Case Title: Virginia Tech. v. Interactive Return Service

Citation: 

Docket Number: 030965

State: virginia

Court: Virginia Supreme Court

Date: 2004-04-23T00:00:00Z

Document:
Present:  All the Justices 
 
VIRGINIA POLYTECHNIC INSTITUTE 
AND STATE UNIVERSITY, ET AL. 
 
v.  Record No. 030965  OPINION BY JUSTICE CYNTHIA D. KINSER 
 
 
 
 
 
 
 
    April 23, 2004 
INTERACTIVE RETURN SERVICE, INC. 
 
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 
Theodore J. Markow, Judge 
 
 
 
The primary question in this appeal is whether a 
reasonably prudent person in the position of the 
contracting parties would have considered the type of 
damages claimed in this case to be the natural consequence 
of a breach of certain agreements dealing with the 
assignment of intellectual property rights.  Answering that 
question affirmatively, we conclude that the circuit court 
did not err by admitting evidence of consequential damages.  
We also conclude that the circuit court did not err in 
instructing the jury on the issue of waiver. 
PRIOR PROCEEDINGS 
Interactive Return Service, Inc. (“IRS”), filed a 
breach of contract action against Virginia Polytechnic 
Institute and State University (“Virginia Tech”), Virginia 
Tech Intellectual Properties, Inc. (“VTIP”), and William 
Landsidle, Comptroller.1  IRS sought damages against 
Virginia Tech for its alleged breach of a sponsored 
“Research Agreement” (“SRA”) entered into between IRS and 
Virginia Tech, and damages against both Virginia Tech and 
VTIP for their alleged breach of an “Industry Project 
Agreement” (“IPA”) entered into between IRS, Virginia Tech, 
VTIP and the Center for Innovative Technology (“CIT”).  A 
jury returned a verdict in favor of IRS against both 
Virginia Tech and VTIP and fixed damages in the amount of 
$110,000.  The circuit court entered judgment against 
Virginia Tech and VTIP, jointly and severally, in that 
amount.  Virginia Tech and VTIP (sometimes referred to as 
“the defendants”) along with Landsidle appeal from that 
judgment.2
RELEVANT FACTS 
 
The terms of the SRA entered into between Virginia 
Tech and IRS in January 1995 provided that IRS would 
                     
1 IRS sued Landsidle in his official capacity as 
Comptroller for the Commonwealth of Virginia pursuant to 
Code § 8.01-193. 
 
2 At the close of the plaintiff’s evidence, Virginia 
Tech and VTIP moved to strike the evidence and enter 
judgment in their favor.  The trial court granted the 
motion with regard to IRS’s claims for breach of an oral 
contract, inverse condemnation, and breach of an implied 
contract.  A claim for breach of the SRA and a separate 
claim for breach of the IPA remained in the case and were 
decided by the jury. 
 
2
sponsor research at Virginia Tech to develop “an 
Interactive Response Unit for use with IRS’ patent pending 
[for an] [I]nteractive and [V]ideo [D]ata [S]ervice 
[S]ystem.”  According to the SRA, “[t]he Interactive 
Response Unit . . . is a device that interprets a 
television transmitted audio signal and analyzes 
coordinates of a position on the television screen directed 
by a laser beam and transmits a signal to a local repeater 
station using IVDS (Interactive and Video Data Service).”  
The Interactive Response Unit supposedly allows a 
television viewer to interact with the television by 
purchasing an advertised product, responding to a polling 
question presented during a news program, or connecting to 
the “Internet.” 
Under the terms of the SRA, Virginia Tech was required 
to “make every effort[] to develop mass production 
engineering prototypes of the system . . . in compliance 
with the Federal Communications Commission[’s] . . . rules 
for IVDS that will allow manufacturers to produce reliable 
products that are affordable to the general public and 
reliable products for the IVDS network providers.”  IRS 
agreed to reimburse Virginia Tech, on a monthly basis, for 
a portion of the costs of the research and development of 
the prototype.  Virginia Tech was to submit monthly 
 
