Designer Direct v. Deforest Redevelopment Auth.

313 F.3d 1036

 

RULE:

1. An injured party has a right to damages based on expenditures made in preparation for performance. Thus, reliance damages are not limited to those expenses made in relation to duties spelled out in the contractual agreement.

2. In determining whether a breach is material, the following circumstances are significant: (a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; (e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing

FACTS:

The parties entered into a contract concerning a development plan created by the developer, the construction of the infrastructure, the sale of land, and the subsequent construction. The authority had a contractual obligation to provide a full-time liaison to work with the developer, but the authority failed to do so. Instead, the authority reimbursed the developer for outside liaison sources. The parties also experienced problems regarding the purchase of a particular parcel of land and the plans to build a public library. The appellate court determined that the authority's breach of the liaison requirement was a material breach; the absence of a liaison had a significant effect on the developer's ability to perform. The appellate court affirmed the district court's decision as it related to the judgment in favor of the developer. The appellate court reversed and remanded the matter concerning the denial of reliance damages to the developer.

ISSUE:

Is counter-defendant appellee entitled to a claim of reliance damages?

ANSWER:

Yes.

CONCLUSION:

The appellate court determined that the authority's breach of the liaison requirement was a material breach; the absence of a liaison had a significant effect on the developer's ability to perform. Regarding the parcel of land that was not developed, the appellate court agreed with the district court's finding that the authority breached the express provisions requiring good faith. Regarding the library, the authority breached the contract by failing to act in good faith with respect to the library negotiations. Finally, the appellate court found that the developer was entitled to reliance damages.

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