John M. Kirby June 26, 2014

The general measure of damages, either for negligence or breach of contract, is that amount required to place the injured person in the position that he would have been if the defendant had not breached his duty to the plaintiff. Computing this damage can be difficult in practice.

In a recent case, J.T. Russell and Sons, Inc. v. Silver Birch Pond, L.L.C. (December 6, 2011), a paver agreed to pave roads in a new housing development. The paving was later found to be defective, based on the amount of base stone under the asphalt. The jury then awarded damages of nearly $371,000. The developer sought damages for the cost of repairing the roads, interest losses, losses from the sale of two lots, and damages for investigations into the roads. The total of those damages, however, was $323,000.

The Court of Appeals was thus faced with the difficult issue of whether to affirm the verdict. The paver had not preserved for appeal any issues pertaining to damages; it had not even filed a motion for a new trial. Nevertheless, the Court of Appeals took the remarkable measure of addressing damages under Rule 2, which allows the appellate court broad discretionary authority to hear appeals that are otherwise defective.

The court concluded that the jury's verdict was erroneous, as it exceeded the maximum amount sought by the developer. The court noted that the that the verdict was not allocted.

The court gave some guidance to the parties as to the correct measure of damages on retrial. First, the paver had never been paid for its work; thus, under the jury's verdict, the developer would obtain the roads for free. This is clearly an error in the computation of damages. (Whether the amount owed to the paver is a separate claim, or is an "offset," was not addressed in the opinion.) The court also wrote that the measure of damages for the sale of the lots is the net profit for the lots, and not the gross sales price. While this is correct, it raises other questions; for example, if the lot ultimately sells for a profit, then the developer will sustain a windfall (because it will receive profits twice). The opinion did not expressly address the recovery of damages for the payment of interest, which raises other issues.

This case reveals the difficulty of computing damages in construction and in other cases. Such problems can sometimes be avoided by provisions for liquidated damages, or by other provisions in the contract (including a limitation for consequential damages). John Kirby has conducted extensive research regarding the measure of damages in North Carolina.