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H-W-H Cattle Co. v. Schroeder - 767 F.2d 437 (8th Cir. 1985)

Rule:

A court should look through the form of a transaction to its substance when necessary to fulfill the parties' expectations expressed in a contract.

Facts:

HWH was an order-buying cattle company that purchased cattle on commission for feedlots.  As an order-buyer, HWH did not own any feedlots itself. HWH is owned by the Hitch family, which owns various cattle businesses, including several feedlots. On September 13, 1978, HWH entered into a contract with Clayton Schroeder to purchase 2,000 steers for $67.00 per hundredweight ($0.67 per pound). The contract specified that the cattle would be delivered between March 1, and May 31, 1979, in Artesia, New Mexico. HWH gave Schroeder a $50,000 downpayment for the cattle. HWH, in turn, had a contract with its customer, Western Trio Cattle Co. (Western Trio), to sell it 2,000 head of cattle of the same description for $67.35 per hundredweight. Western Trio had given HWH a $50,000 downpayment, which it had used to pay Schroeder. Schroeder was only able to deliver 1,397 cattle to HWH, leaving it 603 head short of fulfilling its contract. As a result, HWH filed an action for breach of contract against Schroeder in federal district court for the Northern District of Iowa.  The matter came to trial before the district court without a jury on April 15-16, 1982. The district court found that Schroeder breached its contract with HWH by failing to deliver 603 head of cattle. The court awarded to HWH $15,075, the remaining amount of HWH's downpayment which Schroeder had retained, and $1,371.83 in damages for HWH's lost commission on the 603 cattle not delivered. HWH sought appellate review, contending it was entitled to a greater award of damages for Schroeder's breach of contract.

Issue:

Did the district court in its judgment err in failing to award plaintiff greater damages?

Answer:

No

Conclusion:

The court determined, where a seller failed to deliver goods in breach of contract, a buyer could cover and recover as damages the difference between the cost of cover and the contract price, plus incidental damages, less expenses saved in consequence of seller's breach. A buyer could also recover as damages for nondelivery, the difference between the market price at time of breach and the contract price. The court determined, in order to prevent a windfall to plaintiff buyer, plaintiff could recover as damages the amount of plaintiff's downpayment that defendant seller had retained, and its expectancy interest in lost commission on the goods not delivered. Accordingly, judgment as to the amount of damages was affirmed.

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