Overhead expenses or indirect costs allowable as incidental damages in effecting cover consist generally of the expenses of a business enterprise for salaries of executives, central office staff personnel, rent, communications, vehicles, utilities, interest on borrowed capital and numerous other expenses which are extremely necessary for the operation of the business, but which are not directly attributable to a particular job or project.
The steel supplier orally subcontracted its tubing requirement to the tubing supplier, followed by a written purchase order calling for a certain delivery date, with time of the essence. When the tubing supplier could not make timely delivery, the steel supplier canceled the contract and performed the work itself, at an increased cost. The steel supplier brought an action against the tubing supplier for breach of contract and damages. After a jury-waived trial, the trial court ruled in favor of the steel supplier
Was the steel supplier justified in doing the work subcontracted at an increased cost to itself?
The court held that the tubing supplier was properly held to have accepted the delivery date because it did not object to the date contained in the purchase order, as required under Me. Rev. Stat. Ann. tit. 11, § 2-201(2). The steel supplier was a merchant and thus entitled to the protection of § 2-201(2) because it was chargeable with the knowledge and skill of merchants. The court agreed with the trial court that the steel supplier had acted in good faith in doing the work itself, even though its cost was greater than the contract price, because the items of extra expense were incurred in good faith. The trial court had properly disallowed certain overhead costs because the steel supplier failed to establish that it had foregone other projects while it manufactured the tubing.