3
billings to IRS for the costs that had been incurred in the 
performance of the SRA, and IRS was obligated to pay 
promptly 80 percent of the billings, with the remaining 20 
percent to be paid after Virginia Tech delivered the 
prototype.  Finally, Virginia Tech had “the right to cease 
to perform any additional effort upon written notice to IRS 
to that effect, only after a material breach of this 
agreement [had] occurred.”  In that event, Virginia Tech 
was required to produce “a final report describing the 
effort at such time as the effort ceased.” 
The SRA also addressed the ownership of inventions 
resulting from the research.  The title and ownership of 
inventions resulting from research conceived solely by 
researchers at Virginia Tech would be assigned to CIT.3  For 
inventions resulting from research conceived jointly by 
Virginia Tech researchers and IRS, title and ownership 
would reside jointly with IRS and CIT.  Finally, inventions 
resulting from research conceived solely by IRS would be 
owned by IRS. 
                     
3 At about the same time Virginia Tech and IRS entered 
into the SRA, IRS and CIT executed an agreement setting 
forth the terms under which CIT would license to IRS any 
inventions assigned to CIT by Virginia Tech pursuant to the 
SRA.  This agreement, among other things, granted IRS the 
option to acquire an exclusive, worldwide license of the 
Interactive Response Unit. 
 
4
 
Virginia Tech began the research in 1995.  The 
research was supposed to be completed in nine months at a 
cost of $201,505, but Virginia Tech requested several work 
extensions and additional research costs.  Although IRS 
agreed to these extensions and increased costs, IRS 
repeatedly advised Virginia Tech that it had no revenues 
and that its only source of cash was to sell “equity 
participation (IRS[] Shares) or by selling technology 
rights.”  According to IRS, its major assets were its 
proprietary technology and the relationship with Virginia 
Tech and CIT. 
 
IRS paid Virginia Tech slightly more than $103,000.  
However, after December 1995, IRS did not make any further 
payments on the research costs owed to Virginia Tech under 
the SRA.4  Virginia Tech sent several letters to IRS 
demanding payment of the unpaid costs.  IRS never denied 
the indebtedness but responded by offering to work out a 
payment schedule that delayed payment of the past due 
amount until the research produced a working prototype.  
IRS also offered to pay interest on the unpaid balance.  In 
approximately June 1996, IRS informed Virginia Tech that it 
could not make any further payments until it received the 
                     
4 The last payment made in December 1995 was for the 
July 1995 billing. 
 
 
5
finished product.  Nonetheless, IRS admitted at trial that 
it owed Virginia Tech approximately $750,000.5
 
During the same period of time, June 1996, IRS, 
Virginia Tech, VTIP, and CIT, entered into the IPA.  In 
that agreement, the parties acknowledged their desire that 
the technology related to the Interactive Video and Data 
Service System “be used in the public interest and be 
available to the public quickly and efficiently.”  CIT 
agreed to “cost-share” the research project by providing 
$73,500 to Virginia Tech.  In return for CIT’s funding, IRS 
agreed to repay CIT the amount of $147,000, double CIT’s 
investment, out of “net revenues arising from the selling, 
leasing, licensing, sublicensing, or in any other manner 
generating revenue from the transfer or use of any products 
and/or services using” the technology related to the 
Interactive Video and Data Service System.  IRS also agreed 
to sponsor the research project at Virginia Tech by 
providing $416,131 to Virginia Tech.  Pursuant to the terms 
of the IPA, Virginia Tech was obligated to assign any 
“Discoveries . . . conceived, developed, or reduced to 
practice during the Term of the Research Program” to VTIP, 
                     
5 Virginia Tech’s records showed that it had billed IRS 
the cumulative amount of $678,745.01. 
 
6
which would in turn “assign to CIT all intellectual 
property rights related to the Discover[ies].”6
After execution of the IPA, Virginia Tech requested 
additional extensions and cost increases for the research 
project, but IRS still did not make any payments to 
Virginia Tech.  In a “Call/Visit Documentation” dated July 
10, 1996, a contracts and grants administrator for the 
Virginia Tech Office of Sponsored Programs noted “as of” 
June 26, 1996 that “[s]ponsor [IRS] will not have money 
until he receives finished product and can sell it.  He 
will pay us then.  We are to keep invoicing him.”  
According to IRS, Virginia Tech agreed in the fall of 1996 
to continue the research project until a working prototype 
was developed and to give IRS 90 days thereafter to pay its 
indebtedness to Virginia Tech.  In December 1996, Virginia 
Tech requested a “no-cost extension” of the research 
project to June 30, 1997. 
However, soon after December 1996, Virginia Tech 
stopped working on the project.  It did not deliver a final 
report to IRS as required by the SRA.  In a July 1997 
letter, Virginia Tech advised IRS that, in light of the 
                     
