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Implement Co. v. Harvesting Machine Co.

repairs, fixtures, etc., and which would reasonably have amounted to the sum of $5250.

Defendant's answer contained two counts, the first averring that the contract of November 7, 1905, had been abrogated and a new or modified contract entered into and that plaintiff had violated the latter contract, thereby releasing defendant from any liability. The second count was a counterclaim in which it was alleged the contract of 1905 had been abandoned; that plaintiff had violated the terms of this new contract, and as the result thereof defendant had been damaged in the sum of $15,093. In its last amended answer this counterclaim was abandoned and no evidence was offered in support of it.

By agreement of the parties the cause was referred to Judge Henry C. Timmonds to hear and report on the facts and the law.

The referee thus stated the issues:

"The pleadings admit the execution of the contract of November 7, 1905, but they present the following primary issues:

"1. Was said contract mutually abandoned and a new or modified contract entered into in lieu thereof as alleged in defendant's answer?

"2. Did defendant violate the contract of November 7th, as alleged in plaintiff's petition?''

He then found as a fact:

"That the contract of November 7, 1905, was not mutually abandoned and that no new contract was entered into in lieu thereof.

"That the defendant violated and broke said contract of November 7, 1905."

On the question of damages the referee found that on November 25, 1907, defendant violated its contract by announcing to plaintiff its refusal to deliver any of the thousand mowers in 1908, but that defendant manifested a disposition to assist plaintiff in filling any reasonable orders it might have taken up

Implement Co. v. Harvesting Machine Co.

to that time, and proposed to furnish the required number of mowers and shipping directions at once. The referee also held that, as a matter of law, it was plaintiff's duty to have accepted this offer, notwithstanding the fact that the contract itself provided that said machines were to be sold on credit. The referee then found the loss at $1828.50, being what plaintiff would have profited on the contemplated resale of two hundred and thirty mowers which defendant's default prevented, and reduced it to the sum of $399.10, the difference being the amount plaintiff could have saved had it accepted defendant's proposition to fill certain orders for cash.

Plaintiff filed its exceptions to the report of the referee, and on the hearing of these exceptions the trial court approved the referee's findings of fact, but disapproved his conclusions of law and rendered judgment in favor of plaintiff for one dollar.

Plaintiff, after unavailing motions for new trial and in arrest of judgment, brings this cause here for review.

II. This being neither an equitable action nor one wherein a reference of the issues would have been compulsory under the statute (Reed v. Young, 248

of Referee.

Mo. 1. c. 613, and cases cited), the findings Findings of fact by the referee, if supported by any substantial evidence, are conclusive on appeal. Moreover, the refusal of the respondent (defendant below) to appeal from the judgment of the trial court affirming the verdict of the referee on the issues of fact, closes the door to any re-investigation of the facts at the instance of respondent. This confines the inquiry on the present appeal to the errors assigned by appellant (plaintiff below).

Appellant claims that under the issues and proofs, it was entitled to recover: First, for loss of profits of

268 Mo.-24

Implement Co. v. Harvesting Machine Co.

a probable resale of the whole one thousand mowers which respondent failed to deliver in the year 1908; second, that in any event it was entitled to loss of profits on two hundred and thirty mowers which it had contracted to resell during that year, but was unable to deliver because of respondent's breach of its contract to supply them. These questions will be determined in order.

III. The principle upon which profits prevented by a breach of a contract are recoverable, took root in the case-law of England and America, in a decision of 1854 (Hadley v. Baxendale, 9 Exch. 1. c. 353) where it was said:

Loss of
Profits.

"Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, 1. e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it."

Shortly following (1859) in Smeed v. Foord (1 El. & El. 1. c. 613, 120 Eng. Rep. Reprint, 1. c. 1039), it appeared that a farmer was delayed in threshing his wheat by the failure of the promisor to deliver a threshing machine on a fixed date. In consequence of the delay the stacked wheat was substantially injured by rain. There was a verdict for five hundred pounds. The court (Lord CAMPBELL, Chief Justice) discharged a rule on the plaintiff to show cause why the judgment should not be reduced and affirmed the full recovery for the reason that the case was governed by the ruling of Hadley v. Baxendale, supra, which he said, was "in accordance with the Code Napoleon, with Pothier, with Chancellor Kent and with all other authorities." This observation of Lord

Implement Co. v. Harvesting Machine Co.

CAMPBELL was quoted by the Supreme Court of Maine (VIRGIN, J.) in Grindle v. Eastern Express, 67 Me. 1. c. 322 et seq., citing the authorities supporting the statement and also adopting the ruling in Hadley v. Baxendale, which has now become the accepted statement of the law in America (8 R. C. L. 455, sec. 25, and cases cited) where it had been previously announced by the learned author of the Commentaries on American Law, in his note to *page 480 (12 Ed.) in the following terms:

"Damages for breaches of contract are only those which are incidental to, and directly caused by, the breach, and may reasonably be supposed to have entered into the contemplation of the parties, and not speculative profits or accidental or consequential losses, or the loss of a fancied good bargain."

This is a perfect legal and logical statement of the principle governing breaches of contract and is a moral imperative in every case embraced within its terms. It was only paraphrased in the case of Hadley v. Baxendale, supra, and limits the reach of redress, on the breach of the contract, to the proximately caused or reasonably contemplated losses and excludes the problematical profits of future bargains. Hence there is no merit in appellant's first assignment of

error.

In the matter in hand the contract contemplated resales by the jobbing-purchaser of the products agreed to be manufactured and delivered to it, and for that purpose a fixed time was prescribed within which the articles should be ready for delivery to the purchaser in order that it might turn them over in the performance of agreements for resales to the users of the machines. It was further agreed by the parties that such anticipatory resales by the buyer might be consummated through the delivery of the mowers by a direct shipment from the manufacturing plant in Peoria to the sub-vendees. This and the further fact

Implement Co. v. Harvesting Machine Co.

that the payments were postponed so as to allow the original purchaser to make them after having made delivery under resales, are sufficient to have apprised respondent of the specific object and purpose of the contract made with it for the supplial of machines of a particular kind. Hence it was impossible for the respondent to have been unaware that the mowers it agreed to manufacture were to be resold by the buyer on the faith of its agreement to manufacture and deliver them to the order and direction of the appellant. Evidently it was in the minds of the parties so contracting that a breach of the promise to deliver on the fixed date would entail a loss on the purchaser of all profits on all resales actually made by it in the meantime, and the learned referee correctly stated the law, on the facts showing a resale of two hundred and thirty mowers made by the appellant in reliance on the agreement of the respondent that a thousand would be delivered on or before May 1, 1908. The facts bring this transaction clearly within the ruling made in Hadley v. Baxendale, supra.

The record shows and the referee found that the net profit which appellant would have received on such resales would have been $1828.50; and in this sum judgment should have been recommended by the referee in favor of appellant.

While admitting that this was the measure of appellant's damages, the referee deducted therefrom an amount by which appellant could have lessened the loss to itself, if it had accepted a new contract proffered by respondent when it refused to carry out its original agreement for the year 1908. This was error.

It is the unquestioned law that it is the duty of a party injured by the breach of a contract or by a tort, to take reasonable steps to minimize the loss; but the rule has never been carried, in any well considered case, to the extent of requiring such party to alter its agreement under circumstances like those in

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