Gem Jewelers v. Dykman

In August 1984, Gem Jewelers (plaintiff) contracted with Columbia-Art Store Equipment Company (Columbia) (defendant) for the construction of custom-made jewelry-store furniture and fixtures. Gem Jewelers agreed to pay $36,000 for solid-hardwood-cherry fixtures, built according to custom designs provided to Columbia. Columbia built and delivered the furnishings, which Gem Jewelers accepted, and which were installed in the fall of 1984. However, the furnishings were built of particle board with veneers, some of which were mismatched in color, and many of which were of low-quality craftsmanship. Gem Jewelers had already paid $32,000 to Columbia in May 1986 when Gem Jewelers wrote to Columbia complaining about Columbia’s failure to provide the agreed-upon goods. In response, Columbia denied Gem Jewelers’ allegations and offered only to forgive the balance of the payments due. Gem Jewelers sued for damages, claiming breach of contract, breach of warranty, and fraud. The trial court dismissed the fraud claim but allowed the claims for breach of contract and breach of warranty to proceed to a jury, which awarded $40,000 in damages to Gem Jewelers. The jury awarded damages based on the cost to replace the defective furnishings with solid-cherry-hardwood furnishings. Columbia appealed, arguing that damages should have been measured based only on the difference between the value of the goods accepted and the value of the goods that had been agreed upon.