## Facts

- Kearsarge, a data-processing service provider, and Acme entered a one-year electronic data processing contract beginning June 11, 1971, priced at $25 per computer hour or $2,000 per month, whichever was greater.
- On January 7, 1972, Acme terminated the contract, asserting Kearsarge’s performance was unsatisfactory.
- Kearsarge requested specifics about alleged errors and resulting losses; Acme responded that sufficient information had already been provided at the termination meeting.
- Kearsarge sued for payment for goods and services and damages for breach of contract; Acme counter-sued for breach and alleged Kearsarge retained Acme property after termination.
- In discovery, Acme answered an interrogatory requesting “precise detail” of alleged contract breaches causing termination by listing eleven incidents.
- At the consolidated merits hearing, the master barred Acme from proving additional breaches beyond those listed in the interrogatory answer and barred testimony explaining the answerer’s understanding of the interrogatory.
- The master found for Kearsarge on all ultimate issues in both actions and awarded $12,313.22 plus interest and costs; the trial court approved the report.
- Acme appealed, challenging the evidentiary limits tied to the interrogatory answer and the damages calculation, including mitigation based on Kearsarge’s later business.

## Issues

1. Whether the master abused discretion by limiting Acme’s breach proof to the incidents identified in its detailed interrogatory answer and by excluding explanatory testimony about that answer.
2. Whether damages were improperly awarded as essentially the remaining contract price despite Acme’s claimed corrective costs and Kearsarge’s post-termination acquisition of other business.

## Decision

- The Supreme Court of New Hampshire affirmed the judgment for Kearsarge.
- The court held the master acted within discretion in restricting Acme’s proof to the eleven breaches disclosed in response to the detailed interrogatory and in excluding testimony that would expand or contradict that disclosure.
- The court upheld the damages award, rejecting Acme’s claimed offset for corrective costs because Acme did not establish a breach supporting recovery or setoff.
- The court held Kearsarge’s subsequent business did not require a reduction in damages where the record supported a finding that Kearsarge had capacity to perform both the Acme work and the later work; the later work was not shown to be a substitute made possible only by the termination.

## Legal Principles

- Although interrogatory answers do not automatically confine trial proof, a trial tribunal may, in its discretion, enforce interrogatories’ issue-narrowing function to prevent unfair surprise, especially where a party is asked for and provides detailed, specific grounds.
- A party may be limited at trial to the specific breaches identified in a detailed interrogatory response when the opposing party is entitled to rely on that response in preparing for trial.
- For wrongful termination of a fixed-term service contract, expectation damages may include the unpaid contract amount reduced by costs saved; a breaching party is entitled to credits only for true substitute transactions that the non-breaching party could not have undertaken had the contract been performed.
- Post-breach business does not reduce damages where the non-breaching service provider had capacity to perform both the original contract and the later work and the later work is not a replacement enabled by the breach.

## Conclusion

The court affirmed evidentiary limits tying Acme to its detailed interrogatory disclosure and affirmed an award of essentially the remaining contract compensation because Acme failed to prove an offsetting breach and because Kearsarge’s later work was not shown to be substitute business requiring mitigation credits.


Kearsarge Comput., Inc. v. Acme Staple Co., 116 N.H. 705, 366 A.2d 467 (1976)