6 Virginia Tech and VTIP did not have any different 
practices and procedures for dealing with inventions under 
a sponsored research agreement than for dealing with 
discoveries under an industry project agreement. 
 
7
fact that the research results and intellectual property 
derived from the project remained with Virginia Tech, it 
would assign these rights to VTIP unless IRS’s obligation 
was paid in full within 45 days.  Virginia Tech further 
advised IRS that VTIP, upon receiving the assignment, 
intended to execute a license with Proceso Interactivo S. 
A. de C.V. (“PISA”) and that the terms of that license 
would include an obligation by PISA to repay to Virginia 
Tech the outstanding indebtedness of IRS.7
IRS did not pay as requested.  Consequently, in an 
August 1997 document titled “Virginia Tech Intellectual 
Property Disclosure,” Virginia Tech captured the results of 
the research so that it could be licensed to PISA.8  The 
type of work listed in the disclosure was “Interactive 
Video Data Service (IVDS) System,” and the disclosure 
                     
7 In an email message dated June 17, 1997, Virginia 
Tech indicated that it was proposing “to grant exclusive 
world wide rights for all of the work done at [Virginia] 
Tech (audio coding, circuit design and software) to PISA in 
return for a down stream license payment.”  Virginia Tech 
took the position that the audio coding, circuit design and 
software developed during the research project was 
intellectual property belonging to Virginia Tech, not IRS. 
 
8 Virginia Tech had previously prepared two other 
intellectual property disclosures with regard to the 
research project. In one of those documents, Virginia Tech 
acknowledged that IRS had “exclusive licensing options for 
use [of the intellectual property listed] in an interactive 
television application.”  All three intellectual property 
disclosures arose out of the research project but none were 
assigned to CIT. 
 
8
stated that “the rights to use this technology will be 
assigned to PISA.”  Virginia Tech assigned the intellectual 
property and research results to VTIP, and one day later, 
VTIP licensed those rights to PISA.  The intellectual 
property rights related to the research project were never 
assigned to CIT as required by the terms of both the SRA 
and the IPA. 
 
In October 1997, IRS entered into an agreement with 
The HAGO Company, Inc. (“HAGO”) for the sale and exclusive 
use of certain intellectual property rights in the United 
States of America.  In the agreement, IRS stipulated that 
it had a research and development contract with Virginia 
Tech and that the ownership of the software and other 
results of that research were in dispute.  Accordingly, 
HAGO agreed to pay IRS “a monthly payment equal to the 
greater amount between fifty US cents per each Audio-Link 
in operation and the minimum monthly amount” of $10,000.  
HAGO agreed to increase the minimum monthly amount to 
$60,000 “thirty days after [Virginia Tech] deliver[ed] the 
software and results of” the research and development 
project and “a letter of no action against” IRS or “thirty 
days after [a] final appealable order instruct[ed Virginia 
Tech] to deliver the software and results of” the research 
and development to IRS. 
 
9
 
After executing the agreement with HAGO, IRS sent 
Virginia Tech a copy of the contract.  About two months 
later, IRS presented a pecuniary claim against Virginia 
Tech, and this litigation followed. 
ANALYSIS 
 
Armed with a jury verdict approved by the circuit 
court, IRS holds “the most favored position known to the 
law.”  Stanley v. Webber, 260 Va. 90, 95, 531 S.E.2d 311, 
314 (2000).  On appeal, we view the evidence presented at 
trial in the light most favorable to the prevailing party, 
IRS, and we will not set aside the judgment of the circuit 
court unless it is plainly wrong or without evidence to 
support it.  Id., Code § 8.01-680.  Using these principles 
of appellate review, we turn now to the assignments of 
error presented in this appeal. 
 
