Breach is only half the case. What can you recover, and what can the contract keep you from recovering?
I am Mitchell Bisson, a Grand Rapids civil litigation lawyer. I have litigated for over 15 years. This page explains the money and other remedies available when a contract is broken in Michigan: how damages are measured, what lost profits and consequential damages require, how the sale-of-goods rules differ, and which contract clauses cap or fix what you can recover. I represent people on either side of a civil case, and the same rules decide what a plaintiff can ask for and what a defendant is exposed to. I do not promise outcomes.
The short answer. Contract damages in Michigan are meant to put the nonbreaching party in as good a position as if the contract had been performed, and not to punish the breaching party. Corl v Huron Castings, Inc, 450 Mich 620, 625-626 (1996). Lost profits, consequential damages and other losses are recoverable only when they are proven with reasonable certainty and were foreseeable. The injured party must take reasonable steps to limit the loss. A contract can fix damages in advance if the amount is reasonable, and it can limit remedies, within limits the courts and the Uniform Commercial Code set. Nothing here predicts how your case will end.
Establishing liability does not tell you what a case is worth. I start a contract case by asking what the money loss is, how it will be proved and what the contract says about it. A client who is owed a large sum on paper may find that a clause caps the claim well below that, or that the claimed profits cannot be proven with the certainty the law requires. On the other side, a business that has breached a contract needs to know early whether the exposure is the contract price, the lost profit or something larger.
The remedies I look at first
| Remedy | What it does | Authority |
|---|---|---|
| Expectation damages | Puts the nonbreaching party in as good a position as full performance would have. The goal is not to punish the breaching party | Corl v Huron Castings, Inc, 450 Mich 620, 625-626 (1996); MCL 440.1305(1) |
| Lost profits | Recoverable if proven with a reasonable degree of certainty and not left to conjecture. An estimate is proper where the nature of the case permits only an estimate | Body Rustproofing, Inc v Michigan Bell Tel Co, 149 Mich App 385, 390-391 (1986) |
| Consequential damages | Damages that arise naturally from the breach or were in the contemplation of the parties when they contracted. Under the UCC, losses from needs the seller had reason to know of at the time of contracting | Kewin v Massachusetts Mut Life Ins Co, 409 Mich 401, 414-415 (1980); MCL 440.2715(2) |
| Seller’s remedies for goods | Resale damages, market-price damages, lost profit if those are inadequate, or the price in the cases the statute lists | MCL 440.2706; MCL 440.2708; MCL 440.2709 |
| Buyer’s remedies for goods | Cover damages, market-price damages for nondelivery, and damages for accepted goods that do not conform | MCL 440.2711; MCL 440.2712; MCL 440.2713; MCL 440.2714 |
| Liquidated damages | An agreed amount, enforced if reasonable and not a penalty | UAW-GM Human Resource Ctr v KSL Recreation Corp, 228 Mich App 486, 508 (1998); MCL 440.2718(1) |
| Specific performance | An order to perform a contract in cases where it is available. For goods, where the goods are unique or in other proper circumstances | MCL 600.5807(1); MCL 440.2716(1) |
| Rescission | An equitable remedy granted only in the sound discretion of the court | Lenawee Cnty Bd of Health v Messerly, 417 Mich 17, 30-33 (1982) |
| Interest | Calculated on a money judgment from the date the complaint was filed | MCL 600.6013 |
Expectation damages: the measure of the loss
The Michigan Supreme Court has said that the remedy for breach of contract is to place the nonbreaching party in as good a position as if the contract had been performed, and that the goal is not to punish the breaching party. Corl v Huron Castings, Inc, 450 Mich 620, 625-626 (1996). For contracts for the sale of goods, the Code says the same thing: its remedies are to be liberally administered so that the aggrieved party may be put in as good a position as if the other party had fully performed, but consequential, special or penal damages may not be had except as the Code or another rule of law provides. MCL 440.1305(1). That is why a plaintiff’s damages model starts with the contract: what the plaintiff would have received if the other side had done what it promised, less what the plaintiff saved by not having to perform.
The same principle limits a plaintiff. A plaintiff cannot use a contract case to recover more than performance would have delivered. The Court applied the foreseeability rule of Hadley v Baxendale in Kewin v Massachusetts Mut Life Ins Co, 409 Mich 401, 414-415, 419-420 (1980): damages are recoverable if they arise naturally from the breach or were in the contemplation of the parties when they made the contract. In that case the Court also said that damages for mental distress are generally not recoverable in a contract case and that exemplary damages are generally not recoverable for a breach of contract. I tell clients that a contract case is usually a case about money lost, and that damages for emotional harm or punishment are the exception and not the rule.
