Under Iowa’s Uniform Commercial Code (Iowa Code §544.2713(1)), the measure of damages for non-delivery of goods by a seller under a written contract is “the difference between the market price at the time when the buyer learned of the breach and the contract price.” In this case, a grain elevator and grain storage company entered into a written lease agreement, whereby the elevator would rent extra grain storage space from the storage company. Under the lease, the storage company would provide all labor at the facility and would be solely responsible for any grain shortages. Further, the lease specified that if the elevator sold any grain to the storage company (who was also a grain merchant) the storage company would pay market price plus five cents per bushel.
The lease expired in September 2006 after the elevator notified the storage company that they did not need the space anymore and the parties orally agreed that the storage company would buy the remaining grain and the elevator would pay to transport the grain to Illinois. The parties never discussed paying rent for storage of the left over grain after the written lease expired and no invoices were ever prepared. Thus, the elevator did not pay rent after the written lease expired. In February of 2007, the parties discovered a soybean shortage and the elevator billed the storage company for the shortage. Upon receipt of the bill, the storage company claimed that they were owed rent for the grain storage after the written lease expired.
The parties were unable to come to an agreement on the value of the soybean storage and rent. The elevator sued, claiming the soybeans should be valued at the February 2007 price. That’s the date the elevator learned the exact amount of the shortage. The storage facility claimed that the soybeans should be valued at the price at the time when the written lease expired (a substantially lower market price)- the time when a shortage was discovered. At trial, the court agreed with the storage company and valued the corn at the market price under the written lease. The trial court did not award rent, as requested by the storage company, because the parties could not demonstrate the existence of a rental agreement after the written lease agreement ended.
On appeal, the Iowa Court of Appeals affirmed. Because no invoices for rent were ever produced, the storage company was not entitled to a rental payment for the storage of grain. The court further agreed with the trial court’s valuation of the soybean shortfall. They concluded that the correct valuation was the market price at the time the breach first became known to the elevator. The elevator also claimed that they were owed interest on the grain shortfall from the date the legal suit began. On that point the appellate court agreed, and sent the case back to the trial court to determine the proper interest accrued. The dissent argued that the valuation date should have been tied to the time when the elevator actually learned of the breach – February 2007. That was the first time the elevator knew the actual amount of bushels in the shortfall and the first time they would have been able to cover their losses. Tri-County Grain Co. v. Zimmerman, No. 9-390/08-1639 (Iowa Ct. App., Jul. 2, 2009).