762 S.W.2d 637 (Tex. App.—Texarkana 1988, no writ)
Mistletoe Express Service v. Locke is a staple contracts case for understanding how courts measure expectation damages when a contract contains a termination-on-notice clause.
When a service contract is terminable upon advance notice and a party breaches by terminating without giving that notice, are the nonbreaching party's damages limited to losses during the contractual notice period, and what are the contours of the duty to mitigate and the proof required for lost profits in that setting?
Where a contract gives either party the right to terminate upon a stated period of notice, a wrongful termination without the required notice constitutes a breach, but the injured party's expectation damages are ordinarily limited to the benefits that would have been received during the notice period, less costs avoided and amounts earned or that could reasonably have been earned in mitigation. The plaintiff bears the burden to prove lost profits with reasonable certainty based on objective data, not speculation. The duty to mitigate requires reasonable efforts but does not compel acceptance of employment or contractual arrangements that are substantially different, inferior, or that impose undue hardship, risk, or relocation.
The court held that Mistletoe's failure to give the contractually required notice was a breach, but Locke's recoverable expectation damages were limited to the net profits and unavoidable expenses attributable to the contractual notice period. Lost profits were sufficiently supported by Locke's historical business records. Locke did not fail to mitigate by declining substantially different or less favorable alternatives. The judgment was conformed to limit recovery to the amount supportable for the notice period.
The case is frequently cited for the proposition that, when a contract includes a termination-on-notice clause, the measure of damages for a failure to give notice is limited to what the nonbreaching party would have received during the notice period. It sharpens students' understanding of expectation versus reliance, shows how mitigation operates in service and distributorship contexts, and demonstrates how to prove lost profits with business records. Doctrinally, it is a reminder that remedies track the precise breach and that courts avoid granting more than the contract promised.