Wednesday, August 24, 2011

Causal connection element in BoC claim (breach as cause of the alleged damages)

Causality & damages in a breach-of-contract suit

To prevail on a claim for breach of contract, the plaintiff must establish the following elements: (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as a result of the breach. Wright v. Christian & Smith, 950 S.W.2d 411, 412 (Tex. App.—Houston [1st Dist.] 1997, no writ).

To recover compensatory damages, the plaintiff must prove that he suffered some pecuniary loss as a result of the breach. Abraxas Petroleum Corp. v. Hornburg, 20 S.W.3d 741, 758 (Tex. App.—El Paso 2000, no pet.); Multi-Moto Corp. v. ITT Comm. Fin. Corp., 806 S.W.2d 560, 569 (Tex. App.—Dallas 1990, writ denied). Such losses must be the natural, probable, and foreseeable consequence of the defendant’s conduct. Mead v. Johnson Group, Inc., 615 S.W.2d 685, 687 (Tex. 1981) (citing Hadley v. Baxendale, 9 Exch. 341, 354 (1854)); see, e.g., Stuart v. Bayless, 964 S.W. 2d 920, 921 (Tex. 1998) (holding that loss of contingency fees that lawyers might have earned from other clients was not foreseeable and directly traceable to clients’ failure to pay amounts due under contract); Swanson v. Wells Fargo Home Mortg., No. 14-02-00732-CV, 2003 WL 22945646, at *3 (Tex. App. —Houston [14th Dist.] Dec. 16, 2003, no pet.) (mem. op.) (holding that alleged “damage” to borrower, i.e. lack of leverage against builder, was not foreseeable consequence of lender’s purported breach of loan agreement because no contractual provision existed that lender should withhold monies to give borrower “leverage”).

Further, a party may not recover damages for breach of contract if those damages are remote, contingent, speculative, or conjectural. City of Dallas v. Vills. of Forest Hills, L.P., Phase I, 931 S.W.2d 601, 605 (Tex. App.—Dallas 1996, no writ); see also Westech Eng’g, Inc. v. Clearwater Constructors, Inc., 835 S.W.2d 190, 205 (Tex. App.—Austin 1992, no writ) (holding that plaintiff’s consequential damages were too speculative because no evidence connected damages to defendant’s breach of contract); A.B.F. Freight Sys., Inc. v. Austrian Import Serv., Inc., 798 S.W.2d 606, 615 (Tex. App.—Dallas 1990, writ denied) (holding that no recovery exists for speculative damages). Thus, the absence of a causal connection between the alleged breach and the damages sought will preclude recovery. Prudential Sec., Inc. v. Haugland, 973 S.W.2d 394, 397 (Tex. App.—El Paso 1998, pet. denied). Compare Abraxas Petroleum Corp., 20 S.W. 3d at 758 (holding that legally and factually sufficient evidence existed that breach by operator of oil lease caused damages to working interest owners because, on account of breach, operator seized owners’ interest and withheld earnings) with Clearview Props., L.P. v. Prop. Texas SC One Corp., 287 S.W.3d 132, 139–40 (Tex. App.—Houston [14th Dist.] 2009, pet. denied) (holding that plaintiff’s failure to secure financing for deal caused its damages, rather than any action by defendant in breach of contract claim) and Tidwell Props., Inc. v. Am. First Nat’l Bank, No. 14-04-00120-CV, 2006 WL 176862, at *3 (Tex. App.—Houston [14th Dist.] Jan. 26, 2006, no pet.) (mem. op.) (holding that defendant’s failure to disclose sublease did not cause breach–of–contract damages because plaintiff’s deal fell through for reasons independent of failure to notify plaintiff).

SOURCE: Houston Court of Appeals - 01-10-00649-CV - 8/18/11

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