County of Erie
This appeal arises out of breach of contract litigation spanning 18
years and involving the proposed construction and operation of a domed
stadium facility in the County of Erie.
Erie adopted legislation to authorize the county to build a sports
stadium in Buffalo, New York.
Kenford at first wanted to sell his property in that region to the
County, but he was turned down.
Kenford later offered to donate the land, and the County would in turn
agree to start construction of the stadium within a year.
Also, the County would agree to least the stadium to DSI, a joint
venture started by Kenford and Hofheinz for a period of 40 years.
In the meantime, Kenford started purchases surrounding lots of the
proposed stadium site.
County breached the contract because, the cost of the stadium were ONLY
$22 million than expected.
Kenford initially sued for $90 million in damages.
Trial Jury awarded $25.6 million in lost profits.
It was subsequently reversed on appeal.
On appeal, the damages was reduced to $6.5 million for lost of
Recovery of general damages
The nonbreaching party may recover general damages which are the
natural and probable consequence
of the breach.
"[In] order to impose on the defaulting party a further liability than
for damages [which] naturally and directly [flow from the breach], i.e.,
in the ordinary course of things, arising from a breach of contract,
such unusual or extraordinary damages
must have been brought within the contemplation of the parties
as the probable result of a breach at the time of or
prior to contracting".
reasonable contemplation of the parties
The nature, purpose and particular circumstances of the contract
known by the parties should be considered, as well as "what liability
the defendant fairly may be supposed to have assumed consciously, or
to have warranted the plaintiff reasonably to suppose that it assumed,
when the contract was made".
All parties that the stadium would bring about an economic boom in the
County and would result in increased land values and increased property
This expectation is evidenced by the terms of the provision of the
parties' contract requiring the County and DSI to undertake negotiations
of a lease which would provide for specified revenues to be derived
from the increased taxes on the peripheral lands.
We cannot conclude, however, that this hope or expectation of increased
property values and taxes necessarily or logically leads to the
conclusion that the parties contemplated that the County would assume
liability for Kenford's loss of anticipated appreciation in the value of
its peripheral lands if the stadium were not built.
Court Uses Common Sense Rule
In the absence of any provision for such an eventuality, the
commonsense rule to apply is to consider what the parties would have
concluded had they considered the subject.
The evidence here fails to demonstrate that liability for loss of
profits over the length of the contract would have been in the
contemplation of the parties at the relevant time.
No provision in the contract
between Kenford and the County, nor is
there any evidence in the record to demonstrate that the parties,
at any relevant time, reasonably contemplated or would have
contemplated that the County was
undertaking a contractual responsibility for the lack of appreciation in
the value of Kenford's peripheral lands in the event the
stadium was not built.
Kenford was no obligated under contract to acquire or maintain an land
surrounding the 178 acres it was required to donate to the County.
Usage of key phrases (Test
The Countys knowledge of Kenford acquiring land is insufficient to
impose liability for the loss of anticipated appreciation of value of
those lands never
contemplated at the time of the
Kenford voluntarily and knowingly
assumed the risk that, if the stadium were not built, its
expectations of financial gain would be
Special Consequences Damages Rule
Bare notice of special consequences which might result from a breach of
contract, unless under such
circumstances as to imply that it formed the basis of the agreement
would not be sufficient [to impose liability for special damages].
Reasonably Foreseeable Damages Rule
Damages which may be recovered by a party for breach of contract are
restricted to those damages which were
reasonably foreseen or
contemplated by the parties during
their negotiations or at the time
the contract was executed.
Reasoning of this Rule
To limit the liability for
unassumed risks of one entering into a contract and to
diminish the risk of business
There is no indication whatsoever that the County reasonably
contemplated at any relevant time that it was to assume liability
for Kenford's unfulfilled land appreciation expectations in the event
that the stadium was not built.