## Facts

- A motor carrier entered a written cartage agreement with an independent contractor for pickup and delivery services in Texas.
- The contract had a one-year initial term and then continued month-to-month until terminated by 30-day written notice.
- To perform, the contractor made start-up and capital expenditures tied to the agreement, including construction of a specialized ramp, dirt work, and purchase of vehicles funded by a loan.
- The contractor testified the expenditures were made only because of the agreement; the testimony on amounts and causation was not contradicted.
- The carrier gave notice terminating the contract effective one month later; the contractor then closed the business.
- In winding up, the contractor sold the vehicles at a loss, remained indebted on the loan, had paid interest, and asserted the ramp had only scrap value and the dirt work had no recoverable value.
- A jury awarded $19,400 in damages plus prejudgment interest and attorney’s fees; the trial court entered judgment on the verdict.

## Issues

1. Whether legally sufficient evidence supported the jury’s $19,400 damages award for breach of contract.
2. Whether the nonbreaching party’s recovery was limited to lost profits, or could include reliance-type expenditures and losses incurred in preparation for and performance of the contract.
3. Whether proven reliance losses required credits for amounts recouped (e.g., salvage value and resale proceeds), requiring reduction of the jury’s total.

## Decision

- The appellate court held the evidence supported recovery of reliance damages for expenditures and losses reasonably incurred due to the contract and caused by the early termination.
- The court rejected the argument that damages in this setting were confined to lost profits, especially where profits were not established and would be uncertain.
- The court concluded the jury’s total award was not fully supported in the amount rendered because some items required offsets (such as salvage value of the ramp and proceeds from vehicle resale).
- The court adjusted the damages award downward while sustaining the contractor’s entitlement to reliance-based recovery.

## Legal Principles

- Contract damages aim to place the injured party in the position the party would have occupied had the contract been performed, considering both prevented gains and caused losses.
- Expectation damages may include reliance expenditures when performance reasonably requires capital investment and the breach deprives the injured party of the chance to recoup those outlays.
- Reliance damages are an accepted measure when lost profits are not proven with reasonable certainty, including in early-stage or unprofitable ventures.
- Reliance recovery must account for benefits received or amounts recouped, requiring credits for salvage value and resale proceeds to avoid overcompensation.
- Uncontroverted testimony may provide legally sufficient proof of expenditures, losses, and causal connection to the contract for damages submission.

## Conclusion

The court held that, on sufficient evidence, a nonbreaching service contractor could recover reliance damages for contract-induced start-up and capital costs when early termination prevented recoupment, but the jury’s lump-sum award required reduction to reflect proven offsets and avoid exceeding supported reliance losses.


Mistletoe Express Serv. of Okla. City v. Locke, 762 S.W.2d 637 (Tex. App.—Texarkana 1988)