Lost profits and how they are proved
Lost profits are often the largest part of a business contract claim and the part most often attacked. In Body Rustproofing, Inc v Michigan Bell Tel Co, 149 Mich App 385, 390-391 (1986), the Court of Appeals applied the expectation measure and held that lost profits are recoverable if they are proven with a reasonable degree of certainty and not left to conjecture. The court also said that the law does not require impossibilities and that where the nature of the case permits only an estimate, an estimate is proper. A plaintiff does not have to prove profits to the dollar, but it has to give the trier of fact a reasoned basis to calculate them.
In practice, that means a damages case is built from business records: sales history, margins, contracts with customers, comparable periods and the costs saved by not performing. I look for the documents early, I consider whether an accountant or industry witness is needed and I test the other side’s numbers against the same records. When I defend, I look for speculation, double counting and profits that depended on something other than the contract.
Incidental and consequential damages in sales of goods
The Uniform Commercial Code separates two kinds of extra loss. Incidental damages to a buyer include reasonable expenses in inspecting, receiving, transporting and caring for goods rightfully rejected, commercially reasonable charges connected with cover and any other reasonable expense incident to the delay or other breach. Consequential damages include any loss resulting from the buyer’s general or particular requirements and needs of which the seller had reason to know at the time of contracting and which could not reasonably be prevented by cover or otherwise, and injury to person or property proximately resulting from a breach of warranty. MCL 440.2715. In Sullivan Indus, Inc v Double Seal Glass Co, 192 Mich App 333, 346-347 (1991), the Court of Appeals discussed the distinction and described consequential damages as including lost profits, meaning losses in dealings with third parties that were foreseeable at the time of contracting.
A seller who has been wronged has its own measures. If the buyer wrongfully rejects goods or fails to pay, the seller may resell in good faith and in a commercially reasonable manner and recover the difference between the resale price and the contract price, together with incidental damages and less expenses saved. MCL 440.2706(1). Otherwise, the measure is the difference between market price at the time and place for tender and the unpaid contract price, or, if that is inadequate to put the seller in as good a position as performance would have, the profit the seller would have made. MCL 440.2708. In certain cases the seller may recover the price itself. MCL 440.2709(1).
A buyer may cover by making in good faith and without unreasonable delay any reasonable purchase of substitute goods, and recover the difference between the cost of cover and the contract price, with incidental and consequential damages, less expenses saved. Failure to cover does not bar other remedies. MCL 440.2712. For nondelivery or repudiation, the measure is the difference between the market price and the contract price. MCL 440.2713(1). For goods the buyer has accepted, the buyer may recover the loss resulting in the ordinary course of events from the seller’s breach, and the measure for breach of warranty is generally the difference between the value of the goods as accepted and the value they would have had if they had been as warranted. That remedy depends on notice: a buyer must, within a reasonable time after discovering or when it should have discovered any breach, notify the seller of the breach or be barred from any remedy. MCL 440.2714(1), (2); MCL 440.2607(3)(a). I send that notice in writing as soon as a client discovers a problem with accepted goods.
The duty to limit the loss
A person who has been wronged cannot sit back and let the loss grow. In Morris v Clawson Tank Co, 459 Mich 256, 263-266 (1998), the Michigan Supreme Court explained that the injured party must make reasonable efforts to mitigate damages, that the standard is reasonableness under the circumstances and not the highest standard of diligence, and that reasonableness is a question for the trier of fact. That case arose from a discharge from employment. In a sale of goods, the Code builds in a related idea by letting a buyer cover with a reasonable substitute purchase, although failing to cover does not bar other remedies.
I advise clients to write down what they did to reduce the loss: the replacement purchases they made, the customers they contacted and the offers they received. If the case is tried, those records are the answer to the argument that the loss could have been avoided. If I am defending a claim, I look for steps the plaintiff could have taken and did not.
Liquidated damages: agreeing on the amount in advance
Parties often agree in advance on the amount to be paid for a breach. In UAW-GM Human Resource Ctr v KSL Recreation Corp, 228 Mich App 486, 508 (1998), the Court of Appeals held that whether a clause is a valid liquidated damages provision or an unenforceable penalty is a question of law for the court, and that the clause is sustained if the amount is reasonable in relation to the possible injury and is not unconscionable or excessive. For a contract for the sale of goods, the Code allows damages to be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual harm, the difficulties of proof of loss and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy, and a term fixing unreasonably large liquidated damages is void as a penalty. MCL 440.2718(1).
