Kenford Co. v. County of Erie, 537 N.E.2d 176

New York Court of Appeals

1989

Chapter

20

Title

Contract Remedies

Page

791

Topic

Limitations on Recovery of Expectation Damages

Quick Notes

Kenford donate load to the County for a stadium.  In addition, Kenford bought surrounding lands in hope to reap more financial reward.  The County breached the contract.  Kenford was not able to recovery damages for loss of land appreciation expectations. 

Book Name

Contracts Cases, Discussions, and Problems.  Blum Bushaw, Second Edition.  ISBN:  978-0-7355-7069-6.

Issue

o         Whether the plaintiff Kenford Company, Inc. (Kenford) is entitled to recover damages against the defendant County of Erie (County) for the loss of anticipated appreciation in the value of the land which Kenford owned in the periphery of the proposed stadium site. Under the circumstances of this case?  No.

Procedure

Trial

o          

Appellant

o          

Supreme

o         Reversed.  Kenford is not entitled to recovery on this claim since there is no evidence to support a determination that the parties contemplated, prior to or at the time of the contract, assumption by the County of liability for these damages.

Facts

Reason

Rule

Pl Kenford Co

Df County of Erie

What happened?

o         This appeal arises out of breach of contract litigation spanning 18 years and involving the proposed construction and operation of a domed stadium facility in the County of Erie.

o         County of Erie adopted legislation to authorize the county to build a sports stadium in Buffalo, New York.

o         Kenford at first wanted to sell his property in that region to the County, but he was turned down.

o         Kenford later offered to donate the land, and the County would in turn agree to start construction of the stadium within a year.

o         Also, the County would agree to least the stadium to DSI, a joint venture started by Kenford and Hofheinz for a period of 40 years.

o         In the meantime, Kenford started purchases surrounding lots of the proposed stadium site.

o         County breached the contract because, the cost of the stadium were ONLY $22 million than expected.

o         Kenford initially sued for $90 million in damages.

o         Trial Jury awarded $25.6 million in lost profits.

o         It was subsequently reversed on appeal.

o         On appeal, the damages was reduced to $6.5 million for lost of appreciation.

o         Ultimately REVERSED.

Recovery of general damages

o         The nonbreaching party may recover general damages which are the natural and probable consequence of the breach.

o         "[In] order to impose on the defaulting party a further liability than for damages [which] naturally and directly [flow from the breach], i.e., in the ordinary course of things, arising from a breach of contract, such unusual or extraordinary damages must have been brought within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting".

Determining the reasonable contemplation of the parties

o         The nature, purpose and particular circumstances of the contract known by the parties should be considered, as well as "what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it assumed, when the contract was made".

Expectations and Anticipations

o         All parties that the stadium would bring about an economic boom in the County and would result in increased land values and increased property taxes.

Kenford Argument

o         This expectation is evidenced by the terms of the provision of the parties' contract requiring the County and DSI to undertake negotiations of a lease which would provide for specified revenues to be derived from the increased taxes on the peripheral lands.

Courts Response

o         We cannot conclude, however, that this hope or expectation of increased property values and taxes necessarily or logically leads to the conclusion that the parties contemplated that the County would  assume liability for Kenford's loss of anticipated appreciation in the value of its peripheral lands if the stadium were not built.

Court Uses Common Sense Rule

o         In the absence of any provision for such an eventuality, the commonsense rule to apply is to consider what the parties would have concluded had they considered the subject.

o         The evidence here fails to demonstrate that liability for loss of profits over the length of the contract would have been in the contemplation of the parties at the relevant time.

Courts Expands

o         No provision in the contract between Kenford and the County, nor is there any evidence in the record to demonstrate that the parties, at any relevant time, reasonably contemplated or would have contemplated that the County was undertaking a contractual responsibility for the lack of appreciation in the value of Kenford's peripheral lands in the event the stadium was not built.

o         Kenford was no obligated under contract to acquire or maintain an land surrounding the 178 acres it was required to donate to the County.

Usage of key phrases (Test Purposes)

o         The Countys knowledge of Kenford acquiring land is insufficient to impose liability for the loss of anticipated appreciation of value of those lands never contemplated at the time of the contracts execution.

o         Kenford voluntarily and knowingly assumed the risk that, if the stadium were not built, its expectations of financial gain would be unrealized.

Special Consequences Damages Rule

o         Bare notice of special consequences which might result from a breach of contract, unless under such circumstances as to imply that it formed the basis of the agreement would not be sufficient [to impose liability for special damages].

Reasonably Foreseeable Damages Rule

o         Damages which may be recovered by a party for breach of contract are restricted to those damages which were reasonably foreseen or contemplated by the parties during their negotiations or at the time the contract was executed.

Reasoning of this Rule

o         To limit the liability for unassumed risks of one entering into a contract and to diminish the risk of business enterprise.

Summary

o         There is no indication whatsoever that the County reasonably contemplated at any relevant time that it was to assume liability for Kenford's unfulfilled land appreciation expectations in the event that the stadium was not built.

Class Notes

Contracts Law > Remedies >  Foreseeable Damages > General Overview

o         In actions for breach of contract, the nonbreaching party may recover general damages which are the natural and probable consequence of the breach. In order to impose on the defaulting party a further liability than for damages which naturally and directly flow from the breach, that is, in the ordinary course of things, arising from a breach of contract, such unusual or extraordinary damages must have been brought within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting. In determining the reasonable contemplation of the parties, the nature, purpose and particular circumstances of the contract known by the parties should be considered, as well as what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it assumed, when the contract was made.

o         Bare notice of special consequences which might result from a breach of contract, unless under such circumstances as to imply that it formed the basis of the agreement, would not be sufficient to impose liability for special damages.

o         Damages which may be recovered by a party for breach of contract are restricted to those damages which were reasonably foreseen or contemplated by the parties during their negotiations or at the time the contract was executed.