Fertico Belgium S.A. v. Phosphate Chemicals Export Ass’n

Facts

Fertico Belgium S.A. (Fertico) (plaintiff) is an international trader of fertilizer. In October 1978, Fertico contracted with Phosphate Chemicals Export Association (Phoschem) (defendant) to purchase two shipments of fertilizer. As payment, Fertico issued a letter of credit to Phoschem for $1.7 million, or the value of the first shipment. Phoschem was to deliver the first and second shipments no later than November 20, 1978 and November 30, 1978, respectively. Phoschem knew that Fertico needed delivery of the fertilizer by these dates so Fertico could satisfy its own obligations to deliver fertilizer to Altawreed, a third party purchaser of fertilizer. Phoschem received payment for the first shipment under Fertico’s letter of credit. Phoschem was late in its delivery, however, and did not deliver the promised first shipment of fertilizer to Fertico until December 17, 1978. When Fertico learned that the delivery would be late, it canceled its second shipment order with Phoschem. To avoid breaching its contract with Altawreed, Fertico purchased substitute fertilizer from Unifert. The increase in price to Fertico of its contract with Unifert over its original contract with Phoschem was $700,000. Fertico also offered to provide additional services to Altawreed at an increased price of $20.50 per ton in exchange for Altawreed’s acceptance of a delayed delivery date from Fertico. Through its negotiations with Altawreed and purchase of substitute fertilizer from Unifert, Fertico was able to successfully cover for Phoschem’s late delivery. Beyond its Altawreed contract issues, however, Fertico was also left with 15,000 tons of late-delivered fertilizer that it did not require but had been forced to take because Phoschem had already taken payment for the delivery from Fertico’s letter of credit. Fertico later sold the 15,000 tons to another buyer, Janssens, for a profit of $454,000. Fertico brought suit in New York state court against Phoschem seeking $1.25 million in damages. The jury awarded Fertico $1.07 million. Phoschem appealed, and the appellate court reversed the jury’s award. The appellate court held that Fertico’s additional $700,000 earned from covering its contract to Altawreed and the additional $454,000 from its sale to Janssens would not have been earned but for Phoschem’s breach. The appellate court held that these amounts should be deducted from the amount of damages owed by Phoschem to Fertico. Fertico appealed.