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Corestar International PTE. Ltd. v. LPB Communications

October 10, 2007

CORESTAR INTERNATIONAL PTE. LTD, PLAINTIFF/ COUNTER DEFENDANT,
v.
LPB COMMUNICATIONS, INC., DOMINICK SPADEA AND THOMAS SPADEA, DEFENDANTS/ COUNTER CLAIMANT.



The opinion of the court was delivered by: Hillman, District Judge

OPINION

On May 10, 2007, this Court granted Plaintiff's motion for summary judgment on its breach of contract claim against Defendant LPB Communications for LPB's breach of the parties' contract for the purchase of shortwave transmitters and amplifier modules. The parties were then ordered to submit supplemental briefing with regard to damages. The Court has considered the parties' submissions, and holds that Plaintiff shall be awarded damages for LPB Communications' breach of contract as set forth below.

I. Transmitters

Corestar seeks incidental and consequential damages for LPB's failure to deliver the transmitters it ordered. Corestar had ordered seven 10kw shortwave transmitters from LPB, but LPB only delivered one, non-conforming transmitter. Corestar is seeking the return of its seventy-five percent deposit, less the contracted price of the one delivered transmitter. With regard to the non-conforming transmitter, Corestar is seeking to recover the amount it paid to repair the transmitter. Corestar is also seeking damages for the profits it lost from its contracts to resell the transmitter to its customers.*fn1

LPB contends that the amount of damages should be reduced by the value of the transmitter parts. LPB also contends that because Corestar never notified LPB about the non-conforming transmitter, Corestar is not entitled to its costs for repairing it. LPB also argues that Corestar is not entitled to lost profits because they are speculative and can only be determined by a trier of fact. It appears that LPB is also arguing that Corestar had a security interest in the transmitter parts.

1. Damages for Six Transmitters not Delivered

When a seller fails to make delivery, the buyer is entitled to damages for non-delivery, which is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages. N.J.S.A. 12A:2-711, 2-713. Incidental damages include reasonable expenses incident to the delay or breach. Id. at 2-715(1). Consequential damages include "any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise." Id. at 2-715(2).

Damages for lost profits and additional expenses come within the category of consequential damages. George H. Swatek, Inc. v. North Star Graphics, Inc., 587 A.2d 629, 631 (N.J. Super. App. Div. 1991) (citing Seaman v. United States Steel Corp., 400 A.2d 90 (N.J. Super. App. Div. 1979), cert. denied, 405 A.2d 826 (N.J. 1979)). To recover lost profits, a plaintiff need only demonstrate that the damage was of a type that a reasonable man would realize to be a probable result of his breach--a plaintiff does not need to establish that the defendant had reason to foresee the specific injury that occurred. Id. Additionally, lost profits "may be recoverable if they can be established with a 'reasonable degree of certainty.'" Lithuanian Commerce Corp., Ltd. v. Sara Lee Hosiery, 23 F. Supp. 2d 509, 515 (D.N.J. 1998) (quoting Perth Amboy Iron Works, Inc. v. American Home Assurance Co., 543 A.2d 1020 (N.J. Super. Ct. App. Div. 1988)) (other citations omitted).

Because the Court has found that LPB breached the parties' contract, Corestar is entitled to the deposit it paid for the six transmitters that were never delivered. LPB does not appear to disagree, but LPB argues, however, that these damages should be reduced by the value of the parts LPB purchased for the six transmitters. To support this proposition, LPB cites to N.J.S.A. 12A:2-710, as well as to the Court's Opinion, which states that LPB had the parts available to make the transmitters. LPB's arguments are without merit. First, section 2-710 relates to a seller's incidental damages for a buyer's breach, which is opposite to the situation here, and, thus, inapplicable. Second, the Court's finding that LPB had the parts available to make the transmitters was stated in the context of finding that LPB's inability to ship the transmitters in a timely fashion was not due to the lack of parts to build the transmitters. The Court is perplexed why this finding supports LPB's argument that Corestar's damages should be reduced by the price of the parts. Incidentally, the Court notes that when Corestar attempted to purchase the parts from LPB so that it could hire a third party to build the transmitters due to LPB's breach, LPB refused to sell the parts to Corestar. (Op. at 11.)

Further, with regard to LPB's argument that Corestar had a security interest in the transmitter parts, LPB cites to N.J.S.A. 12A:2-711, which provides that on rightful rejection or revocation of acceptance, a buyer has a security interest in goods in his possession or control. Corestar did not have possession or control of any of the parts for the six transmitters, and, therefore, could not have a security interest in the parts.

Corestar is also entitled to lost profits for its inability to provide the transmitters to its customer. Corestar had contracted with its customer to sell seven "LPB 10KW Solid State SW Transmitter[s]" to a customer in Indonesia on January 25, 2005, a few days before it contacted LPB to inquire about purchasing the transmitters from them. The contract provided that the Indonesian customer would pay Corestar $65,000.00 per transmitter for seven transmitters, which would net Corestar a profit of $18,505.00 per transmitter. As extensively noted in the Court's Opinion and documented by Corestar, LPB knew from the beginning that Corestar was purchasing these transmitters for resale. Thus, (1) because it was reasonably foreseeable that LPB's failure to provide Corestar the transmitters would prevent Corestar from fulfilling its contract with its customer, and, correspondingly, realizing its profit, (2) because LPB knew at the time of the contract that Corestar was reselling the transmitters for profit, and (3) the lost profits are certain, Corestar is entitled to lost profits on the six undelivered transmitters.

2. Damages for Non-Conforming Transmitter

A buyer must reject a non-conforming good within a reasonable time after delivery, and the buyer must seasonably notify the seller. N.J.S.A. 12A:2-602(1). When a buyer has accepted a good, and the buyer knows of the non-conformity, it cannot be revoked unless the acceptance was on the reasonable assumption that the non-conformity would be seasonably cured. Id. at 2-607(2). The burden is on the buyer to establish any breach with respect to the goods accepted. Id. at 2-607(4).

When a buyer has accepted goods and given notification pursuant to section 2-607, the buyer may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller's breach. Id. at 2-714(1). Incidental and ...


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