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KGM Harvesting Co. v. Fresh Network - 36 Cal. App. 4th 376, 42 Cal. Rptr. 2d 286 (1995)

Rule:

The test for recovery of prejudgment interest under Cal. Civ. Code § 3287(a) is whether defendant (1) actually knows the amount of damages owed plaintiff or (2) could have computed that amount from reasonably available information. If the defendant does not know or cannot readily compute the damages, the plaintiff must supply him with a statement and supporting data so that defendant can ascertain the damages.

Where a buyer covers by making in good faith and without unreasonable delay any reasonable purchase of goods in substitution for those due from the seller, that buyer may recover from the seller as damages the difference between the cost of cover and the contract price under Cal. Com. Code § 2712. This gives the buyer the benefit of its bargain. What the buyer chooses to do with that bargain is not relevant to the determination of damages under § 2712

Facts:

Seller KGM Harvesting Company (“KGM”) entered into a contract with buyer Fresh Network to deliver lettuce to it every week. When the price of lettuce rose dramatically, KGM refused to deliver the required quantity of lettuce to Fresh Network. Fresh Network then purchased lettuce on the open market in order to fulfill its contractual obligations to third parties and brought suit to recover damages incurred by KGM's breach. The jury returned a verdict awarding Fresh Network damages in an amount equal to the difference between the contract price and the price Fresh Network was forced to pay for substitute lettuce on the open market. KGM appealed, arguing that the award was excessive and that the contract-cover differential of Cal. Com. Code § 2712 was inappropriate where Fresh Network was able to pass on its extra expenses to the open market.

Issue:

In a breach of contract action by plaintiff lettuce buyer Fresh Network, was the award of damages under the California Uniform Commercial Code excessive, as claimed by defendant seller KGM because Fresh Network recovered the expenses incurred in obtaining substitute goods by passing those expenses on to its customers?

Answer:

No

Conclusion:

The appellate court affirmed the decision of the trial court concluding that where Fresh Network covered the goods by making in good faith and without unreasonable delay any reasonable purchase of goods in substitution for those due from KGM, Fresh Network could recover from KGM as damages the difference between the cost of cover and the contract price in substitution for those goods in accordance with Cal. Com. Code § 2712.

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