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Hydraform Prods. Corp. v. Am. Steel & Aluminum Corp. - 127 N.H. 187, 498 A.2d 339 (1985)

Rule:

Consequential damages must be reasonably foreseeable, ascertainable and unavoidable. The second requirement, pursuant to N.H. Rev. Stat. Ann § 382-A:2-715, is that the damages sought must be limited to recompense for the reasonably ascertainable consequences of the breach. While proof of damages to the degree of mathematical certainty is not necessary, a claim for lost profits must rest on evidence demonstrating that the profits claimed were "reasonably certain" in the absence of the breach. Speculative losses are not recoverable.

Facts:

Plaintiff Hydraform Products Corporation was incorporated in 1975 and began manufacturing and selling woodstoves in 1976. During the sales season of 1977-78, Hydraform sold 640 stoves. It purchased steel from a number of suppliers until July 1978, when it entered into a "trial run" contract with defendant, American Steel & Aluminum Corporation, for enough steel to manufacture 40 stoves. Upon delivery of the steel, certain Hydraform's agents and employees signed a delivery receipt prepared by American Steel, which contained language that waived American Steel’s liability for labor costs expended on goods or other consequential damages. Hydraform again submitted a purchase order for steel; American Steel's acceptance of this offer took the form of deliveries accompanied by receipt forms. The forms included the same language limiting American Steel's liability for damages that had appeared on the receipts used during the trial run agreement. Hydraform's employees signed these receipts as the steel was delivered from time to time, and no one representing Hydraform ever objected to that language.

During the entire phase of the agreement, deliveries made by American Steel were late, some of the steel delivered was defective, and replacements of defective steel were tardy. Consequently, Hydraform brought an action for breach of contract, which provoked a countersuit by American Steel. In January of 1983, American Steel moved to dismiss Hydraform's claims for consequential damages to compensate for lost profits and for loss on the sale of the business. American Steel based the motion on the limitation of damages clause and upon its defense that Hydraform had failed to mitigate its damages by cover or otherwise. The trial court ruled in favor of Hydraform. American Steel appealed, arguing that the trial court erred in its pronouncement that the limitation of damages clause was ineffective to bar the claim for consequential damages.

Issue:

Was a limitation of damages clause ineffective to bar a plaintiff's claim for consequential damages?

Answer:

Yes.

Conclusion:

The state appellate court held that a limitation of damages clause was ineffective to bar the claim for consequential damages. Specifically, the record supported the trial court's conclusion that these circumstances caused the exclusive remedy clause to fail because the limitation clause did not address the problem of late shipment at all. The appellate court averred that the trial court properly refused to enforce the limitation of damages clause, where circumstances caused the exclusive remedy to fail of its purpose and where the injured party would have been left without any effective remedy if it had been enforced.

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