Peevyhouse v. Garland
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Peevyhouse v. Garland | |
Court | Oklahoma Supreme Court |
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Citation | 382 P.2d 109, cert. denied, 375 U.S. 906, 84 S.Ct. 196, 11 L.Ed.2d 145 |
Date decided | May 28, 1963 |
Facts
- In 1954, the Peevyhouse couple owned acres of land in Oklahoma containing rich coal deposits.
- Mr. & Mrs. Peevyhouse = "Peevyhouse" = plaintiff
- Garland Coal Mining Co. = "Garland" = defendant
- Garland wanted to lease the Peevyhouse in order to mine the coal
- Plaintiff contracted with defendant coal mining company to allow them to use Peevyhouse’s land (60 acres) in excavating a coal vein. The contract was for 5 years.
- In the contract, Garland specifically agreed to perform certain restorative and remedial work at the end of the contract.
- The work would involve moving many thousands of yards of dirt, a cost estimated to be about $29,000, while the improvement to the land was estimated at only $300.
- Garland employed the strip mining technique. At the end of the 5 years, Garland refused to restore the land to its original condition.
Procedural History
- Peevyhouse sued Garland for breach of contract.
- Garland's expert testified that it restoration cost would be $29,000 while increasing the land value by only $300.
- Verdict for plaintiffs in the amount of $5,000, only a fraction of the cost of performance.
- The $5,000 the jury awarded Peevyhouse exceeded the cost of the farm in 1962.
Issues
- Must the breaching party (Garland) pay the full cost of performance ($29,000), if that cost greatly exceeds the total economic value of full performance ($300)?
- Whether the damages should be limited to
- the difference in the value of the land or
- to the cost of the remedial work defendant agreed to do.
Arguments
Garland argued that the court should limit damages to $300.
Holding
In a 5 to 4 decision: If the cost of performance is grossly dis-proportionate to the economic benefit, the defendant should only pay the economic benefit.
Judgment
for Peevyhouse for $300
Reasons
- The cost of performance is the proper measure of damages if it does not involve unreasonable economic waste.
- Where the defect in material or construction is incidental to the main purpose of the contract & one that cannot be remedied without an expenditure for re-construction disproportionate to the end to be attained, the value rule should be followed.
- Sometimes, the full cost of performance is an economic waste!
Rule
Justice Jackson: The proper way to calculate damages is by looking at the relative economic benefit.
Comments
- Dissent of Justice Irwin: The measure of damages should be the cost of performance because that is what the contract calls for and there is freedom of contract.
- Contracts_Farnsworth/Outline#Chapter_7:_Remedies_for_Breach
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