Virginia Tech and VTIP assign three errors to the 
circuit court’s judgment.  Initially, they assert that IRS 
was the first party to commit a material breach of “the 
contract” and that the circuit court, therefore, erred in 
overruling the defendants’ motion to strike and Virginia 
Tech’s motion to vacate the final order and enter summary 
 
10
judgment in its favor.9  Next, Virginia Tech and VTIP 
contend that the circuit court “erred by instructing the 
jury on waiver and by denying [d]efendants’ motion to 
strike” and Virginia Tech’s post-trial motion for summary 
judgment because there was no “evidence that Virginia Tech 
waived its right to payment under the contract.”10  In the 
third assignment of error, Virginia Tech and VTIP assert 
that the circuit court “erred by admitting evidence of 
consequential damages even though the evidence failed to 
establish that those damages were within the contemplation 
of the parties at the time of contracting.” 
In order to understand the posture of this case and to 
address the first two assignments of error, we begin by 
restating the questions presented to the jury for decision.  
The circuit court instructed the jury that the issues in 
the case were whether the SRA was a contract between IRS 
and Virginia Tech, and if so, whether either party breached 
it; and whether the IPA was a contract to which IRS, 
Virginia Tech, and VTIP were parties, and if so, whether 
any party breached it.  The jury was further instructed 
                     
9 Only Virginia Tech filed a post-trial motion to 
vacate the final order and enter summary judgment in its 
favor. 
 
10 By its terms, the second assignment of error speaks 
only to Virginia Tech. 
 
11
that it should find its verdict in favor of IRS and against 
Virginia Tech if it found that there was a contract between 
those parties; that IRS did not breach that contract, or if 
it did, Virginia Tech waived the breach; and that Virginia 
Tech breached the contract.  The jury was similarly 
instructed with regard to VTIP.  Based on these 
instructions, the jury necessarily concluded that VTIP 
breached the IPA since that was the only contract to which 
it was a party.  However, given the general verdict form, 
it is impossible to know whether the jury concluded that 
Virginia Tech breached the SRA, the IPA, or both. 
However, as IRS observes, the defendants’ argument in 
the opening brief with regard to the first assignment of 
error addresses only the SRA.  Virginia Tech and VTIP state 
that “[b]ecause it was undisputed that IRS committed the 
first material breach of the [Sponsored] Research 
Agreement, IRS was precluded as a matter of law from 
recovering for breach of the agreement.”  With regard to 
VTIP, it is irrelevant whether IRS was the first party to 
commit a material breach of the SRA because VTIP was not a 
party to that contract.  As to Virginia Tech, it is not 
necessary to decide the merits of the first assignment of 
error because we conclude that the circuit court properly 
 
12
instructed the jury with regard to the issue of waiver, 
which is the subject of the second assignment of error. 
In that regard, Virginia Tech argues, and we agree, 
that it never waived the contractual right to be paid under 
both the SRA and the IPA.  Even IRS acknowledged that fact 
by its admission at trial that it owed Virginia Tech 
approximately $750,000.  Also, during closing argument, IRS 
suggested that the jury should reduce any award of damages 
to IRS by the amount of its indebtedness to Virginia Tech.  
The relevant question, however, was whether Virginia Tech 
waived its contractual right to timely payment by IRS, not 
whether Virginia Tech waived the right to all payment. 
On the issue of waiver, the circuit court instructed 
the jury that “[a] waiver occurs when a party intentionally 
gives up a contractual right which would have been 
beneficial to it.  A waiver may be expressly stated or it 
may be implied from conduct.  A party cannot waive a right 
unless he has full knowledge of it.”  The court further 
instructed that “[t]he burden rests on a party claiming the 
other party has waived a right under a contract to prove 
the other party waived that [right] by clear, unequivocal, 
and convincing evidence, direct or implied.”  In addressing 
the defendants’ objection to these instructions, the 
circuit court correctly stated, “The waiver question is did 
 
