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.
If a contract to manufacture and deliver goods is broken by the manufacturer, the measure of damages is the market price of such goods, minus the contract price.1 If such a contract is broken by the vendee, the measure of damages is the contract price, less the cost of manufacturing.2 Thus A agreed to get logs, cut them into lumber, and deliver the lumber to B. . After A had obtained the logs and before he had cut them, B repudiated the contract. A could recover the profit that he would have made had there been no breach.3 If the vendee manufactures the article himself the measure of damages is the contract price less the cost of manufacturing the article, allowing nothing to the vendee for a manufacturer's profit.4, some cases, however, this rule cannot be applied as the value of the article as it is, or as represented, may be impossible to ascertain. Thus in a breach of warranty that a judgment sold by the warrantor was valid, it has been held that the measure of damages is the amount paid therefor with interest.3 In such a case as this, there is moreover a total failure of consideration. If A sells personal property to B with warranty of title and B sells to C, from whom it is taken under legal process by the real owner 5, A is not liable to B for more than the price paid by B to A. A is not liable for the amount of the judgment recovered by C from B, including C's attorney fees in resisting X's action.4 It has been held that in contracts for the sale of machinery which does not conform to the warranty, the measure of damages is the cost of making such machinery conform to the warranty,5 especially if the vendor has requested the vendee to put it in condition.6