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35. If the court finds for the mill, how much should it award in damages?
The mill has sued the company for breach of contract.
The mill paid an attorney $2,000 for advice concerning its options in enforcing the contract. It paid a broker a reasonable fee of $5,000 to find additional logs to make up for the company's shortfall. The mill also incurred reasonable costs of $25,000 to transport the additional logs to its facility. Despite the mill's efforts to mitigate damages, it sustained $200,000 in losses because of the company's failure to timely deliver enough logs.
A well-established paper mill and a logging company signed a written contract in which the mill agreed to buy from the company all the logs the mill would need for one year. The company was unable to keep up with the mill's needs, and its log deliveries fell short by 10% to 15% in each of the four quarters of the year. The mill paid the company on time for all delivered logs.
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The «American Rule» is that each party bears the burden of his own attorney's fees. This rule can be modified for example by statute, agreement, or through an equity judgment — but it is the rule. Any time you see a remedy problem that wants to include attorney's fees, look at the facts. If there is no exception to this rule, like a fee-shifting statute or contract clause, then do not pick an answer that includes attorney's fees.
C is correct. $230,000 is the correct amount of damages. Here, the mill took reasonable steps to mitigate the losses that occurred as a result of the logging company's breach. The mill suffered $200,000 in profit losses because of the breach. The mill had to pay a broker $5,000 to find coverage for the shortfall and an additional $25,000 for transportation; these are incidental damages. $200,000 + $5,000 + $25,000 = $230,000. Attorney's fees are not allowed because of the American Rule, and absence of a fee-shifting clause or statute.
A is incorrect. Commercially reasonable expenses are recoverable. The facts specifically state that the transportation costs are reasonable expenses, so this answer is incorrect because it indicates that these costs are not valid.
B is incorrect. This answer indicates that the brokerage costs are not incidental damages. Incidental damages are available in UCC contracts and are commercially reasonable expenses incurred by the non-breaching party to do business despite the breach. Here, it may be difficult to know if a broker is a reasonable expense, but the facts identify it as such. Therefore, this choice is incorrect because it indicates that brokerage costs are not valid incidental damages.
D is incorrect. Under the American Rule, each party bears its own costs of litigation unless a contract clause agrees to something different. Here the facts do not say that there is any special circumstance that would change the default American Rule, so attorney's fees will not be allowed as damages.