For a client, a liquidated damages clause cuts both ways. If it is enforceable, it spares the plaintiff the burden of proving its loss and caps the exposure of the defendant. If it is a penalty, the court will not enforce it. I look at the amount, how it was set, how hard the loss would have been to prove at signing and whether the same sum applies to a minor breach and a major one.
Clauses that limit what you can recover
Michigan courts generally enforce unambiguous contracts as written unless the terms are contrary to law or public policy. Bloomfield Estates Improvement Ass’n v City of Birmingham, 479 Mich 206, 212 (2007). A limitation of liability clause is read in that light, but not everything can be limited. The Court of Appeals has said that a party may contract against liability for ordinary negligence but may not insulate itself from liability for gross negligence or wilful and wanton misconduct. Lamp v Reynolds, 249 Mich App 591, 594 (2002). Whether a clause protects a party also depends on its wording, who signed it and what claims it covers.
For sales of goods, the Code says the agreement may provide remedies in addition to or in place of the Code remedies and may limit the measure of damages, for example by limiting the buyer to the return of the goods and repayment of the price, or to repair and replacement. A remedy is optional unless expressly agreed to be exclusive. Where an exclusive or limited remedy fails of its essential purpose, the Code remedies are available. Consequential damages may be limited or excluded unless the limitation is unconscionable. A limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable, but a limitation where the loss is commercial is not. MCL 440.2719. In Severn v Sperry Corp, 212 Mich App 406, 413-414 (1995), the Court of Appeals held that a limited warranty fails of its essential purpose when the seller cannot repair or replace within a reasonable time, and that the buyer then has the Code remedies.
So a repair-or-replace clause and a ban on lost profits do not always end the analysis. I look at whether the seller actually repaired or replaced the goods in a reasonable time, whether the loss is commercial and whether the clause was negotiated.
Rescission and specific performance
Some remedies are not money damages. Rescission is an equitable remedy granted only in the sound discretion of the court. In Lenawee Cnty Bd of Health v Messerly, 417 Mich 17, 30-33 (1982), the Michigan Supreme Court applied that rule and treated an “as is” clause as an allocation of risk between the parties. The clause mattered because it placed a risk on one side of the bargain, so I read any “as is” or similar clause closely before I advise on rescission.
Specific performance is the remedy of enforcing the contract itself. The limitations statute applies to an action to enforce the specific performance of a contract just as it applies to an action for damages. MCL 600.5807(1). For goods, the Code says specific performance may be decreed where the goods are unique or in other proper circumstances. MCL 440.2716(1). Because rescission is granted in the court’s discretion, I plan a case to seek money damages in the alternative.
Interest and attorney fees
Interest is part of what a money judgment is worth. For complaints filed on or after January 1, 1987, the general rate is 1% plus the average rate paid at auctions of 5-year United States treasury notes in the 6 months before each July 1 and January 1, calculated at 6-month intervals from the date of filing the complaint and compounded annually. MCL 600.6013(8). Attorney fees are a separate question. Michigan follows the American rule, and attorney fees are not recoverable absent a statute or court rule that authorizes them. Haliw v Sterling Heights, 471 Mich 700, 706-707 (2005). A contract that provides for fees can change that, and I read every contract for such a clause.
How I handle a contract damages case
- Define the loss. I identify every category of loss, from the unpaid price to lost profits, replacement costs and expenses, and I separate what the contract supports from what it does not.
- Read the remedy clauses. I look for liquidated damages, limitation of liability, exclusive remedy, notice and time-to-sue clauses, and I decide which are likely to be enforced.
- Collect the proof. I gather the business records that show the loss, and I decide whether an accountant or industry witness is needed.
- Document mitigation. I help the client record the steps taken to reduce the loss, such as cover purchases, resale efforts and replacement work.
- Give notice. For goods that were accepted, I send written notice of breach promptly so that remedies are not lost.
- Plead in the alternative. I plead damages, and where the facts support it I plead equitable relief and statutory interest as well.
- Value the case. I give you a range with the risks on each side, including what a judge may do with a clause or a damages model, and then you decide whether to settle or try the case.
How these cases can end
A contract damages case can end in a settlement, in a judgment after a motion on a clause or a damages model, or in a verdict after trial. A good deal of the negotiation turns on how the damages will be proved and what the contract allows. I tell you where I think your numbers are strong and where they are exposed, and I do not promise a result.
