Law School Case Brief
Drews Co. v. Ledwith-Wolfe Assocs., Inc. - 296 S.C. 207, 371 S.E.2d 532 (1988)
The same standards that govern lost profits awards apply with equal force to cases where damages are sought for a new business or enterprise. First, profits must have been prevented or lost as a natural consequences of the breach of contract. The second requirement is foreseeability; a breaching party is liable for those damages, including lost profits, which may reasonably be supposed to have been within the contemplation of the parties at the time the contract was made as a probable result of the breach of it. The crucial requirement in lost profits determinations is that they be established with reasonable certainty, for recovery cannot be had for profits that are conjectural or speculative. The proof must pass the realm of conjecture, speculation, or opinion not founded on facts, and must consist of actual facts from which a reasonably accurate conclusion regarding the cause and the amount of the loss can be logically and rationally drawn.
Appellant contractor filed an action against appellee owner to foreclose a mechanic's lien. The owner filed a counterclaim alleging breached of contract. The jury returned a verdict for the contractor on its complaint and for the owner on its counterclaim. A Charleston County (South Carolina) trial court denied the contractor's motion for a new trial. The contractor appealed. The owner hired the contractor to renovate the owner's building. The owner intended to convert the building into a restaurant. Construction delays and disagreements over the quality of the contractor's work plagued the project from its inception. The contractor eventually pulled its workers off the project. The contractor filed a mechanic's lien for the labor and materials used in renovating the building and subsequently filed suit to foreclose on the lien. The owner alleged in his counterclaim that the contractor's breach of the contract forced the owner to rework part of the job. The owner also alleged that the contractor's performance delays caused the owner to lose profits from the restaurant.
(a) Did the trial court err when it admitted evidence of Owner's "delay damages"? (b) Did the "new business rule" operate to automatically preclude the recovery of lost profits by a new business or enterprise?
(a) No (b) No
The court held (a) the contractor could be held liable for the damages resulting from its performance delays regardless of whether the contract specified a completion date or stated that "time was of the essence.” A contractor may be liable for delay damages regardless of whether time was of the essence of the contract. Where a contract sets no date for performance, time is not of the essence of the contract and it must be performed within a reasonable time; (b) The new business rule as a per se rule of nonrecoverability of lost profits was firmly established in this state in Standard Supply Co. v. Carter & Harris, 81 S.C. 181, 187, 62 S.E. 150, 152 (1907). "When a business is in contemplation, but not established or not in actual operation, profit merely hoped for is too uncertain and conjectural to be considered." McMeekin v. Southern Ry. Co., 82 S.C. 468, 64 S.E. 413 (1909), like Standard Supply Co., involved profits allegedly lost when a carrier failed to deliver machinery necessary for a new mill enterprise. The Court adhered to a strict application of the rule, stating that "[t]he plaintiff's business had not been launched, and therefore he could not recover profits he expected to make. Modern cases, however, reflect the willingness of this Court and our Court of Appeals to view the new business rule as a rule of evidentiary sufficiency rather than an automatic bar to recovery of lost profits by a new business.
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