Kenford Company, Inc. v. County of Erie

In Kenford Company, Inc. v. County of Erie (67 NY2d 257 [1986]) the Court of Appeals addressed only the portion of the award of money damages for lost profits which the plaintiff would have received under a proposed twenty-year management agreement. (67 NY2d at 261.) The Court held that lost profits may only be awarded where (1) the plaintiff "demonstrates with certainty that such damages have been caused by the breach"; (2) "the alleged loss [is] capable of proof with reasonable certainty"; and (3) the plaintiff makes "a showing that the particular damages were fairly within the contemplation of the parties to the contract at the time it was made." (Id.) The Court cautioned that "the damages may not be merely speculative, possible or imaginary, but must be reasonably certain and directly traceable to the breach, not remote or the result of other intervening causes." (67 NY2d at 261.) In addition, "if it is a new business seeking to recover for loss of future profits, a stricter standard is imposed for the obvious reason that there does not exist a reasonable basis of experience upon which to estimate lost profits with the requisite degree of reasonable certainty." (Id.) The Court denied plaintiff's claim for lost profits both because plaintiff did not demonstrate that damages for lost profits were within the contemplation of the parties at the time of contracting and because the assessment of income that might have been generated from an unrealized construction project was speculative. Specifically, the Court found that "the provisions in the contract providing remedy for a default do not suggest or provide for such a heavy responsibility on the part of the County. 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. 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 times." (Id. at 262.) The Court further held that plaintiff's assumptions "that the facility was completed, available for use and successfully operated by it for 20 years, providing professional sporting events and other forms of entertainment, as well as hosting meetings, conventions and related commercial gatherings" could not "satisfy the legal requirements of proof with reasonable certainty." (Id.) In Kenford Company, Inc. v. County of Erie (73 NY2d 312 [1989] the Court of Appeals addressed whether the plaintiff could recover damages for the loss of "anticipated appreciation" in the land owned by the plaintiff surrounding the proposed stadium site. The Court reiterated that in a breach of contract action, "the nonbreaching party may recover general damages which are the natural and probable consequence of the breach." (73 NY2d at 319.) However, "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." (Id.) As the Court further explained: "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." (Id.)