13
they waive prompt payment.  Not payment but prompt 
payment.” 
“[W]aiver is an intentional relinquishment of a known 
right.”  Stanley’s Cafeteria, Inc. v. Abramson, 226 Va. 68, 
74, 306 S.E.2d 870, 873 (1983).  Two elements are necessary 
to establish waiver: “knowledge of the facts basic to the 
exercise of the right and the intent to relinquish that 
right.”  Employers Commercial Union Ins. Co. of America v. 
Great American Ins. Co., 214 Va. 410, 412-13, 200 S.E.2d 
560, 562 (1973); accord Horton v. Horton, 254 Va. 111, 117, 
487 S.E.2d 200, 204 (1997); Stanley’s Cafeteria, 226 Va. at 
74, 306 S.E.2d at 873.  The party relying on a waiver has 
the burden “to prove the essentials of such waiver . . . by 
clear, precise and unequivocal evidence.”  Utica Mut. Ins. 
Co. v. Nat’l Indem. Co., 210 Va. 769, 773, 173 S.E.2d 855, 
858 (1970). 
Virginia Tech clearly knew of its contractual right 
under the SRA to receive prompt payment from IRS of 80 
percent of the research costs as billed on a monthly basis 
and its right to stop the research project if IRS 
materially breached its obligations under the SRA.  
Virginia Tech also was aware that, as of December 1995, IRS 
ceased making any payments on its indebtedness and that the 
December 1995 payment was for the July 1995 billing.  The 
 
14
question here is whether Virginia Tech intended to 
relinquish its contractual right to receive prompt payment 
from IRS. 
There is sufficient evidence to make that question a 
jury issue.  From the beginning of the research project, 
IRS did not promptly pay the bills submitted by Virginia 
Tech and failed to make any payments after December 1995.  
Nevertheless, Virginia Tech continued to conduct research 
and requested several extensions and cost increases for the 
project.  As early as August 1995, IRS informed Virginia 
Tech that its only sources of cash for the next few years 
would be by selling shares of stock in IRS and by selling 
technology rights.  IRS’s inability to pay until it 
received a working prototype was the subject of discussions 
and correspondence between IRS and Virginia Tech.  A July 
1996 internal Virginia Tech document acknowledged that 
fact, and according to IRS, Virginia Tech agreed in the 
fall of 1996 to give IRS 90 days after receipt of a working 
prototype to pay the indebtedness to Virginia Tech.  As 
late as December 1996, Virginia Tech requested a no-cost 
extension of the research project.  All this evidence is 
consistent with IRS’s position that Virginia Tech had 
agreed to wait for payment until 90 days after it provided 
a working prototype to IRS. 
 
15
This is not a case in which Virginia Tech merely 
acquiesced in IRS’s failure to pay its indebtedness 
promptly.  See Stanley’s Cafeteria, 226 Va. at 74, 306 
S.E.2d at 874 (“[a]cquiescence, that is, the failure to 
protest or object, is an element of waiver; but does not of 
itself constitute waiver”).  Instead, there is sufficient 
evidence from which the jury could fairly infer that 
Virginia Tech intended to relinquish its contractual right 
to receive prompt payment by IRS in order to produce a 
working prototype.  Rather than standing on its contractual 
rights and treating the SRA as ended, Virginia Tech, by its 
conduct, see Cocoa Products Co. of Am. v. Duche, 156 Va. 
86, 96, 158 S.E. 719, 722 (1931) (contractual rights may be 
waived by course of dealing), kept the SRA alive for itself 
and for IRS, see Richmond Leather Mfg. Co. v. Fawcett, 130 
Va. 484, 506-07, 107 S.E. 800, 808 (1921) (“series of 
dealings in which delayed deliveries are accepted and paid 
for, and further deliveries demanded, justifies the party 
in default in the absence of anything to the contrary, in 
concluding that the contract will not be rescinded on 
account of such delayed deliveries without notice,” thereby 
“keep[ing] the contract alive”). 
 
