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Law School Case Brief

Peevyhouse v. Garland Coal & Mining Co. - 1962 OK 267, 382 P.2d 109

Rule:

Where, in a coal mining lease, lessee agrees to perform certain remedial work on the premises concerned at the end of the lease period, and thereafter the contract is fully performed by both parties except that the remedial work is not done, the measure of damages in an action by lessor against lessee for damages for breach of contract is ordinarily the reasonable cost of performance of the work; however, where the contract provision which was breached was merely incidental to the main purpose in view, and where the economic benefit which would result to lessor by full performance of the work is grossly disproportionate to the cost of performance, the damages which lessor may recover are limited to the diminution in value resulting to the premises because of the non-performance.

Facts:

Plaintiffs leased their premises to defendant for coal mining purposes. Defendant agreed to perform certain restorative and remedial work at the end of the lease period, which defendant failed to perform. The plaintiff filed breach of contract action arising from defendant's nonperformance after expiration of a lease. At trial, plaintiffs introduced expert testimony as to the estimated cost of the work to be done. Defendant introduced expert testimony as to the diminution in value of plaintiffs' farm resulting from defendant's nonperformance. The court left the amount of damages for jury determination. The jury returned a verdict for plaintiffs for only a fraction of the cost of performance, but more than the total value of the farm even after the remedial work was done. 

Issue:

Were the plaintiffs entitled to recover damages for the breach?

Answer:

Yes, but only a reasonable amount.

Conclusion:

On appeal, the court held that the diminution in value resulting to the premises because of non-performance of the remedial work should be modified and reduced to the sum of $ 300.00 because plaintiffs were not entitled to recover more than a reasonable amount, not contrary to substantial justice, for defendant's breach. The court explained that where lessee agrees to perform certain remedial work on the premises concerned at the end of the lease period, and thereafter the contract is fully performed by both parties except that the remedial work is not done, the measure of damages in an action by lessor against lessee for damages for breach of contract is ordinarily the reasonable cost of performance of the work; however, where the contract provision which was breached was merely incidental to the main purpose in view, and where the economic benefit which would result to lessor by full performance of the work is grossly disproportionate to the cost of performance, the damages which lessor may recover are limited to the diminution in value resulting to the premises because of the non-performance.

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