the measure of damages for breach of a vendor's warranty of personal property against encumbrances.

§ 1702. Merchantable character. If property sold is to be delivered in a good merchantable condition and it is not sound and merchantable, the measure of damages is the difference between the value as fixed by the contract price at the time and place of their sale and delivery and their value with the defect complained of. And when the merchandise sold under a contract by a particular description is affected by latent defects, not discoverable on inspection, which renders it unmerchantable, the buyer may recover from the seller the amount of a judgment recovered against him by a buyer from him, based on the defects of the merchandise, and also the expense of defending the suit if the seller has been notified of such suit and given an opportunity to defend it. Again, a seller need only show good merchantable quality and condition in an action to recover the difference between the amount realized on a sale made at the risk of the purchaser and the contract price, since a purchaser who rejects goods for the specific reasons that they are not in merchantable condition waives all other objections. So in an action for breach of an implied warranty that refined petroleum was free from latent defects which would render it unmerchantable, evidence is admissible that defendants, from whom plaintiff purchased said article, knew from the manner in which it was packed and from other sources, the destination to which it was to be sent by plaintiff.

59 Hendrickson v. Bank, 74 Minn. 90; 76 N. W. 1019.

60 Bump v. Cooper, 19 Ore. 81; 23 Pac. 806; English v. Spokane Com. Co., 6 C. C. A. 416; 57 Fed. 451.

61 Carleton v. Lombard, Ayres & Co., 162 N. Y. 628; 57 N. E. 1106, aff'g 19 App. Div. 297; 46 N. Y. Supp. 120.

62 Littlejohn v. Shaw, 159 N. Y. 188; 53 N. E. 810, aff'g 6 App. Div. 492; 39 N. Y. Supp. 595.

63 Carleton v. Lombard, A. & Co., 149 N. Y. 137; 43 N. E. 422; Same v. Same, 149 N. Y. 601; 44 N. E. 1121.

63

In an action for breach of warranty of the merchantable character of dates, sold under a contract for the sale of 4,000 boxes consisting of Hallowee and Sairs, at a specified price per pound, 2,500 boxes for immediate delivery and 1,500 then afloat for delivery, on arrival, if such 1,500 do not arrive, the sale thereof to be void, the seller cannot show that the value of the 1,500 boxes was less than the contract price if the dates were in a merchantable condition. Levi v. Dimmick, 99 Cal. 490; 34 Pac. 79.

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§ 1703. Warranty of title-Vindictive damages. The purchaser can only recover nominal damages for breach of a warranty of title even though there has been a recovery against him by the rightful owner, but the amount thereof has not been paid," athough the value of the property has also been declared to be the measure of damages; or the purchase price with interest; or the actual loss sustained. And the necessary costs and expenses of defending an adverse suit in which the property has been recovered from the purchaser by title paramount will be allowed as damages where the seller has been given notice to defend, otherwise not. Again, vindictive damages must in some way be connected with and flow from the same facts upon which actual damages are based and cannot therefore be recovered in an action in which a claim for actual damages is based upon a breach of warranty of title, although the claim is for the fraudulent act of the seller in taking the property sold from the possession of the buyer.

§ 1704. Articles manufactured or to be used in manufacture-Or for particular work. The difference in value between the articles actually furnished and such as should have been furnished is ordinarily the measure of damages for breach of warranty of articles manufactured under agreement, but which are not furnished for any particular use. Or the measure of damages is the difference in value between such articles as were contracted for and those delivered; " or the actual loss sustained, ascertainable by deducting the market value of the article delivered, at the time of delivery, from the market value of that which was contracted for plus something by way of punishment

64 Burt v. Dewey, 40 N. Y. 283, | rev'g 31 Barb. (N. Y.) 540.

65 Marlatt v. Clary, 20 Ark. 251. 66 See Rowland v. Shelton, 25 Ala. 217; Moorhead v. Davis, 92 Ind. 303; Woods v. Woods, 1 Metc. (Ky.) 512; Shattuck v. Green, 104 Mass. 42; Noel v. Wheatley, 30 Miss. 181; Arthur v. Moss, 1 Oreg. 193; Ware v. Weathnall, 2 McCord (S. C.), 413; Anding v. Perkins, 29 Tex. 348.

