American Mechanical v. Union Machine

In October 1976, American Mechanical Corporation ("American") contracted to sell its real estate & business equipment to Union Machine Company of Lynn, Incorporated ("Union") for $135,000.

At the time of the transaction, "Union" knew that "American" was under financial pressure. Union gave American a $5,000 check to be held in escrow. 2 days later, Union stopped payment on the check. Within 2 weeks, Union decided to back out of the contract.

Next, American's bank foreclosed its real estate for $55,000 & sold its equipment for $35,000.

American sued Union for breach of contract.

The trial court decided in favor of American but only awarded nominal damages.

Is the actual loss from a breach of contract recoverable if it was reasonably foreseeable or within the parties' contemplation when the contract was made?

Yes. The actual loss from a breach of contract is recoverable if the loss was reasonably foreseeable or within the parties' contemplation when the contract was made.

Holding was in favor of American.

Trial court's judgment is vacated. American is awarded $45,000 plus interest.

(damages involving real estate) = (contract price) - (fair market value on breach date) = (actual loss).

However, in this particular case,

$135,000 (contract price) - $90,000 (bank's sale) = $45,000 (actual loss)