Question: VANDERWERFF IMPLEMENT, INC. v. McCANCE, 561 N.W.2D 24 (S.D. 1997)
FACTS Blaine McCance purchased a used farming disc from Vanderwerff Implement, Inc. for $2,575. After using the disc for one day, McCance found that the disc was leaving a six- to eight-inch ridge on one side. Within a day after purchase, McAfee telephoned Vanderwerff and informed the company of the problem. McCance stopped payment on his check and returned the disc two weeks later. Vanderwerff checked the disc but found no defect. The trial court found that Vanderwerff had made an express warranty to McCance that the disc was "field ready," that this warranty had not been breached, and that McCance was in violation of an enforceable contract. The court also found that Vanderwerff was a lost volume seller and awarded damages to Vanderwerff in the amount of $2,575 plus interest. McCance appealed the trial court's decision. DECISION The appellate court stated that the normal measure of a seller's damages in the event of a breach is the difference between the market price and the contract price.
A "lost volume seller," however, may seek damages for lost profits on the sales contract: To be a "lost volume seller," one must prove that "even though [it] resold the contract goods, that sale to the third party would have been made regardless of the buyer's breach," using the inventory on hand at the time. Furthermore, "the lost volume seller must establish that had the breaching buyer performed, the seller would have realized profits from two sales." The main inquiry is whether the seller had the ability to sell the product to both the buyer who breached and the resale buyer. The appellate court agreed with the trial court that Vanderwerff was a lost volume seller. Vanderwerff sold approximately 15 new and 15 used discs each year and typically carried about 10-12 discs in inventory. The "most compelling" evidence that Vanderwerff was a lost volume seller was that Vanderwerff actually resold the disc at issue. The appellate court found that the trial court had awarded the wrong measure of damages, however. A lost volume seller is entitled to the profit that the seller would have made had the buyer fully performed, plus interest. The trial court, however, awarded Vanderwerff the full contract price, including the profit, plus interest. The appellate court thus remanded the case for a correct determination of damages.