For a breach of contract, the injured party is entitled to compensation for the loss suffered, but can recover no more than would have been gained by full performance. N.D. Cent. Code §§ 32-03-09, 32-03-36. North Dakota law thus incorporates the notion that contract damages should give the nonbreaching party the benefit of the bargain by awarding a sum of money that will put that person in as good a position as if the contract had been performed. Where the contract is for service and the breach prevents the performance of that service, the value of the contract consists of two items: (1) the party's reasonable expenditures toward performance, including costs paid, material wasted, and time and services spent on the contract, and (2) the anticipated profits. Thus, a party is entitled to recover for the detriment caused by the defendant's breach, including lost profits if they are reasonable and not speculative.Where a plaintiff offers evidence estimating anticipated profits with reasonable certainty, they may be awarded.
The weed board awarded plaintiff contractor a contract to cut weeds on lots larger than a certain number of square feet. Another contractor received a contract for smaller lots. Plaintiff discovered that the board's agent was improperly assigning large lots to the small-lot contractor. Plaintiff complained and the weed board assigned him some substitute lots. Plaintiff filed the action for breach of contract in an action against the city weed board and the board admitted that it had prevented plaintiff's performance under the contract price. The trial court awarded damages to the plaintiff but the plaintiff appealed the method used by the trial court to derive net profits.
Did the trial court properly calculate the "net profit" margin after deducting some fixed costs from its damage amount?
The court reversed the judgment and remanded for a new trial on the issue of damages. In measuring plaintiff's anticipated profits, the trial court erroneously calculated a "net profit" margin by deducting general costs of doing business including insurance, repairs, supplies, and car and truck expenses. The trial court did not determine whether those costs remained constant regardless of the board's breach and whether they were, therefore, not to be deducted from the contract price. The reduction from the contract price of a portion of the "fixed," or constant expenses, effectively required plaintiff to pay that portion twice.