67 O'Brien v. Jones, 91 N. Y. 193, aff'g 15 J. & S. (47 Sup.) 67.

68 Marlatt v. Clary, 20 Ark. 251. See Boyd v. Whitfield, 19 Ark. 447; Gross v. Hennessey, 13 Allen (Mass.), 389; Thurston v. Spratt, 52 Me. 202. 69 Hudson v. Norwood, 13 Tex. Civ. App. 662; 35 S. W. 1075.

70 Whitmore v. South Boston I. Co., 2 Allen (Mass.), 52.

71 Woodworth v. Woodburn, 20 Ill. 184.

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for the deceit and fraud occasioning the loss. If, however, the defects are only in a part of the article, and said part is easily removable and capable of complete remedy without depreciation in that part which composes the substantial and most valuable part of the apparatus, the damages are limited to the difference between the value of the defective separable part and the value thereof if properly made. Again, where the manufacturer is not required to produce any specified amount of a "by product," the damages are to be based on the least possible quantity that would have been produced in case the factory had been operated in good faith." In case of articles to be used in manufacturing, the measure of damages for breach of warranty is the difference between the market value of the article manufactured, as it would have been had the warranted material to be used therein been equal to the guaranty, and the price obtained for the completed goods, when such price equals or is greater than the actual value as said goods were after the use of the warranted material. So where wagons finished with a defective filler are sold for as much as they would be worth if properly finished, no damages can be recovered." Damages in this class of cases may also include those which proximately and directly result from the breach of warranty, or those which may reasonably be held to have been within the contemplation of the parties as consequential upon the breach. This rule applies to and covers damages for loss of business and customers, and the value of cream spoiled by using a poisonous substance for coloring ice cream in ignorance of its character, the same being warranted as fit for that purpose." So the injury sustained by the buyer in his manufacture, and not the difference in value between the article sold and a pure article, is the measure of damages, where relying upon the seller's warranty of purity the buyer used the ar72 McAvoy v. Wright, 25 Ind. 22. 78 New York State Monitor-M. P. Co. v. Remington Ag. Works, 109 N. Y. 143; 14 N. Y. St. R. 826; 28 W. D. 473; 16 N. E. 48.

168; 1 Silv. S. C. 129; Moore v. King, 52 Hun, 224; 32 N. Y. St. R. 808; 10 N. Y. Supp. 651, aff'd 134 N. Y. 596; | 45 N. Y. St. R. 935; 31 N. E. 624. 76 Sherman v. Billings, K. & Co.,

74 Nute v. American Glucose Co., 90 Hun, 544; 71 N. Y. St. R. 405; 36 55 Kan. 225; 40 Pac. 279.

75 Waite v. Borne, 123 N. Y. 592; 34 N. Y. St. R. 344; 25 N. E. 1053, rev'g 23 N. Y. St. R. 341; 5 N. Y. Supp.

N. Y. Supp. 69.

77 Swain v. Schieffelin, 134 N. Y. 471; 47 N. Y. St. R. 910; 46 Alb. L. J. 448; 18 L. R. A. 385; 31 N. E. 1025.

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ticles without further examination and his goods were spoiled. And if the manufacturer is forced to buy other articles at a higher price for the purpose of supplying his wants which the seller had stipulated to supply, he may recover damages therefor. So damages to windows and blinds by the use of worthless and unsuitable paints and oils are recoverable against the seller who agreed to supply suitable materials.80 So all damages sustained necessarily and directly by the owner of a butter and cheese factory, occasioned by the bad quality of milk in which foul water had been put can be recovered. So where defective carriage springs sold under a warranty are used in manufacturing carriages, the seller is liable for the expense of renewing and applying them. But damages for injury to business and reputation may be too uncertain, remote, speculative and conjectural to be recoverable. Nor can there be any recovery by the purchaser where he has used the defective material in work for another to whom he has had to pay no damages. 81

