Chrysler Corp. v. E. Shavitz & Sons
| Decision Date | 05 August 1976 |
| Docket Number | No. 75-2011,75-2011 |
| Citation | 536 F.2d 743 |
| Parties | 19 UCC Rep.Serv. 519 CHRYSLER CORPORATION, a Delaware Corporation, Plaintiff-Appellant, v. E. SHAVITZ & SONS, a partnership, and Ernest Shavitz, d/b/a E. Shavitz & Sons, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Stanley A. Walton, III, Chicago, Ill., for plaintiff-appellant.
Erwin H. Greenberg, Chicago, Ill., for defendants-appellees.
Before CLARK, Associate Justice (Retired), * SWYGERT and BAUER, Circuit Judges.
We are asked to review this diversity suit in which Chrysler Corporation appeals from a judgment against it and in favor of E. Shavitz & Sons, a partnership, and Ernest Shavitz, individually. The question is whether a buyer can recover consequential damages from a seller who breached a sales contract and because of the breach the buyer subsequently suffered loss of good will among his prospective retail customers, resulting in a loss of business. We hold that the buyer may not recover such damages and reverse the judgment below.
Chrysler makes air cooling and air handling equipment. Shavitz is engaged in installing air conditioning and ventilation systems in commercial buildings. In designing the jobs for his customers between 1961 and 1973, Shavitz used Chrysler products except when a customer specified otherwise. Because of the events which gave rise to this lawsuit, Shavitz ceased buying from Chrysler on a regular open-account basis around April 1, 1973.
In 1968 Shavitz installed an air conditioning system in a restaurant owned by Peter Arvantis. Arvantis was quite satisfied with the job. In February 1971, Shavitz designed an air conditioning and ventilation system for a second restaurant owned by Arvantis known as Homer's Pub. Both orders were given to Chrysler. Delivery of the equipment for the second installation was to be made by April 20, 1971; however, it was actually made on May 20, 1971, and the job was completed on June 2, 1971. Arvantis withheld $2,000 from the amount due Shavitz because of Chrysler's tardy delivery. In the fall of 1974 more than three years after the Homer's Pub installation and a year and one-half after Shavitz had ceased doing business with Chrysler Shavitz lost an additional restaurant job for Arvantis even though he was the low bidder. Arvantis testified that Shavitz lost his business because
In April 1972, Shavitz ordered equipment from Chrysler for an air conditioning system in a building occupied by Standard Dental Laboratory. Although delivery was to be made within thirty days, it did not occur until mid-July. The system was unsatisfactory because of the improper sizing of certain pipes furnished by Chrysler. Shavitz tried to make the system work. Subsequently, Standard Dental had two other air conditioning and ventilation jobs. One of these occurred more than two years after the initial Standard Dental-Shavitz contract, and only a few details are available in the record concerning the second job. Lewis Wall, president of Standard Dental, testified that he would not give these additional contracts to Shavitz because he "lost faith and confidence in Mr. Shavitz (and) because the job never worked properly."
In December 1973, Chrysler brought this suit against the defendants seeking to collect $16,335.55 on unpaid invoices. Shavitz filed counterclaims in addition to an answer to the suit. A jury awarded Chrysler damages on its claim in the net amount of $11,967. It also awarded Shavitz $7,893 on his counterclaims. We have examined the record including the pleadings and the instructions given the jury and are satisfied that the $11,967 verdict against Shavitz represents the amount of the outstanding invoices due and owing Chrysler less certain set-offs. It is also clear that the $7,893 verdict against Chrysler represents profits lost on subsequent nascent sales to Arvantis and Standard Dental that were never consummated. This appeal concerns only the $7,893 judgment against Chrysler.
Chrysler contends that the judgment awarded against it should be reversed because an improper standard was applied. It argues that the damages are tortious in nature, based on the principle of "proximate cause," and have no precedent in the law of contracts.
The relevant provisions of the Illinois Commercial Code are sections 2-714 and 2-715, Ill.Rev.Stat., ch. 26, §§ 2-714, 2-715 (1975), Smith-Hurd Ill.Ann.Stat., ch. 26, §§ 2-714, 2-715. They provide:
In a proper case any . . . consequential damages under the next section may also be recovered.
(2) Consequential damages resulting from the seller's breach include
(a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; . . ..
The question is whether Chrysler "had reason to know" either the "general or particular requirements and needs" of Shavitz when the sales-contracts, later breached, were entered into. We are of the view that it did not. Shavitz and Chrysler were not involved in a fixed contract covering a definite period of time; their relationship was on an ad hoc basis. At the time of supplying the equipment for the Arvantis and Standard Dental jobs, Chrysler had no reason to know of any subsequent job opportunities that Shavitz might have with these two customers. It was not prescient. Nor were there job opportunities pending with these customers at the time Shavitz severed his open-end relationship with Chrysler. Simple logic requires a holding that the instant case does not fall within the meaning of the above statutory provision.
Shavitz argues that because of the breach of the two sales-contracts, Chrysler is liable to him for all damages he sustained that fairly and substantially flow from these breaches including lost profits from collateral transactions. For that proposition, Shavitz cites Sitnick v. Glazer, 11 Ill.App.2d 462, 138 N.E.2d 84 (1956). That...
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