Therefore, we conclude that the circuit court did not 
err in instructing the jury on the issue of waiver and in 
 
16
refusing to grant the defendants’ motion to strike and 
Virginia Tech’s post-trial motion.  That conclusion renders 
irrelevant the question whether IRS was the first party to 
commit a material breach of the SRA.  Assuming the jury’s 
verdict against Virginia Tech was based on its finding that 
Virginia Tech breached the SRA, not the IPA, the jury could 
have reached that verdict either by finding, per its 
instructions, that IRS did not breach the SRA, or that it 
did but Virginia Tech waived the breach.  For that reason 
and because VTIP was not a party to the SRA, neither 
defendant can obtain any relief under the first assignment 
of error. 
 
Virginia Tech and VTIP, nevertheless, argue in the 
reply brief that IRS was also the first party to commit a 
material breach of the IPA.  They contend that the IPA did 
not alter IRS’s obligation to pay Virginia Tech for the 
costs of the research project and that, under the terms of 
the IPA, IRS was required to sponsor the research by 
providing $416,131 to Virginia Tech.  However, the terms of 
the IPA did not specify whether this sum reflected the 
balance owed to Virginia Tech at the time the parties 
entered into the IPA or whether it was additional money to 
be paid by IRS.  Nor does the evidence in the record answer 
this question.  Moreover, the IPA does not contain any 
 
17
terms regarding when IRS was to pay that sum to Virginia 
Tech.  Thus, the evidence at trial failed to demonstrate a 
material breach of the IPA by IRS. 
 
Finally, with regard to the issue of consequential 
damages, Virginia Tech and VTIP argue that, when they 
contracted with IRS, they could not have contemplated that 
IRS would create an arrangement with a third party that 
tied royalty payments to IRS to its securing a final 
judgment against Virginia Tech.  They also contend that the 
HAGO agreement was “a sham, nothing more than a thinly 
veiled attempt to manufacture consequential damages where 
no damages exist[ed].”  Thus, according to the defendants, 
the circuit court erred in admitting evidence of 
consequential damages based on the HAGO agreement.  We do 
not agree. 
 
“Consequential damages are those which arise from the 
intervention of ‘special circumstances’ not ordinarily 
predictable.”  Roanoke Hosp. Ass’n v. Doyle & Russell, 
Inc., 215 Va. 796, 801, 214 S.E.2d 155, 160 (1975); accord 
NAJLA Assocs., Inc. v. William L. Griffith & Co. of Va., 
Inc., 253 Va. 83, 86, 480 S.E.2d 492, 494 (1997).  
Consequential damages “are compensable only if it is 
determined that the special circumstances were within the 
‘contemplation’ of both contracting parties.”  NAJLA 
 
18
Assocs., 253 Va. at 87, 480 S.E.2d at 494.  The term 
“contemplation” used in this context means both “what was 
actually foreseen and what was reasonably foreseeable.”  
Roanoke Hosp., 215 Va. at 801 n. 4, 214 S.E.2d at 160 n. 4; 
accord Danburg v. Keil, 235 Va. 71, 76, 365 S.E.2d 754, 757 
(1988).  The question “[w]hether special circumstances were 
within the contemplation of the parties is a question of 
fact.”  Roanoke Hosp., 215 Va. at 801, 214 S.E.2d at 160. 
 
We need look no further than the terms of the SRA and 
IPA to conclude that the evidence was sufficient to make 
the question whether the type of damages claimed by IRS was 
within the contemplation of the parties an issue for the 
jury to resolve.  See Fairfax County Redevelopment & 
Housing Auth. v. Hurst & Assocs. Consulting Eng’rs, Inc., 
231 Va. 164, 168, 343 S.E.2d 294, 296 (1986).  Under the 
terms of the SRA, Virginia Tech was obligated to “make 
every effort[] to develop mass production engineering 
prototypes of the system . . . that will allow 
manufacturers to produce reliable products that are 
affordable to the general public and reliable products for 
the IVDS network providers.”  The introductory section of 
the IPA, which both Virginia Tech and VTIP executed, stated 
that IRS had “an interest in developing and commercializing 
technology related to [the] Interactive Video and Data 
 
