Restauranteur recently opened a tapas and wine bar called Incapacity. In preparation for the restaurant’s opening, Restauranteur signed an agreement to purchase ten cases of “assorted top quality red wines” per month from Wine Store. The contract would run for a total of two years (24 months). Restauranteur’s total payment would be $40,000, to be paid in four installments of $10,000 every six months.
Wine Store performed under the agreement for the first eighteen months, and Incapacity had a smooth opening. After delivery of the eighteenth monthly shipment, however, Wine Store’s CEO emailed Restauranteur the following:
Apologies for the inconvenience, but I’m afraid this will be our last shipment of wine to Incapacity. Our costs have increased, due in part to changes in the larger wine market of red varietals, and in part to some staffing difficulties that have made maintaining our supply difficult.
Restauranteur called Wine Store to confirm Wine Store’s refusal to send more shipments. When Wine Store confirmed the CEO’s email, Restauranteur promptly called his bank and stopped payments to Wine Store. Up to that point, Restauranteur had paid two installments to Wine Store, for a total of $20,000. He was able to stop a third payment of $10,000 before it went through to Wine Store.
Restauranteur subsequently signed a contract with another wine store, again to provide ten cases of “assorted top quality red wines” per month. The lowest price Restauranteur was able to find, however, was $30,000 per year, split into payments of $15,000 every six months. The new contract would cover the six months that Wine Store refused to supply Restauranteur.
Wine Store sent Restauranteur an invoice for the final six months of wine shipments it sent (constituting months 13 to 18 under their agreement.) In the invoice, Wine Store asked for the $10,000 payment that Restauranteur had stopped.
Restauranteur denied that he owed Wine Store anything, and sued Wine Store for breach of contract. Restauranteur argues that Wine Store’s failure to deliver the final six months of wine shipments under the contract constitutes a material breach, and that Wine Store’s breach has caused significant damage. Restauranteur argues that he was planning to store at least half of the wines in a cellar for many years, so that their eventual value would be at least triple what he paid Wine Store under the contract. Additionally, Restauranteur argued that the success of Incapacity depends upon top quality wines, therefore, Wine Store’s breach caused reputational damage of at least $100,000.
Wine Store countersued for breach of contract, arguing that Restauranteur owed at least the contract price of $10,000.
- Was Wine Store’s breach a material breach of the contract with Restauranteur? Explain.
- Is Restauranteur likely to receive the reputational damages and damages for the cellared wine he requested? Explain.
- Is Wine Store likely to receive all the damages it requested? What is a court likely to award in damages, either to Wine Store or Restauranteur? Explain.