## Facts

- Laura Rashid sold a mule, “Fancy,” to Dave Jolly.
- After transfer of possession, the parties signed a written bill of sale that gave Rashid a right of first refusal if Jolly later chose to sell Fancy.
- Years later, Jolly sold Fancy to third-party purchasers without notifying Rashid or giving her an opportunity to buy the mule under the right of first refusal.
- Rashid traveled out of state to locate Fancy and ultimately found the mule with the third-party purchasers.
- Rashid sued Jolly seeking return of the mule and damages, including expenses incurred in locating Fancy.

## Issues

1. Whether Jolly breached an enforceable right of first refusal by selling the mule to third parties without first offering it to Rashid.
2. What measure of compensatory damages applies for breach of a right of first refusal, including whether search and travel expenses are recoverable as contract damages.
3. Whether punitive damages may stand where the compensatory damages award was based on an incorrect measure of damages.

## Decision

- The Montana Supreme Court reversed and remanded.
- The Court treated Jolly’s sale without notice as a breach of Rashid’s right of first refusal.
- The Court held the district court applied an improper damages measure by awarding Rashid’s search and travel expenses.
- The Court directed that compensatory damages be calculated as the difference between the price Rashid would have paid under the right of first refusal and the mule’s fair market value at the time of breach.
- Because compensatory damages required recalculation, the punitive damages award could not stand as awarded and required reconsideration on remand.

## Legal Principles

- Contract damages generally protect the expectation interest by placing the injured party in the position they would have occupied had the contract been performed.
- For breach of a right of first refusal, the standard compensatory measure is the difference between the contractual purchase price the holder could have paid and the property’s fair market value at the time of breach.
- Damages based primarily on post-breach efforts to recover the property (such as search and travel costs) are not the proper substitute for the benefit-of-the-bargain measure in this context.
- When an award of actual damages is reversed for legal error, associated punitive damages premised on that award must be revisited on remand under the governing standards.

## Conclusion

The court held that breach of a right of first refusal warrants expectation damages measured by contract price minus fair market value at the time of breach, not reimbursement of the holder’s search expenses, and it reversed and remanded for recalculation of damages and reconsideration of punitive damages.


Rashid v. Jolly, 352 Mont. 552, 218 P.3d 499 (Mont. 2009)