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Current Developments in the Commercial Divisions of the
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Posted: October 1, 2018

Breach of Contract Claim Properly Dismissed for Lack of Evidence of Damages

On September 27, 2018, the First Department issued a decision in FranPearl Equities Corp. v. 24 W. 23rd St., LLC, 2018 NY Slip Op. 06326, holding that a breach of contract claim was properly dismissed for lack of evidence of damages, explaining:

It is undisputed that, following the sale of a parcel of land by plaintiff to defendant’s assignor, defendant failed to construct a building on the property and obtain a temporary certificate of occupancy (TCO) for it by September 15, 2011, as the contract of sale required. It is further undisputed that defendant obtained a TCO on November 1, 2012, 13½ months after the deadline. In its case against defendant for breach of contract, plaintiff failed to show that it was harmed by defendant’s delay.

Plaintiff contends that, due to applicable zoning regulations, defendant’s delay prevented it from constructing a building on its own adjacent property for 13½ months. However, plaintiff failed to show that it would otherwise have started construction in September 2011; the evidence it submitted consists primarily of preliminary zoning calculations. Ultimately, plaintiff did not construct a building at all, and sold its property seven months after the TCO was obtained.

Plaintiff also failed to show that commencing construction in November 2012 would have been more costly, or otherwise less advantageous, than commencing in September 2011, or that defendant’s delay affected the price it received for the sale of its own property.

To the extent plaintiff tried to show lost profits during the 13½ month delay, its expert submissions were merely speculative, possible or imaginary rather than reasonably certain and directly traceable to the breach.

We reject plaintiff’s contention that damages should be presumed because the contract provides that if the TCO deadline is missed, plaintiff may have a claim for up to $2 million. Rather than guaranteeing plaintiff a monetary award for a missed deadline, this provision contemplates the possibility of a claim, and caps any resulting damages at $2 million. Further, given that the consequences of a timely obtained TCO are not known, this is not a case where it is reasonable to infer that there probably are damages from the breach.

(Internal quotations and citations omitted).

A key element in commercial litigation is proving damages. As this decision shows, the inability to show damages can be fatal to a claim. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding proving damages.

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