## Facts

- The City of Mandan Weed Board (Board) awarded Robert Leingang a contract to cut weeds on lots larger than 10,000 square feet, while another contractor was to handle smaller lots.
- During the contract period, Leingang learned that the Board had assigned some of the large lots covered by his contract to the other contractor.
- Leingang complained to the Board. The Board reassigned substitute lots, but Leingang claimed he still lost contract work and the related contract revenue.
- Leingang sued the Board for breach of contract in small claims court.
- The Board removed the case to county court.
- Liability was not disputed; the dispute at trial concerned the proper method of calculating damages for the work Leingang was not allowed to perform.
- Leingang claimed damages equaled the contract price for the lost work minus the specific costs he avoided by not doing that work (such as variable operating expenses).
- The Board argued that Leingang’s general overhead and other business expenses should also be subtracted, using figures drawn from his tax returns.
- The trial court used a “modified net profit” approach, subtracting overhead-type expenses to reach a determination that Leingang’s recoverable profit was 20 percent of the contract price.
- Leingang appealed to the North Dakota Supreme Court, challenging the trial court’s damage calculation.

## Issues

1. When a contracting party prevents a contractor from performing part of the contract, are damages measured by the contract price for the prevented work minus only the costs actually avoided, rather than by a net-profit method that allocates overhead to the unperformed work?
2. May the breaching party reduce the contractor’s recovery by subtracting general overhead based on tax-return categories without proof those expenses were saved because the contractor did not perform the prevented work?

## Decision

- The North Dakota Supreme Court reversed and remanded.
- The court held the trial court used the wrong measure of damages by applying a “modified net profit” calculation that allocated overhead to the prevented work.
- The court directed that damages be recalculated using the contract price for the prevented work minus the costs Leingang actually saved because he was not allowed to perform that work.

## Legal Principles

- A party wrongfully prevented from performing is entitled to expectation damages designed to place the nonbreaching party in the position it would have been in had the contract been performed.
- For a contractor prevented from performing, the standard measure is the contract price for the prevented work minus the cost of performance the contractor was spared because of the breach.
- Only costs actually avoided by nonperformance are deducted; ongoing expenses of running the business are not treated as “saved” merely because some work was not performed.
- General overhead may be deducted only if the breaching party proves the overhead expenses were reduced or avoided as a result of the breach.
- Tax accounting categories and general profitability figures may not be used as a substitute for proof of which costs were truly avoided on the specific prevented work.

## Conclusion

Leingang v. City of Mandan Weed Board holds that when the Board prevented Leingang from performing part of his weed-cutting contract, his damages should be based on the contract price for the lost work minus only those costs he actually saved by not doing the work, and the trial court erred by reducing his recovery through a net-profit approach that treated general overhead as automatically deductible without proof it was avoided.


Leingang v. City of Mandan Weed Board, 468 N.W.2d 397 (1991)