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    Peevyhouse v. Garland Coal & Mining Company

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    crlstinaaa
    The plaintiffs leased part of their farm to the defendant mining company for strip mining under a contract that required the company to refill pits and smooth the land after mining. The company breached this requirement. While it would cost $29,000 to perform the work, it would only increase the land value by $300. The court held that awarding the $29,000 cost would be an economic waste, so damages were limited to the $300 diminution in value under the value rule rather than the cost of performance rule. The dissent argued specific performance was proper as the remedial work requirement was a key part of the negotiated contract.

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    Peevyhouse v. Garland Coal & Mining Company

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    crlstinaaa
    1K views1 page
    The plaintiffs leased part of their farm to the defendant mining company for strip mining under a contract that required the company to refill pits and smooth the land after mining. The company breached this requirement. While it would cost $29,000 to perform the work, it would only increase the land value by $300. The court held that awarding the $29,000 cost would be an economic waste, so damages were limited to the $300 diminution in value under the value rule rather than the cost of performance rule. The dissent argued specific performance was proper as the remedial work requirement was a key part of the negotiated contract.

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    The plaintiffs leased part of their farm to the defendant mining company for strip mining under a contract that required the company to refill pits and smooth the land after mining. The company breached this requirement. While it would cost $29,000 to perform the work, it would only increase the land value by $300. The court held that awarding the $29,000 cost would be an economic waste, so damages were limited to the $300 diminution in value under the value rule rather than the cost of performance rule. The dissent argued specific performance was proper as the remedial work requirement was a key part of the negotiated contract.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as TXT, PDF, TXT or read online from Scribd
    Download as txt, pdf, or txt
    1K views1 page

    Peevyhouse v. Garland Coal & Mining Company

    Uploaded by

    crlstinaaa
    The plaintiffs leased part of their farm to the defendant mining company for strip mining under a contract that required the company to refill pits and smooth the land after mining. The company breached this requirement. While it would cost $29,000 to perform the work, it would only increase the land value by $300. The court held that awarding the $29,000 cost would be an economic waste, so damages were limited to the $300 diminution in value under the value rule rather than the cost of performance rule. The dissent argued specific performance was proper as the remedial work requirement was a key part of the negotiated contract.

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    Download as TXT, PDF, TXT or read online from Scribd
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    Compensatory Damages - Breach of Contract by Supplier of Goods, Services, or

    Construction
    Note: Peevyhouse v. Garland Coal & Mining Co. is a famous case.

    Case: Peevyhouse v. Garland Coal & Mining Company (1962, OK) [pp. 936-941]

    Facts: The plaintiff leased half their farm that had coal deposits to the
    defendant for strip mining. Part of the agreement was that the mining company
    would fill in the pits and smooth out the land. The defendant breached. It would
    have cost $29,000 (per an expert witness) to fill in the pits, but doing so would
    have only increased the value of the land by $300. Pl sued for $25,000. The jury
    awarded the Pls $5,000, which was much less than the cost of performance, but more
    than the total value of the farm even after the remedial work was done. Plaintiffs
    appealed.

    Issue: What measure of damages should be applied; the value rule or the cost of
    performance rule? - The value Rule

    Holding: Damages given in lower court changed to $300.

    Reasoning:
    ○ In contract law, no one should be awarded more than he would have gained
    if there was full performance.
    § If we use the cost of performance rule, Pl would be awarded $25,000.
    But the actual value they would have gained if there were no breach is $300.
    § Therefore, the value rule should be used.
    ○ § 348 - where the cost of correcting is much more than the increase in
    value to the Pl (subjective test), the award should not be made. This is b/c if
    Pl would be awarded these damages , the Pl will not pay to correct the defects,
    b/c it will cost him more to do that than the resulting increase in value to Pl.
    § Court said it was unlikely that an owner would agree to pay $29,000
    for construction of improvements that would increase the value of the property by
    only $300.
    ○ Conclusion: So instead, the damages would be the objective diminution in
    value of market price. The land, while destroyed, had only lost $300 in value.
    The Court found that to pay the Peevyhouses to restore their land would be an
    economic waste, since the $25,000 in labor would result only in a $300 improvement
    of the land.
    Dissent: During negotiations, Pls said they would not agree to the K unless the
    provision for the remedial work was included (they also waived $3k cash
    customarily paid in order to have this provision). The cost for Df to perform
    could have been established when K was formed, since there is nothing that
    happened that could not have been foreseen by Df, so they knew the consequences. K
    was not entered into by mistake, fraud, etc.; it was voluntarily entered into by
    both parties. So the damages should be specific performance.

    RULE: Where the breach of a construction K causes a defect, and the cost of
    correction is more than the increase in value of the structure, then damages
    should be measured by the diminution in value, not the cost of performance.

    Notes:
    ○ This case has been criticized on the ground that the diminished value
    award undercut both the landowner's "subjective" value in having his land
    reclaimed and a broader "public interest" in achieving the same results.
    ○ In 1967, OK legislative imposed a duty upon mine operators to reclaim the
    land after work was done
    § In light of this, the OK Supreme Court would probably no longer
    follow Peevyhouse.

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