Tongish v. Thomas

Decatur Cooperative Association (the co-op) (plaintiff) contracted with farmer Denis Tongish (defendant) to purchase all the sunflower seeds that Tongish grew over a period of time. Under a separate contract, the co-op would deliver Tongish’s seeds to a third party and would receive a handling charge based on the seed volume delivered. This handling charge was the co-op’s only anticipated profit from Tongish’s contract. Tongish delivered the first seed installment to the co-op. Then the seeds’ market price doubled. Instead of selling his seeds to the co-op, Tongish sold his remaining seeds to Danny Thomas at the newly doubled price. Tongish had to sue Thomas to get his full payment. The co-op intervened in that lawsuit and filed a claim against Tongish for breach of contract. The trial court ruled that Tongish had breached the co-op contract. Consistent with Uniform Commercial Code (UCC) § 1-106, the court awarded the co-op its expectation damages, which were its lost $455 of handling-charge profits. The co-op appealed, arguing that the damages should be calculated under UCC § 2-713 as the difference between the market price paid by Thomas and the price in the co-op contract. This section would essentially make Tongish disgorge the gain he made from breaching the co-op contract, which was $5,100. The appellate court ordered the trial court to recalculate the damages under UCC § 2-713. Tongish appealed to the Kansas Supreme Court.