NY’s Highest Court Expands Damages That Can Be Recovered For Breach of Contract November 3, 2009

In an important decision that was handed down on October 20, New York’s highest court held that where a developer of land breaches a real estate development contract and doesn’t close, the seller’s legal remedy is not limited to recovery of “only those [expenses which are] ordinarily incurred regarding such a contract, such as a title search, survey and attorney’s fees.” To the contrary, the seller is entitled to recover those expenses that were incurred in reasonable reliance on the purchaser’s anticipated performance of his end of the contract, such as the expenses incurred in arranging financing and obtaining prospective tenants for the property.

Although this holding does open a potential Pandora’s Box that could foster, rather than inhibit, litigation, overall I still like this decision for two simple reasons:

(1) I think that allowing the party who has been wronged by a breach of contract to recover the damages they incurred on the assumption that the other party to the agreement would honor their end of the contract is only fair (and more closely reflects reality); and,

(2) anything that provides a greater disincentive to breaching a contract is probably a good thing.

Jonathan Cooper is a New York Business Litigation and New York Commercial Litigation Lawyer with a focus on New York breach of contract and New York business fraud claims before the Nassau, Queens, Brooklyn, Bronx, Westchester and Suffolk County courts of New York State. For more information, feel free to contact his Long Island office at 516-791-5700.

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