19
Service System.”  In that same section, the parties to the 
agreement expressed their desire that such technology be 
made available to the public, and CIT stated its interest 
in helping IRS commercialize the technology.  In return for 
CIT’s “cost-share funding” to Virginia Tech, IRS agreed to 
repay CIT from its worldwide “net revenues arising from the 
selling, leasing, licensing, sublicensing, or in any other 
manner generating revenue from the transfer or use of any 
products and/or services using” the technology developed in 
the research program by Virginia Tech.  In turn, CIT was 
required to distribute to Virginia Tech a proportional 
share of each payment received from IRS. 
Based on the provisions of the SRA and the IPA, it was 
reasonably foreseeable to the parties that, following 
research and the development of intellectual property and 
technology related to the Interactive Video and Data 
Service System, there would be licensing, manufacturing, 
and/or marketing contracts for those rights and that such 
contracts would generate revenues to IRS.  IRS’s agreement 
to sell intellectual property rights to HAGO was such a 
contract.  Thus, the consequential damages claimed by IRS 
were of the nature and type of damages within the 
contemplation of the parties, i.e., reasonably foreseeable, 
at the time of contracting.  See Krauss v. Greenbarg, 137 
 
20
F.2d 569, 570-71 (3rd Cir. 1943) (in Pennsylvania, the 
determinative question is whether the breaching party knew 
that the breach would probably result in the kind of 
special damages claimed).  Stated differently, a reasonably 
prudent person in the position of Virginia Tech and VTIP at 
the time of contracting would have considered this type of 
damages to be the natural consequence of their breach of 
the SRA and/or the IPA when they failed to assign the 
intellectual property rights to CIT so those rights could 
be licensed to IRS.  See Contempo Design, Inc. v. Chicago & 
Northeast Ill. Dist. Council of Carpenters, 226 F.3d 535, 
554 (7th Cir. 2000), cert. denied, 531 U.S. 1078 (2001). 
It was not necessary for the parties actually to 
foresee that type of consequential damages.  See Roanoke 
Hosp., 215 Va. at 801 n. 4, 214 S.E.2d at 160 n. 4; see 
also Passaic Distrib., Inc. v. The Sherman Co., 386 F. 
Supp. 647, 651 (S.D.N.Y. 1974) (applying New Jersey law, 
“[a]ctual foresight of the specific injury of a particular 
amount in money is not required”).  Neither was it 
necessary that the HAGO agreement in particular or the 
exact consequential damages claimed by IRS be in fact 
foreseen or reasonably foreseeable by the parties.11  See 
                     
11 To the extent that Virginia Tech and VTIP argue that 
the quantum of consequential damages claimed by IRS was 
 
21
Sabraw v. Kaplan, 211 Cal. App. 2d 224, 228 (Cal. Ct. App. 
1962) (“it is not necessary that the exact manner by which 
damages occur by reason of breach of contract be 
foreseeable”); Stern & Stern Assocs. v. Timmons, 423 S.E.2d 
124, 125 (S.C. 1992) (“the defendant need not foresee the 
exact dollar amount of the injury, the defendant [need 
only] know or have reason to know the special 
circumstances”).  Accordingly, the circuit court did not 
err in admitting evidence of consequential damages.  There 
was sufficient evidence of special circumstances within the 
contemplation of the parties to submit this factual issue 
to the jury and to sustain the jury’s verdict. 
CONCLUSION 
In summary, there is sufficient evidence from which 
the jury could have concluded that Virginia Tech waived its 
contractual right to receive prompt payment from IRS.  
Thus, the circuit court did not err by instructing the jury 
on the issue of waiver.  Consequently, it is irrelevant 
whether IRS was the first party to commit a material breach 
of the SRA.  And, there is no evidence that IRS was the 
first party to commit a material breach of the IPA.  
                                                             
speculative or that the HAGO agreement was entered into for 
fraudulent purposes, those arguments are not encompassed 
within the assignment of error.  See Rule 5:17(c).  We note 
that the defendants asserted those particular arguments in 
their motion in limine before the circuit court. 
 
22
Finally, the evidence demonstrated that special 
circumstances giving rise to the type of consequential 
damages claimed by IRS were within the contemplation of the 
parties at the time of contracting.  For these reasons, we 
will affirm the judgment of the circuit court. 
Affirmed. 
 
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