general principle that if a contract has been substantially performed, the measure of damage for defects in the performance is the cost of remedying the defects. But if the cost of correcting the defects would exceed the amount of the contract, then “it follows that there has not been a substantial performance. In such a case, the proper measure of damages is the difference between the value of the work performed and the value it would have had if the work had been done properly.” Alpine Indus., 30 Wn.App. at 759. It is error to instruct jurors that they may award damages for both the cost of repairs and diminished market value. However, the owner may recover both the cost of repairs and, in a proper case, lost profits as special or consequential damages. Alpine Indus., 30 Wn.App. at 759. See WPI 303.04 (Contract—Damages—Lost Profits).

Employer's breach of contract of employment. An employee who has been injured by an employer's breach of contract of employment is entitled to recover future lost wages for such period of time as the employee is able to prove with reasonable certainty is attributable to the breach. Kohn v. Georgia-Pacific Corp., 69 Wn.App. 709, 850 P.2d 517 (1993). For employment at will contracts, however, different rules apply. See Ford v. Trendwest Resorts, Inc., 146 Wn.2d 146, 43 P.3d 1223 (2002) (holding that “lost earnings cannot measure damages for the breach of an employment at will contract because the parties to such a contract do not bargain for future earnings”).

Landlord's breach of covenant regarding use of property. The measure of general damages for breach of a landlord's covenant regarding use of rental property is the difference between the rental value of the premises in the condition of repair or utility required by the covenant and the rental value of the premises in the actual condition of the property. Pappas v. Zerwoodis, 21 Wn.2d 725, 734, 153 P.2d 170 (1944) (covenant to repair roof and walls); Matzger v. Arcade Bldg. & Realty Co., 80 Wash. 401, 141 P. 900 (1914) (interference with access to light and ventilation); Purcell v. Warburton, 70 Wash. 129, 126 P. 89 (1912) (covenant to heat). Cf. Gilmartin v. Stevens Inv. Co., 43 Wn.2d 289, 261 P.2d 73 (1953) (breach by seller of contract to supply water to land, difference between value of land with water and without).

In a proper case, a commercial tenant may also be able to recover lost profits attributable to the breach of the landlord's covenant. See Pappas, 21 Wn.2d 725; WPI 303.04 (Contract—Damages—Lost Profits).

Lessee's breach of lease. When the lessor makes a reasonable effort to mitigate damages, the lessor is entitled to recover rental at the contract rate for the period reasonably necessary to re-rent the premises, plus the difference, if any, between the actual rental rate and the contractual rental rate for the term of the lease. Family Med. Bldg., Inc., v. Dep't of Soc. & Health Servis., 104 Wn.2d 105, 702 P.2d 459 (1985).

For a detailed discussion of damages issues, see DeWolf, Allen & Caruso, 25 Washington Practice, Contract Law and Practice ch. 14 (3d ed.).