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Kearsarge Computer, Inc. v. Acme Staple Company, Inc. | 366 A.2d 467 (1976)

In breach-of-contract actions, an injured party is usually awarded expectation damages, that is, damages that place the injured party in the same position it would’ve been in had the contract not been breached. Consequently, when such damages are awarded, the loss or injury sustained, not the contract price agreed upon, is the general measure of the injured party’s damages. But what if an injured party sues for the full contract price instead? Can the injured party’s damages award be reduced by the expenses it saved as a result of the breach? That was the question for the New Hampshire Supreme Court in Kearsarge Computer versus Acme Staple Company.

In nineteen seventy-one, Kearsarge Computer and Acme Staple Company entered into a one-year contract for electronic data-processing services. Under the contract, Kearsarge would perform electronic data-processing services for Acme in exchange for payment.

However, approximately seven months after the contract began, Acme terminated the contract due to Kearsarge’s unsatisfactory performance. In fact, Acme spent eight hundred thirty-seven dollars and seventy-five cents fixing Kearsarge’s data-processing errors.

Following Acme’s termination of the contract, Kearsarge increased its effort to secure new business, which it did. Kearsarge’s employees also voluntarily agreed to a large reduction in wages so that Kearsarge could stay in business.

Subsequently, Kearsarge sued Acme in state superior court for breach of contract. Following a hearing before a special master, that is, an individual appointed by the court to rule on a particular issue, the master found for Kearsarge. In so finding, the special master awarded Kearsarge twelve thousand three hundred thirteen dollars and twenty-two cents in damages, which represented the full balance of the contract price. The court affirmed the master’s report. Acme appealed to the New Hampshire Supreme Court.

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