This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
There is no arbitrary rule forbidding the recovery of profits as such. If they follow naturally from the breach, are not too remote and can be proved with sufficient certainty, there is no reason why they may not be considered as an element of damage.1 Thus under a contract by A to supply cars to B to haul timber which B had agreed to sell to X, B may recover the profits of such resale if A does not furnish cars.2 If the vendor does not deliver the goods which he has agreed to deliver and he knows that the vendee is buying them to deliver under an existing or contemplated contract of resale, and contracts in contemplation thereof, the loss of profits by reason of such resale may be recovered.3 If a contract is made to deliver machinery and the vendor does not deliver it, thereby causing a delay in the operation of the entire establishment for which such machinery was bought, and the vendor knows that his delay has such effect, some liability rests upon vendor by reason of such facts. If failure to receive this machinery has not prevented the operation of the rest of the mill or factory the measure of damages for delay is the value of the use of the machinery.4 If the vendor has no other notice of special loss caused by his delay he is liable for fair rental value of that part of the mill kept idle during the time lost by reason of the breach.5 If no market value for rental can be shown, the interest on the capital kept idle, and such losses as insurance, idle labor, deterioration in value and the like may be considered, but not the loss of profits.6 So if defective machinery is delivered and blows up, delaying the operation of the cotton-press for use in connection with which it was sold, the rental value of such cotton-press may be recovered.7 Delay in delivering a gas-holder until just at the end of that part of the year at which its use is needed, makes the vendor liable for the interest on the money paid in and on the cost of the realty bought for such purpose.8 If the vendor knows that the vendee is expecting to perform outstanding contracts by means of such machinery he is liable for loss of profits due to such delay,9 if other machinery cannot be obtained.10 So loss of profits on existing contracts has been given for breach of a contract for repairing machinery.11 So on breach of a contract to deliver machinery to a mill, damages to cotton seed caused by delay in delivering such machinery may be recovered.12 So if the vendor knows that the vendee needs such machinery to use in harvesting a certain crop, his failure to deliver makes him liable for injury to such crop.13 The right to recover such anticipated profits has, however, been denied in some cases. A vendor agreed to deliver a machine for making bicycle hubs; but did not deliver such machine. It was held that though there was a great demand for bicycle hubs, no recovery could be had for loss of profits which would have been earned had such machine been deliverd.14 If the contract is entered into to provide for earning and dividing profits, the amount of future profits is the only measure of damages on principles of contract. Such profits furnish the measure of damages under a contract to divide profits earned by feeding steers,15 or to divide the increase of a flock of sheep and the wool clip.16 So on breach of a contract to furnish fertilizer, the loss caused thereby is not too remote and may be recovered.17 On breach of a contract to furnish a telephone the measure of damages is the value of the telephone to the user.18
7 Skirm v. Hilliker, 66 N. J. L. 410; 49 Atl. 679.
8 Fitzsimmons v. Chapman, 37 Mich. 139; 26 Am. Rep. 508; Hudson v. Archer, 9 S. D. 240; 68 N. W. 541.
9 Holt Mfg. Co. v. Thornton, 136 Cal. 232; 68 Pac. 708.
10 Skinn v. Reutter, - Mich. -; 63 L. R. A. 743; 97 N. W. 152.
1 Baxley v. R. R., 128 Ala. 183; 29 So. 451; Watson v. Kirby, 112 Ala. 436; 20 So. 624; Silver Springs, etc., Ry. v. Van Ness, - Fla. -; 34 So. 884; Rule v. McGregor, 117 la. 419; 90 N. W. 811; Schrandt v. Young, 62 Neb. 254; 86 N. W.
1085; Herring v. Armwood, 130 N. C. 177; 57 L. R. A. 958; 41 S. E. 96; Hamilton v. R. R., 96 N. C. 398; 3 S. E. 164.
2 Baxley v. R. R., 128 Ala. 183; 29 So. 451.
3 Denhard v. Hirst, 111 Ky. 546; 64 S. W. °93; Harrow Spring Co. v. Harrow Co., 90 Mich. 147; 30 Am. St. Rep. 421; 51 N. W. 197; Ellis v. Miller, 164 N. Y. 434; 58 N. E. 516; Hockersmith v. Hanley, 29 Or. 27; 44 Pac. 497; Perry, etc., Co. v. Rennolds, 100 Va. 264; 40 S. E. 919; Jones v. Foster, 67 Wis. 296; 30 N. W. 697.
4 Champion, etc., Co. v. Iron Works, 68 O. S. 229; 67 N. E. 486.
5 Tompkins v. Cotton Mills, 130 N. C. 347; 41 S. E. 938.
6 Sharpe v. Ry., 130 N. C. 613; 41 S. E. 799.
7 Machine Co. v. Compress Co., 105 Tenn. 187; sub nomine, Liver-more Foundry & Machine Co. v. Compress Co., 53 L. R. A. 482; 58 S. W. 270.
8 Wood v. Gaslight Co., Ill Fed. 463; 49 C. C. A. 427.
9 Central, etc., Co. v. Hartman, 111 Fed. 96; 49 C. C. A. 244; Dil-lye v. Ratcliff, 29 Tex. Civ. App. 545; 69 S. W. 237.
10 Bates Machine Co. v. Iron Works. - Ky. - ; 68 S. W. 423.
11 Pender Lumber Co. v. Iron Works, 130 N. C. 584; 41 S. E. 797.
£1578. Contract with, reference to special course of things.
The law allows all damages which may reasonably be presumed to have been within the contemplation of the parties when they made the contract.1 Accordingly if special circumstances, out of the usual course of things, are known to both parties and they contract with reference thereto, the damages which follow breach and are occasioned by such special course of things must be awarded to the party not in default as compensation.2 It seems to be held, however, that mere knowledge of the special circumstances is not sufficient unless it further appears as an established fact, that the parties contracted with reference to such circumstances.3 If a contract to deliver pipe is broken and the vendor knows that the vendee has, in reliance upon such contract, dug a trench to lay such pipe, it cannot be said as a matter of law that the vendor is not liable for the cost of re-digging, which has become necessary because, while the vendee was delayed by the vendor's breach, the rain washed the dirt back into the trench.4 Thus A agreed to deliver a monument in the spring to B, and B had resold it to X. A repudiated his contract in December. It was held that the difficulty of getting stock for a monument during the winter should be considered in estimating damages.5
12 Colvin v. Oil Co., 66 S. C. 61; 44 S. E. 380.
13 Neal v. Hardware Co., 122 N. C. 104; 65 Am. St. Rep. 697; 29 S. E. 96
14 Acme Cycle Co. v. Clarke, 157 Tnd. 271: 61 N. E. 561.
15 Rule v. McGregor, 117 la. 419; 90 N. W. 811. (A case arising out of a refusal to furnish steers to be fed. Probable expenses for extra help; and the amount actually received by the injured party for his own labor during the term of the contract should be deducted.) 151
16 Schrandt v. Young (Neb.), 89 N. W. 607; 62 Neb. 254; 86 N. W. 1085.
17 Herring v. Arm wood. 130 N. C. 177; 57 L. R. A. 958; 41 S. E. 96.
18 Zabel v. Telephone Co., 127 Mich. 402; 86 N. W. 949. But such measure of damages was denied in the absence of proof of special damages. Cumberland, etc., Co. v. Hen-don, - Ky. - ; 60 L. R. A. 849; 71 S. W. 435.
1 Spencer v. Hamilton, 113 N. C. 49; 37 Am. St. Rep. 611; 18 S. E. 167.