R.E. Davis Chemical Corp. v. Diasonics, Inc.

1987 7th Circuit Court of Appeals

• Diasonics well selling medical diagnostic equipment to Davis.
• Plaintiff buyer had contract with medical facility where equipment was going to be used, and as a consequence Davis breached its contract with Diasonics.
• Defendant ended up selling equipment to another party for same price. Under 2-706 (1), no remedy to seller, because there is no contract-resale differential. Also, under 2-708 (1) if there is no market-contract differential, also no recovery.
• Plaintiff buyer had to put down $300,000 deposit, suing to recover deposit.
• Common law largely adopted the replacement theory, and did not allow sellers to recover for lost profits.
• Defendant could argue that it would have made both sales if Davis hadn’t breached, thus it shouldn’t return deposit.
• Majority of courts allow for lost volume recovery.
• Defendant claims standard should be if they had the capacity to fulfill both orders, they should be allowed lost volume recovery.
• Court holds it should be a question of profitability, however, not capacity. Would it have been profitable for defendant to fulfill both orders? If so, then plaintiff cannot recover deposit.

Author: international

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Common law.