On this date in 1961, the Supreme Court decided 525 Main St. Corp. v. Eagle Roofing Corp., 34 N.J. 251 (1961). The Court’s opinion, a 5-0 decision, was written by Chief Justice Weintraub.
The case involved a roof on an industrial building. Defendant contracted with the assignor of plaintiff to repair the roof, and defendant gave a five-year guarantee against leaks, along with a promise to repair. After about two years, leaks appeared. Defendant made some repairs but then refused to do anything further. Plaintiff got another roofer to repair the roof and then sued defendant for damages. The trial court found that defendant had breached its contract, but awarded only nominal damages. The Appellate Division affirmed. The Supreme Court granted review and, noting that “the sole issue is one of damages,” reversed the lower courts.
In language that has been cited many times, Chief Justice Weintraub laid out a practical approach to contract damages. “Compensatory damages are designed to put the injured party in as good a position as he would have had if performance had been rendered as promised. Although specific rules are formulated for sundry situations, they are subordinate to this broad purpose. Hence a given formula is improvidently invoked if it defeats a common sense solution.”
Defendant had argued that the proper measure of damages was the difference in value between “the value of the entire building with the defective roof and the value of the building if the contract had been performed.” The Court rejected that approach as “awkward ….[,] labored and unrewarding.” The roof was “sufficiently discrete” that damages were to be measured in terms of the roof alone. Moreover, there was “no apparent reason to deal with differences in value rather than the cost of remedying the broken promise.”
The Court then focused on what was bargained for, whether defendant delivered it, and whether plaintiff was within its rights to have someone else make the repairs. The bargained-for result was a roof that would serve as a roof for five years with the aid of such repairs as might occasionally be required. Defendant did not deliver a roof that served as a roof, and plaintiff was justified in hiring another contractor when defendant refused to perform, since tenants’ property was at risk and time was of the essence.
The remaining question was how to measure damages. The general rule, the Court observed, was that “the disappointed owner may recover the costs of completing the promised performance or making necessary repairs, unless under the facts it is impossible to do so or the cost of completion or repairs would constitute unreasonable economic waste, in which event reference would be made to the difference in value formula.” Again emphasizing practicality and a result that “makes sense,” Chief Justice Weintraub gave plaintiff a choice: either prove “the actual cost of the new work which was in fact done … to permit a comparison between its benefit and the benefit defendant failed to deliver” or “receive a portion of the contract price paid to defendant, prorated for the balance of the 5-year period.”
This compact decision, which occupies just seven pages of New Jersey Reports, has been cited in more than 80 cases, according to a Westlaw search, including at least one as recently as 2017. Its practical approach to damages shows the way to the avoidance of economic waste and commons sense solutions to knotty damage issues.