What I need from you
Bring the contract with every amendment, purchase order or terms and conditions that came with it, and the correspondence about the breach. Bring the records that show the loss: invoices, payment history, financial statements, sales records and receipts for replacement purchases or extra expenses. Write down what you did after the breach to reduce the loss and the date of each step. Tell me about any notice you gave or received, any payment or credit that has been applied and any offer to settle. If the contract involves goods, tell me when they were delivered, when you found the problem and when you told the seller.
Where your Kent County civil case will be heard
I represent clients in Grand Rapids, Kentwood, Grandville, Wyoming and across Kent County. Under MCL 600.8301(1), the district court has exclusive jurisdiction in civil actions when the amount in controversy does not exceed $25,000. Michigan law sets the Kent County district courts by municipality. The 61st District Court serves the city of Grand Rapids, the 59th serves the cities of Grandville and Walker, the 62A serves the city of Wyoming and the 62B serves the city of Kentwood. MCL 600.8128a; MCL 600.8130(1)-(3). The 63rd District Court serves the rest of Kent County, which includes the cities of Rockford, Lowell, Cedar Springs and East Grand Rapids and the surrounding townships. MCL 600.8130(4). Larger claims are filed in the Kent County Circuit Court, the 17th Judicial Circuit. MCL 600.518.
Why people hire me for a Michigan contract damages matter
You work directly with me, the lawyer handling your case. I give you the strengths and weaknesses of the case straight, including what it could cost you and what it could recover. I build the case the facts support, and then we decide together how to proceed. On a damages question, that means I tell you what the contract lets you recover, what it keeps you from recovering and how hard the proof will be.
Fees depend on the type of case, its complexity and whether it is likely to go to trial. I explain my fee arrangement at the consultation, before you decide whether to hire me.
Questions I hear from people about contract damages in Michigan
What damages can I recover if someone breaches a contract in Michigan?
The goal is to put you in as good a position as if the contract had been performed, according to Corl v Huron Castings. That usually means the money you lost because of the breach, plus statutory interest under MCL 600.6013 and taxable costs. Attorney fees are generally not recoverable unless a statute, court rule, or other recognized basis allows them.
Do I have to try to limit my losses after a breach or a firing?
Michigan requires efforts that are reasonable under the circumstances to minimize the economic harm, not the highest standard of diligence, according to Morris v Clawson Tank Co., an employment discharge case. Whether your efforts were reasonable is generally a question for the trier of fact. Document what you did to reduce the loss, such as replacement purchases or job applications.
Will a Michigan court enforce a liquidated damages clause in my contract?
Courts sustain a liquidated damages clause if the amount is reasonable in relation to the possible injury and is not unconscionable or excessive, according to UAW-GM Human Resource Center v KSL Recreation. Whether a clause is a valid liquidated amount or an unenforceable penalty is a question of law for the judge, so the numbers and the nature of the harm matter.
Will a Michigan court enforce a limitation of liability clause?
In some cases, but not for everything. The Court of Appeals has said a party may contract against liability for ordinary negligence but may not insulate itself from liability for gross negligence or willful and wanton misconduct. Whether a particular clause works also depends on its wording, who signed it, and the claims involved.
What do I have to prove to win a breach of contract case in Michigan?
You have to prove three things by a preponderance of the evidence: a contract existed, the other side breached it, and the breach caused you damages. A valid contract itself requires competent parties, a proper subject matter, legal consideration, mutuality of agreement, and mutuality of obligation. The Michigan Supreme Court laid out these elements in Bank of America v First American Title.
Can I sue for fraud instead of breach of contract when I bought defective goods?
Often not, if the fraud only concerns the quality of what you bought. In Huron Tool v Precision Consulting the Court of Appeals held that fraud interwoven with the breach leaves the buyer with contract remedies, while fraud in the inducement, which undermines your ability to negotiate fair terms, can stand as a separate claim. The distinction can also change the limitations period.
Related Michigan pages
- Grand Rapids civil litigation attorney
- Breach of contract
- Unjust enrichment and promissory estoppel
- Attorney fees and costs in civil cases
- Commercial contracts and UCC disputes
I represent plaintiffs and defendants in contract and civil cases in Kent County and West Michigan. Contact me 24/7 by phone or email. Your Rights, My Fight! Call for a free initial consultation.
Big-Firm Power. Street-Level Grit.
Law Offices of Mitchell S. Bisson, 2828 Kraft Ave SE, Suite 295, Grand Rapids, MI 49512, serving Kent County and West Michigan.
This page provides general information about Michigan law and is not legal advice. Reading it does not create an attorney-client relationship. Laws change and every case turns on its own facts. Consult a licensed attorney about your specific situation.