Last week, the Tennessee Court of Appeals issued a new opinion, National Door & Hardware Installers, Inc. v. Hassan Mirsaidi, No. M2013-00386-COA-R3-CV (filed June 30, 2014). This is a construction dispute on a project in Nashville, Tennessee, but it reviews a number of legal issues and it's a good read on those issues.
Breach of Contract: Notable excerpts include:
Elements: "In a breach of contract action, the plaintiff is responsible for proving “(1) the existence of an enforceable contract, (2) nonperformance amounting to a breach of the contract, and (3) damages caused by the breach of contract.” BancorpSouth Bank, Inc. v. Hatchel, 223 S.W.3d 223, 227 (Tenn. Ct. App. 2006).
"The purpose of assessing damages in breach of contract cases is to place the plaintiff as nearly as possible in the same position she would have been in had the contract been performed, but the non-breaching party is not to be put in any better position by recovery of damages for the breach of the contract than he would have been if the contract had been fully performed.” Lamons v. Chamberlain, 909 S.W.2d 795, 801 (Tenn. Ct. App. 1993). Therefore, the injured party is not entitled to profit from the defendant’s breach." Action Ads, Inc. v. William B. Tanner Co., Inc., 595 S.W.2d 572, 575 (Tenn. Ct. App. 1979).
"Our courts permit the recovery of damages that are the normal and foreseeable result
of a breach of contract. Wilson v. Dealy, 434 S.W.2d 835, 838 (Tenn. 1968); Moore Const. Co., Inc. v. Clarksville Dep’t of Elec., 707 S.W.2d 1, 14 (Tenn. Ct. App. 1985).
"In the context of a construction contract, it is “reasonably foreseeable that a contractor whose ability to complete its work is impaired by the general contractor and whose performance is thereby substantially delayed will suffer direct damages and that the extent of these damages will depend upon the unique facts of each case.” Moore, 707 S.W.2d at 15. Such damages can include increased payroll and other labor costs, increased material costs, loss of efficiency of the use of equipment, extended bonding and insurance coverage, and other increased overhead items that can reasonably be attributed to the performance of the work that was delayed." Id; see generally Foster & Creighton Co. v. Wilson Contracting Co., 579 S.W.2d 422, 428 (Tenn. Ct. App. 1978).
"Determinations concerning the amount of damages are factually driven. Thus, the amount of damages to be awarded in a particular case is essentially a fact question. However, the choice of the proper measure of damages is a question of law to be decided by the court." Beaty v. McGraw, 15 S.W.3d 819, 827 (Tenn. Ct. App. 1998).
"A plaintiff who seeks damages caused by a breach of contract “is responsible for proving . . . the damages caused by the breach of contract,” BancorpSouth Bank, Inc., 223 S.W.3d at 227, and when assessing a claim for damages, our goal “is to place the plaintiff as nearly as possible in the same position she would have been in had the contract been performed,” and “the non-breaching party is not to be put in any better position by recovery of damages for the breach of the contract than he would have been if the contract had been fully performed.” Lamons, 909 S.W.2d at 801.
Proof of Damages:
"Courts will allow damages for breach of contract even where it is impossible to prove the exact amount of damages, Provident Life and Accident Ins. Co. v. Globe Indemnity Co., 3 S.W.2d 1057, 1058 (Tenn. 1928), and proof within a reasonable degree of certainty is all that is required, Buice v. Scruggs Equip. Co., 267 S.W.2d 119, 125-26 (Tenn. Ct. App. 1953).
"However, “uncertain, contingent, or speculative damages” should not be awarded." Maple Manor Hotel, Inc. v. Metro. Gov’t of Nashville and Davidson Cnty., 543 S.W.2d 593, 599 (Tenn. Ct. App. 1975).
Tennessee's Trust Fund Statute: The Court considered the claims that the general contractor deposited all funds into one account and freely transferred the funds into non-project accounts, in apparent violation of Tenn. Code Ann. § 66-11-138 and Tenn. Code Ann. § 66-11-140.
In stating that "Intention to defraud is a question of fact," Keith v. Murfreesboro Livestock Mkt., Inc., 780 S.W.2d 751, 754 (Tenn. Ct. App. 1989), the Court found that the general contractor's various transfers between his accounts appeared tied to an effort to increase interest rate returns, not to defraud.
This finding is in contrast to the strict liability apparently imposed in Tenn. Code Ann. § 66-11-140.