Opinion ID: 1381094
Heading Depth: 2
Heading Rank: 5

Heading: Did the superior court err in its award of damages?

Text: The superior court found that TTC was a lost volume seller entitled to the profits it would have made if the contract had been performed. The superior court held that AS 45.05.208(b), now codified as AS 45.02.708(b), provided the proper measure of damages. This section of Alaska's Uniform Commercial Code provides: If the measure of damages provided in (a) of this section is inadequate to put the seller in as good a position as performance would have done, then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in AS 45.02.710, due allowance for costs reasonably incurred, and due credit for payments or proceeds of resale. The real issue here is whether the superior court properly applied AS 45.02.708(b) to award TTC its lost profits. Lost profits will be awarded in the circumstances where normal damages (market price/contract price differential) would not place the seller in the same position he would have been in had the contract been fully performed. Here TTC was entitled to its lost profits under AS 45.02.708(b) since the record shows that the phone system TTC designed was specifically modified for appellants and was not generally marketable. [17] We therefore uphold the superior court's decision to award TTC its lost profits, and we now consider appellants' claim that the court erred in its assessment of TTC's lost profits. In its determination of lost profits the superior court found that the contract consisted of the lease agreement and the option to purchase and concluded TTC was entitled to $73,332, the sum TTC would have received if appellants had made all of the lease payments. Appellants contend that the damages should have been determined according to the alternative contract theory. Under this theory appellants argue that the superior court should have based its calculations of lost profits on the $45,000 option price, rather than the total lease price of $73,332. An alternative contract is one in which a party promises to render some one of two or more alternative performances either one of which is mutually agreed upon as the bargained-for equivalent given in exchange for the return performance by the other party. [18] In McBain v. Pratt, 514 P.2d 823, 827 (Alaska 1973), we stated: The damages for breach of an alternative contract are determined in accordance with that one of the alternatives that is chosen by the party having an election, or, in case of breach without an election, in accordance with the alternative that will result in the smallest recovery. [19] Appellants contend they could have discharged the contract by making 84 lease payments or by purchasing the equipment under the option and that damages should have been based on the lower option price because the contract was breached prior to any election. The purchase option could have been exercised at any time during the lease period. [20] The superior court concluded, however, that the option letter had no bearing on the case since appellants breached the lease prior to relying on the option. In our view this ignores the fact that the option letter formed part of the consideration for the contract. We therefore conclude that the superior court erred in not applying the alternative contract theory and thus calculating the lost profits of TTC based on the $45,000 option price. [21]