Rockingham County v. Luten Bridge Co.
35 F.2d 301 (4th Cir. 1929)
- Rockingham County contracted with a Luten to build a bridge.
- There was come controversy as to whether the county really needed the bridge to be built, and a commissioner resigned.
- Rockingham decided not to build the bridge and told Luten to stop work.
- Luten already had completed $1,900 worth of work
- Luten knew the contract was in breach, but completed the bridge anyway. Then demanded the full contract price ($18k) as damages for breach of contract.
- Luten claimed that they didn’t know the contract was in breach, but the court said that was baloney.
- Rockingham paid the bill, and then turned around and sued to get the money back.
- Rockingham argued that the contract was void as soon as they told Luten to stop working, so they were not liable for any charges after that time.
- The Trial Court found for Luten. Rockingham appealed.
- The Appellate Court reversed.
- The Appellate Court found that as soon as Luten knew the contract was in breach, they had a duty to not further increase the damages.
- “When the county gave notice to the plaintiff that it would not proceed with the project, plaintiff should have desisted from further work. It had no right to pile up damages by proceeding with the erection of a useless bridge.”
- The Court found that Rockinham was only liable for $1,900.
- That’s the amount ‘out of pocket’ Luten spent, plus the entirety of the profit they would have received if the contract went to completion.
- In theory, Luten should get $18k, since that is the benefit of the bargain. However the Court felt that they didn’t act in good faith by continuing work after the breach.
- This case shows the principle of mitigation of damages. You cannot recover damages that could reasonably have been mitigated by the non-breaching party. Contract law is not a game. You cannot pile on damages. Remember, contract law doesn’t attempt to punish.
- This is a ‘very fundamental’ principle of contract law, and is intimately linked to the idea of strict liability.
- It is not technically accurate that you have a duty to mitigate in the sense that you will be punished. It’s just that you won’t recover for damages that result for failure to mitigate.