Opinion ID: 570028
Heading Depth: 3
Heading Rank: 2

Heading: Whiting-Turner's Damages

Text: 37 The district court calculated the loss to Whiting-Turner when W & M abandoned the contract by limiting the damages to the reasonable cost of completing the mechanical work. It estimated this reasonable cost at $1,000,000. The district court then deducted from this amount the $126,000 unpaid balance owed to W & M on the contract and $10,000 for tools W & M lost when it was unable to recover the tools from the job site. The district court deducted another $200,000 to reflect the extent to which the plaintiff's damages would have increased had it completed the job itself. 38 Whiting-Turner contends that the district court erred (1) by estimating a mystical reasonable cost to complete the work rather than accepting its actual cost to complete the job and (2) by deducting $200,000 for damages saved by Whiting-Turner. We agree.
39 It was error for the district court to award damages based on its estimation of the reasonable cost to complete the job instead of accepting Whiting-Turner's actual costs of completion, which the district court found was $1,741,866. See L.G. Defelice & Sons v. Globe Indem. Co., 189 F.Supp. 455, 459-60 (S.D.N.Y.1960); Restatement (Second) Contracts § 348 comment c; cf. 3 E. Farnsworth, Contracts 233 (1990) (as long as ... the injured buyer covers 'by making in good faith, a 'reasonable purchase or contract to purchase,' the injured party can recover based on actual loss, regardless of the market price) (footnotes omitted). 40 Article 7(a) of the Subcontract provides that, in the event of W & M's breach, Whiting-Turner may make independent arrangements for completion of the job. The amount of completion cost ... incurred as a result of such default shall be charged against any unpaid balance due the Subcontractor ... and, if said total costs, damages or expenses shall exceed the balance due, the Subcontractor agrees to pay the amount of said excess.... This contractual damages provision is consistent with New York law: 41 The proper measure of damages in a case such as this, where the contractor walked off the job after completing only a portion of the work required by his agreement is the difference between the contract price and the cost of completing the work left undone. In practical application, however, the rule of damages is more clearly and appropriately stated to be the difference between the amount remaining due and owing under the original agreement and the actual cost of completing the work required by the contract. 42 Sarnelli v. Curzio, 104 A.D.2d 552, 553, 479 N.Y.S.2d 257, 258 (2d Dept.1984) (citations omitted); accord Manniello v. Dea, 92 A.D.2d 426, 428, 461 N.Y.S.2d 582, 584-85 (3d Dept.1983); Condello v. Stock, 285 A.D. 861, 861, 136 N.Y.S.2d 507, 508 (4th Dept.1955). Accordingly, absent fraud, overreaching, or other evidence of bad faith, Whiting-Turner should be awarded its actual costs to complete the mechanical work, less the $126,000 remaining contract balance and the $10,000 offset for tools.
43 The remaining issue concerns the propriety of the district court's offset of $200,000 against Whiting-Turner's damages. The district court essentially determined that, if W & M had completed the job, its delay damages, for which Whiting-Turner was liable, would have grown by approximately $200,000. Thus, W & M actually saved Whiting-Turner $200,000 by abandoning the job. Accordingly, the district court reasoned, Whiting-Turner's damages should be offset by this $200,000 savings. 44 Although this approach may hold some visceral appeal, cf. Al-Ev Constr. Corp. v. Ahern Maintenance & Supply Corp., 141 A.D.2d 591, 593, 529 N.Y.S.2d 354, 356 (2d Dept.1988) (in computing damages for cost of completing a contractor's work, the trial court should have taken into consideration the cost the defendant [ ] avoided as a result of not having to complete the contract with the plaintiff), it does not accord with New York law. Giving W & M a credit for the amount by which W & M's damages would have increased had W & M completed the job, perforce rewards W & M for its own breach. Having elected to continue with the contract after Whiting-Turner's breach, W & M was bound to comply with it or be itself liable for breach. See Thuman v. Clawson & Wilson Co., 211 A.D. 507, 510, 207 N.Y.S. 565, 569 (4th Dept.1925). Having itself breached the contract, W & M should not now be heard to boast that it saved Whiting-Turner money that Whiting-Turner would have had to pay if W & M had completed the IBM project. 45 While Whiting-Turner could not recover for costs it truly avoided by virtue of W & M's breach, see Al-Ev Constr., 141 A.D.2d at 593, 529 N.Y.S.2d at 356; Sarnelli, 104 A.D.2d at 553, 479 N.Y.S.2d at 258. See generally, 3 E. Farnsworth, supra, at 200-02 (discussing reduction of damages for costs and losses avoided), W & M cannot recover for damages it never incurred because of its own breach. Because it abandoned the contract on December 28, 1988, W & M cannot recover or be credited for damages it would have suffered after that date; not having incurred them, they manifestly are not damages and therefore cannot provide a basis for recovery. See generally 3 E. Farnsworth, supra, at 196-218 (compensatory damages awarded for actual economic gains and losses). 46 Even assuming arguendo that damages saved could, in theory, properly offset Whiting-Turner's damages, the amount of such an offset would be so speculative as to constitute an improper basis for awarding damages. See Berley Indus., Inc. v. City of New York, 45 N.Y.2d 683, 687, 412 N.Y.S.2d 589, 591, 385 N.E.2d 281, 283 (1978). As this case amply demonstrates, fixing an award for delay damages actually incurred can be a herculean task. Settling on an amount of future delay damages which might have been incurred had W & M completed the job is a bootless exercise. In any event, such an exercise lacks the requisite certainty and basis in fact upon which damage awards must be based under New York law. See id.; see also Griffin v. Colver, 16 N.Y. 489, 491 (1858) (damages must be shown with certainty, and not left to speculation or conjecture); Restatement (Second) Contracts § 352.