Case summary brief (2-page maximum)
Recorder name:
Case name:
Citation; Date:
Court:
Mia Kliuieva
Peevyhouse v. Garland Coal and Mining Co.
Breach of Contract; 1962
Supreme Court of Oklahoma
Name (if specified) and description of litigants at the original trial court level
Willie and Lucille Peevyhouse
Plaintiff:
Defendant: Garland Coal and Mining Company
Facts of the case:
Garland Coal and Mining Company signed a contract with Willie and Lucille Peevyhouse, which
gave the former the right to strip mine coal on Peevyhouse’s property for five years. One of the
contract’s clauses provided that the defendant would perform restoration work on the property
after the lease runs out, which he failed to do. When Garland refused to perform the restoration,
Peevyhouse sued for $25,000, $4000 less than estimated cost of the restoration.
Procedural history (remedy sought, prior rulings, grounds for appeal, etc., as available):
The trial court judge instructed the jury that it could consider both the decrease of value of the
land and the cost of restoration in calculation damages. The jury awarded Peevyhouse $5000,
which was less than the cost of restoring the property, but greater than the reduction in value
suffered by the plaintiff. Peevyhouse appealed this decision in the Supreme Court of Oklahoma,
contending that the true measure of damages in this case is what it will cost him to obtain
performance of the work that was not done by the defendant. Defendant argued that the measure
of damages is the cost of performance should be limited to the total difference in the market value
before and after the work was performed.
Court opinion (key issues and arguments):
Key issue: The court had to decide what is the proper measure of damages if the breach pertains
to a matter only incidental to the main purpose of the contract and performance would be
disproportionately costly.
The court addressed the decision in Groves v. John Wunder Co., stating that it was not applicable
to the present case because the primary purpose of the lease contract between plaintiffs and
defendant was neither 'building and construction' nor 'grading and excavation'. The special
provisions of the lease contract pertaining to remedial work were, therefore, incidental to the main
object involved. The court also stated that Restatement of Contracts limits damages to those that
do not cause economic waste or to those where the costs involved are not disproportional to the
result obtained. Guided by these findings, the court decided that it would be unreasonable to
spend $29,000 to obtain an increase of value of mere $3000 and lowered the award to the
difference between the property value before and after the lease, which was $300.
Dissenting opinion, if any (key issues and arguments):
In the dissenting opinion, it was argued that the plaintiff was entitled to specific performance of
the contract because the provision about the remedial work that the defendant refused to perform
was an essential part of the agreement. In arguing its position, the dissent stated that the courts
couldn’t make a better contract for the parties that they have made for themselves and, therefore,
should not alter it for the benefit of one party and detriment of the other.
Disposition of case:
The award was reduced to $300
ANALYSIS OF THE CASE
Liability for damages and types of damages
1. Course topic of the
case:
2. How does the case relate to the course topic?
It is an example of “reduction in value” damages.
3. Which previously assigned cases, if any, are related to this case, and how does this one
differ?
This case is related to Groves v. John Wunder Co. These cases are similar due to the fact that they
involve contracts that include a provision for some remedial work that must be performed in the
end of the term specified by the contract. In addition, in both cases there is a significant difference
between the cost of performance and the market value of the performance. Unlike Peevyhouse,
who received only $300 (the reduction of his property value), Groves was awarded the cost of
performance damages of $60,000 (enough to complete the restoration). The difference between
the two cases is in the nature of the restoration work: While in Peevyhouse the restoration work is
only incidental to the main objective of the contract, in Groves it is an integral part of the
contract.
4. How does the case affect economic incentives and efficiency?
This case emphasized the importance of considering possible economic waste when awarding the
damages. When the cost of performance is significantly higher than the increase in value that such
performance would create and when the clause breached by one party relates to the main
objective of the contract only incidentally, it might make more economic sense to consider only
reduction in value when awarding the damages.