Security Stove & Mfg. Co. v. American Ry. Express Co., 227 Mo. App. 175, 51 S.W.2d 572 (Mo. Ct. App. 1932)
Security Stove & Manufacturing Co. v.
When a carrier, with notice of the special purpose requiring timely delivery, delays delivery and thereby defeats that purpose, may the shipper recover reliance expenditures (out-of-pocket costs reasonably incurred in preparation for and in performing the transaction) even though lost profits are too speculative to prove?
Under the principle of Hadley v. Baxendale and general contract-remedies doctrine, a non-breaching party may recover damages that are the natural and probable consequence of the breach and were within the reasonable contemplation of the parties at the time of contracting. When expectancy (lost profits) cannot be proven with reasonable certainty, the appropriate measure of damages may be the plaintiff's reliance interest—i.e., expenditures reasonably made in preparation for or in part performance of the contract that were foreseeable and proximately caused or rendered wasted by the breach.
Yes. Because the carrier had notice of the shipment's time-sensitive, special purpose, it is liable for the plaintiff's reasonable and foreseeable reliance expenditures made in preparation for and in part performance of the contract, even though lost profits from the planned exhibition are too speculative to recover.
Security Stove is a leading reliance-damages case. It teaches that when lost profits cannot be established with reasonable certainty, courts may award the non-breaching party the expenditures reasonably incurred in reliance on the contract, provided those losses were foreseeable at the time of contracting and proximately caused by the breach. For students, it operationalizes Hadley's foreseeability and shows how the reliance interest can be the most faithful way to effectuate the compensatory aim of contract remedies when expectation damages fail for uncertainty.