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shaft. The manufacturer agreed to supply the new shaft within a day, yet it was several days before the manufacturer actually tendered the new shaft. The miller lost profits because he could not operate his mill during this time, and due to the situation’s urgency and the difficulty of manufacturing crank shafts, he could not obtain a replacement elsewhere. The miller can likely recover his lost profits as consequential damages. [ Adapted from Hadley v. Baxendale , 9 Ex. 341, 156 Eng. Rep. 145 (1854)], as discussed in Rexnord Industries, LLC v. Biggie Power Constructors , 947 F.Supp.2d 951 (E.D. Wisc. 2013).] Litigation Expenses and Liability Arising from the Seller’s Breach as Consequential Damages A third party may bring claims against the buyer due to the seller’s breach of contract. In these cases, the buyer may be able to recover the resulting litigation expenses or even a resulting judgment or settlement (including a settlement to avoid litigation) as consequential damages. [ See Restatement (Second) of Contracts § 351, cmt. c.] Example : A broker of industrial machines entered a contract with a manufacturer. The contract provided that the broker would sell, in State A, only machines purchased from the manufacturer. Before contracting, the broker truthfully communicated to the manufacturer that (1) it intended to sell the machines in State A at a profit and (2) had already entered contracts with prospective purchasers in State A to resell the machines. The broker could not reasonably obtain the machines from a source other than the manufacturer. When the manufacturer breached the contract by failing to deliver the machines as scheduled, the broker could not fulfill its contracts with the third parties, who then sued him for breach and recovered damages. The resulting damages and litigation expenses may constitute consequential damages that the broker can recover from the manufacturer. [ Adapted from Restatement (Second) of Contracts § 351, illustrations 4, 8.] Loss Not Reasonably Preventable by Cover or Otherwise Consequential damages arising from the buyer’s foreseeable general or particular needs are recoverable only insofar as the loss was not reasonably preventable, whether by cover or other means. Put differently, the buyer must make reasonable, good-faith efforts to mitigate her losses. If the buyer fails to make reasonable efforts to mitigate damages, any damages she could have prevented by reasonable efforts will be subtracted from the final consequential-damages award. If the buyer makes reasonable efforts to mitigate losses, but those efforts fail, then she will recover her full damages. [ See U.C.C. § 2-715(2)(a) (1951); Restatement (Second) of Contracts § 350(2), cmt. b; 2
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