## Facts

- Dwight John owned and operated two motels in Englewood, Colorado.
- John entered a written agreement with United Advertising Inc. for United to construct, install, and maintain seven outdoor advertising signs for three years.
- John agreed to pay \$95 per month for three years.
- The contract split the monthly price by sign: \$35 per month for one large (10' x 30') sign and \$10 per month for each of six smaller (4' x 8') signs.
- The agreement included a term stating that termination or modification “of any item” affected only that item and did not affect any other item or part of the agreement.
- John claimed United failed to perform as promised on two signs: one sign (sign No. 4) was never erected, and another (sign No. 5) was erected but not at the contractually specified location.
- John sued for breach of contract and sought damages, including alleged lost business profits and repayment of amounts he had paid under the contract.
- After a bench trial, the trial court found five signs were erected in substantial compliance, found breaches as to signs 4 and 5, and concluded those breaches were severable.
- The trial court found John had paid \$680 total and that \$120 of that amount was the portion apportioned to signs 4 and 5 under the contract’s pricing structure.
- Even so, the trial court dismissed John’s claim on the ground that he did not prove damages (including lost profits) with sufficient certainty.
- John sought review in the Colorado Supreme Court, arguing he should at least recover the apportioned amount tied to the two signs that were not properly provided.

## Issues

1. Whether the sign agreement was an entire contract or a severable contract, given the separate monthly prices assigned to individual signs and the clause stating changes to “any item” did not affect the rest.
2. If the contract was severable and United breached as to two signs, whether John could recover the portion of the amounts paid that was allocated to those signs even though he failed to prove lost profits.

## Decision

- The Colorado Supreme Court accepted the trial court’s determination that the contract was severable based on the contract language and the apportionment of consideration among the individual signs.
- The court agreed that John failed to prove lost profits with the certainty required for an award of such damages.
- The court held, however, that the trial court erred by denying all recovery after finding (1) a severable breach as to two signs and (2) a definite, segregated portion of John’s payments attributable to those signs.
- The court directed that John recover \$120, the amount the trial court found allocable to signs 4 and 5.
- The case was remanded for entry of judgment consistent with that recovery.

## Legal Principles

- Whether a contract is entire or severable depends primarily on the parties’ intent as shown by the agreement’s terms and structure.
- Separate performance “items” paired with separately stated prices support treating an agreement as severable.
- A clause providing that termination or modification of any “item” affects only that item supports severability.
- Lost profits are not recoverable when the proof is uncertain or speculative.
- When a contract is severable and the breach concerns only certain severable items, the nonbreaching party may recover the portion of the contract price (or payments made) that is specifically allocated to the items not properly performed, even if additional consequential damages are not proven.

## Conclusion

John v. United Advertising Inc. holds that a multi-item sign contract with separately priced sign obligations and an item-by-item termination/modification clause is severable; although John could not recover speculative lost profits, he was entitled to recover the \$120 portion of his payments allocated to the two signs United failed to provide as promised.


John v. United Advertising Inc., 439 P.2d 53 (1968)