83

§ 1705. Sales of shares of stock-Bonds.-If stock has some value the measure of damages for breach of warranty, or for false representations or deceit inducing its purchase, is the difference between its par value as it was represented and what it was in fact worth at the time of transfer. 85 Or the difference between the price paid at the time of sale and the actual value of the stock is recoverable; or the loss which the purchaser has sustained by reason of the false and fraudulent representations, such as the money paid out and interest and all outlays legitimately attributable to the defendant's fraud; but it does

78 Milburn v. Belloni, 39 N. Y. 53. See Hitchcock v. Hunt, 28 Conn. 343. 79 Porter v. Woods, 3 Humph. (Tenn.) 56.

80 McCaa v. Elain D. Co., 114 Ala. 74; 21 So. 479; 44 Cent. L. J. 347. See Moore v. King, 52 Hun, 224; 32 N. Y. St. R. 808; 10 N. Y. Supp. 651, aff'd 134 N. Y. 596; 45 N. Y. St. R. 935; 31 N. E. 624.

81 Stranahan Bros. C. Co. v. Coit, 55 Ohio St. 398; 37 Ohio L. J. 3; 44 Cent. L. J. 140; 45 N. E. 634.

82 Thoms v. Dingley, 70 Me. 100; 35 Am. Rep. 310.

83 Knorr v. Reedy, 27 Ohio L. J. 103. 84 Sherman v. Billings, K. & Co., 90 Hun, 544; 71 N. Y. St. R. 405; 36 N. Y. Supp. 69.

85 Maxtel v. Fowler, 94 Mich. 106; 53 N. W. 921. See Hubbell v. Meigs, 50 N. Y. 480.

86 Zeiley v. Palliser, 80 Hun, 603; 62 N. Y. St. R. 62; High v. Berret, 148 Pa. St. 261; 30 W. N. C. 81; 23 Atl. 1004.

not include expected fruits of an unrealized speculation, although the rule applies that those results are to be considered proximate which the wrongdoer from his position must have contemplated as the probable consequences of his wrongful acts or breach of contract. In case of the falsity of a report of the financial condition of a corporation, the damages recoverable against the directors, under a statute making them liable, is the difference between the value of the stock if the report had been true and its actual value, and not necessarily the difference between its actual value and the property given in exchange therefor in the absence of fraud or deceit on the part of the purchaser. Again, if the value of the stock is falsely represented inducing an exchange of lands therefor, the rule first stated under this section applies as to the measure of damages, or the difference between the value of the stock and the land given in exchange constitutes the damages. And where property is sold, based upon misrepresentations as to the financial responsibility of a bank, and the value of certain stock and shares of said stock are taken as security, the value of property so sold may be recovered, less any payments made thereon, and the value of the stock so taken with interest on the balance.91

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89

§ 1706. Same subject continued.-If stock has no market value and the representations as to the amount of corporate property are false, the measure of damages is the difference between the value of the stock and its value had the amount of property been as represented. And where the purchase is induced by misrepresentations as to the price paid for stock by others and such amount is paid, the buyer cannot recover the full amount paid by him, but only such damages as he has sustained as the direct consequences of such false representations. So special or consequential damages resulting from delay, extra 87 Smith v. Bolles, 132 U. S. 125; 90 Alden v. Wright, 47 Minn. 225; 33 L. Ed. 279. See Rockefeller v. 49 N. W. 767. Merritt, 79 Fed. at p. 914; Wilson v. New U.S. C.-R. Co., 73 Fed. at p. 997. 88 Parson v. Johnson, 28 App. Div. 1; 50 N. Y. Supp. 780; N. Y. Stock Corp. Law, sec. 31.

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91 American Nat. Bk. v. Hammond, 25 Colo. 367; 55 Pac. 1090.

92 Boddy v. Henry, 113 Iowa, 462; 85 N. W. 771; 53 L. R. A. 769.

93 Weaver v. Shriver, 79 Md. 580;

89 Nysewander v. Lowman, 124 Ind. 30 Atl. 189. 184; 24 N. E. 355.