Colo. Supreme Court Backs Lost Volume Claim in U.S. Welding Case

In United States Welding, Inc. v. Advanced Circuits, Inc., the Supreme Court of Colorado reviewed a breach of contract dispute concerning an exclusive requirements contract. The case addressed the proper measurement of damages and whether an aggrieved party must mitigate damages by giving up its contractual rights. The Court reversed the lower courts' decisions and provided clarification on mitigation and damages.

Background and Facts

United States Welding, Inc. (Welding) and Advanced Circuits, Inc. (Advanced) entered into a contract in 2011, under which Advanced agreed to purchase all its liquid nitrogen needs from Welding for a two-year term, with an automatic renewal for an additional year. Welding initially delivered nitrogen using dewars, which was the only specified delivery method in the contract.

After the renewal, Advanced determined that bulk delivery would be cheaper and sought to negotiate new pricing. Negotiations failed, and Advanced solicited bids from other suppliers. It contracted with Buckeye Welding Supply Company and informed Welding that it would terminate their agreement as of June 16, 2014, but also stated it would cease purchases from Welding by February 28, 2014. Advanced requested a buyout amount for the remainder of the contract term, which Welding declined to provide. Advanced began receiving bulk liquid nitrogen deliveries from Buckeye before the contract term ended.

Welding filed a cross-complaint for breach of contract. The district court found Advanced breached the contract but awarded no damages, reasoning that Welding failed to mitigate its damages by declining the buyout offer or to agree to bulk deliveries.

Trial Court and Court of Appeals Proceedings

The district court concluded that Welding should have provided an anticipated lost profits estimate or agreed to deliver in bulk to mitigate its damages. The Court of Appeals affirmed the district court's ruling and found that damages should be measured by anticipated purchases rather than actual purchases.

Welding petitioned the Supreme Court of Colorado for review.

Supreme Court Decision

The Supreme Court reversed the Court of Appeals. It held that an aggrieved party is not required to mitigate damages by surrendering rights under the original contract. Welding had the right to seek damages based on actual losses measured by the nitrogen Advanced purchased from another vendor during the contract period.

The Court found that forcing Welding to provide a lost profits estimate or to agree to different delivery terms would amount to a relinquishment of its contractual rights, which is not required under Colorado law. The Court emphasized that damages in breach of contract cases should be based on the injured party's actual losses, not projections or hypothetical expectations.

The Court also clarified that mitigation efforts must not compel a party to accept a substitute agreement that would alter their rights under the original contract. Welding had no obligation to accept Advanced's offer of a buyout or new delivery terms. Instead, damages should be calculated based on the actual amount of nitrogen purchased from the new supplier during the remaining contract term.

The case was remanded for further proceedings to determine the proper measure of damages.

Conclusion

The Supreme Court of Colorado reversed the judgment of the Court of Appeals and remanded the case for proceedings consistent with its opinion. The decision reaffirmed that aggrieved parties are entitled to enforce their contractual rights and are not required to accept modifications that would diminish those rights when mitigating damages.

How We Can Help

If you are navigating a breach of contract or dispute over contractual obligations, the attorneys at Whitcomb, Selinsky, PC are available to assist. Our team works with businesses and individuals to address contract disputes and pursue remedies that protect your legal and financial interests.