St. Lawrence Factory Stores v. Ogdensburg Bridge & Port Auth., 15 N.Y.3d 203 (2010)
In a breach of contract for the sale of land, the non-breaching party can recover reliance damages, including expenses reasonably incurred in preparing to perform the contract, not limited to typical costs like title searches, surveys, and attorney’s fees.
Summary
St. Lawrence Factory Stores sued Ogdensburg Bridge & Port Authority for breach of contract after the Authority failed to close on an agreement to sell land for a shopping center. St. Lawrence sought lost profits, benefit-of-the-bargain damages, and reliance damages (expenses incurred preparing for the project). The lower courts dismissed the lost profits and reliance damages claims. The New York Court of Appeals affirmed the dismissal of lost profit and benefit of bargain claims, finding them speculative. However, it reversed the dismissal of the reliance damages claim, holding that the plaintiff could recover expenses reasonably incurred preparing to perform the contract.
Facts
St. Lawrence Factory Stores entered into a contract to purchase land from Ogdensburg Bridge & Port Authority to construct a shopping center. St. Lawrence allegedly incurred expenses preparing for performance, including arranging financing and seeking tenants. Ogdensburg Bridge & Port Authority breached the contract by failing to close the sale.
Procedural History
The Supreme Court dismissed St. Lawrence’s claims for lost profits and reliance damages before trial. The Appellate Division affirmed that decision. St. Lawrence’s benefit-of-the-bargain claim was rejected at trial, and the Appellate Division affirmed. The New York Court of Appeals granted leave to appeal, reviewing both Appellate Division orders.
Issue(s)
Whether, in a breach of contract for the sale of land, the non-breaching party’s recoverable reliance damages are limited to expenses ordinarily incurred in such contracts, such as title searches, surveys, and attorney’s closing fees.
Holding
No, because a plaintiff may recover damages based on their reliance interest, including expenditures made in preparation for performance, less any loss the breaching party can prove the injured party would have suffered had the contract been performed.
Court’s Reasoning
The court stated the correct rule for reliance damages is found in Restatement (Second) of Contracts § 349, which allows recovery for “damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed.” This rule is consistent with New York law. The court explicitly rejected the Appellate Division’s narrow view of reliance damages in land sale contracts. The court noted that the plaintiff should be compensated for the expenses incurred in preparing to perform the contract. The court emphasized that the purpose of reliance damages is to put the non-breaching party in the position they would have been in had the contract never been made. The court quoted from the case: “reliance losses suffered … in making necessary preparations to perform’ would be recoverable ‘if foreseeable and ascertainable’.” The court remitted the case to the Supreme Court for further proceedings to determine the amount of recoverable reliance damages.