Freund v. Washington Square Press, Inc., 34 N.Y.2d 379 (1974)

Damages for breach of contract are intended to compensate the injured party for foreseeable losses caused by the breach, but not to put the injured party in a better position than they would have been in had the contract been fully performed; when anticipated profits, such as royalties, are too speculative, nominal damages may be awarded.

Summary

An author, Freund, sued Washington Square Press for breach of a publishing contract after the publisher failed to publish his manuscript. The contract stipulated an advance and royalties. The court held that Freund was only entitled to nominal damages because the cost of publication was not a proper measure of damages, and the anticipated royalties were too speculative. The court emphasized that damages should compensate for actual loss, not enrich the plaintiff, and that speculative profits cannot form the basis of a damage award.

Facts

Freund, an author, contracted with Washington Square Press to publish his work on modern drama. The agreement granted the publisher exclusive rights and stipulated a $2,000 non-returnable advance to the author. The publisher had the right to terminate the agreement within 60 days if the manuscript was unsuitable for publication. If not terminated, the publisher was obligated to publish the work in hardbound within 18 months, followed by a paperbound edition, paying royalties based on sales. The publisher merged with another company and ceased hardbound publishing without exercising its termination right, and refused to publish Freund’s manuscript.

Procedural History

Freund initially sought specific performance, which was denied. The trial court found a valid contract and breach, setting the matter for trial on monetary damages. The trial court awarded $10,000 for the cost of hardcover publication, but denied recovery for lost royalties and paperbound publication costs. The Appellate Division affirmed the award for publication costs. The New York Court of Appeals then reviewed the case.

Issue(s)

Whether the proper measure of damages for a publisher’s breach of contract by failing to publish a manuscript is the cost of publication to the author, or whether the author is limited to recovering lost royalties and other actual damages.

Holding

No, because the cost of publication would place the author in a better position than if the contract had been performed, and the author’s claim for lost royalties was too speculative to support a damage award beyond nominal damages.

Court’s Reasoning

The court reasoned that damages for breach of contract should compensate for the injury caused by the breach and put the injured party in as good a position as full performance would have, but not a better one. Awarding the cost of publication would enrich the plaintiff beyond what he would have gained from the contract’s performance, as his profit was tied to royalties, not ownership of the books themselves. The court distinguished this case from construction contracts, where the value of the promised performance is the completed building. Here, the value to the author was the royalties from book sales. Since the author could not prove anticipated royalties with reasonable certainty, he was only entitled to nominal damages. The court stated, “Damages are not measured, however, by what the defaulting party saved by the breach, but by the natural and probable consequences of the breach to the plaintiff.” The court further noted, “Though these are damages in name only and not at all compensatory, they are nevertheless awarded as a formal vindication of plaintiff’s legal right to compensation which has not been given a sufficiently certain monetary valuation.”