{ "id": 8554327, "name": "INDUSTRIAL CIRCUITS COMPANY v. TERMINAL COMMUNICATIONS, INC.", "name_abbreviation": "Industrial Circuits Co. v. Terminal Communications, Inc.", "decision_date": "1975-07-16", "docket_number": "No. 7510SC290", "first_page": "536", "last_page": "548", "citations": [ { "type": "official", "cite": "26 N.C. App. 536" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "152 S.E. 2d 505", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1967, "pin_cites": [ { "page": "507" } ], "opinion_index": 0 }, { "cite": "269 N.C. 433", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8564081 ], "year": 1967, "pin_cites": [ { "page": "435-436" } ], "opinion_index": 0, "case_paths": [ "/nc/269/0433-01" ] }, { "cite": "126 S.E. 2d 113", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1962, "opinion_index": 0 }, { "cite": "257 N.C. 374", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8567939 ], "year": 1962, "opinion_index": 0, "case_paths": [ "/nc/257/0374-01" ] }, { "cite": "190 S.E. 669", "category": "reporters:state_regional", "reporter": "S.E.", "year": 1937, "opinion_index": 0 }, { "cite": "49 S.E. 988", "category": "reporters:state_regional", "reporter": "S.E.", "year": 1905, "opinion_index": 0 }, { "cite": "29 A.L.R. 1089", "category": "reporters:specialty", "reporter": "A.L.R.", "year": 1923, "opinion_index": 0 }, { "cite": "140 N.E. 222", "category": "reporters:state_regional", "reporter": "N.E.", "year": 1923, "opinion_index": 0 }, { "cite": "200 F. 2d 297", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 1281312 ], "year": 1952, "opinion_index": 0, "case_paths": [ "/f2d/200/0297-01" ] }, { "cite": "155 A. 68", "category": "reporters:state_regional", "reporter": "A.", "year": 1931, "opinion_index": 0 }, { "cite": "119 S.E. 196", "category": "reporters:state_regional", "reporter": "S.E.", "opinion_index": 0 }, { "cite": "186 N.C. 197", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8653235 ], "opinion_index": 0, "case_paths": [ "/nc/186/0197-01" ] }, { "cite": "108 A.L.R. 1482", "category": "reporters:specialty", "reporter": "A.L.R.", "year": 1948, "opinion_index": 0 }, { "cite": "77 N.C. 142", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8682213 ], "opinion_index": 0, "case_paths": [ "/nc/77/0142-01" ] }, { "cite": "62 S.E. 637", "category": "reporters:state_regional", "reporter": "S.E.", "opinion_index": 0 }, { "cite": "148 N.C. 533", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 11270831 ], "opinion_index": 0, "case_paths": [ "/nc/148/0533-01" ] }, { "cite": "1 S.E. 2d 357", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 0 }, { "cite": "215 N.C. 112", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8628388 ], "opinion_index": 0, "case_paths": [ "/nc/215/0112-01" ] }, { "cite": "111 S.E. 2d 606", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 0 }, { "cite": "251 N.C. 359", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8625678 ], "opinion_index": 0, "case_paths": [ "/nc/251/0359-01" ] }, { "cite": "181 S.E. 2d 9", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1963, "pin_cites": [ { "page": "21-28" } ], "opinion_index": 0 }, { "cite": "259 N.C. 400", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8560878 ], "year": 1963, "pin_cites": [ { "page": "415-417" } ], "opinion_index": 0, "case_paths": [ "/nc/259/0400-01" ] }, { "cite": "88 S.E. 433", "category": "reporters:state_regional", "reporter": "S.E.", "opinion_index": 0 }, { "cite": "171 N.C. 305", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 11270097 ], "opinion_index": 0, "case_paths": [ "/nc/171/0305-01" ] }, { "cite": "136 S.E. 2d 38", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1964, "pin_cites": [ { "page": "40" } ], "opinion_index": 0 }, { "cite": "261 N.C. 730", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8575404 ], "year": 1964, "pin_cites": [ { "page": "732" } ], "opinion_index": 0, "case_paths": [ "/nc/261/0730-01" ] } ], "analysis": { "cardinality": 1033, "char_count": 28086, "ocr_confidence": 0.568, "pagerank": { "raw": 2.3892481741341505e-07, "percentile": 0.7976804825300625 }, "sha256": "cd4f061311a91bd55c3daf1d5c312992365f6ec29c6421ecbfb48449d2bcaca4", "simhash": "1:0b04a7e3ea44db7e", "word_count": 4642 }, "last_updated": "2023-07-14T16:59:13.418266+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judges Vaughn and Clark concur." ], "parties": [ "INDUSTRIAL CIRCUITS COMPANY v. TERMINAL COMMUNICATIONS, INC." ], "opinions": [ { "text": "MORRIS, Judge.\nThe court, in its instructions to the jury,- specifically directed the jury that they could not Consider the \u201cbill back\u201d figures as damages for breach of contract. From the jury verdict, it is apparent that the jury disregarded this instruction and included the bill back charges. From the evidence presented, there is no other way the jury could have arrived at the verdict it did. The court found that the verdict on- the third issue (damages) constituted a \u201cmanifest disregard by the jury of the instructions of the Court\u201d within the language of G.S. 1A-1, Rule 59 (a) (5), one of the grounds upon which a new trial may be granted upon motion of a party or on the initiative of the court. G.S. 1A-1, Rule 59 (d). We think the court properly found that the jury had disregarded his instructions on this issue. However, we do not agree that the court acted properly or with authority when it entered an order, \u201c [i] n its discretion, as an alternative to ordering a new trial,\u201d eliminating the \u201cbill back\u201d item of $8,168.51 and reducing the verdict to $12,626.30, without the consent of the interested party. The rule is stated in Bethea v. Kenly, 261 N.C. 730, 732, 136 S.E. 2d 38, 40 (1964) :\n\u201c \u2018It is a cardinal rule that the judgment must follow the verdict, and if the jury have given a specified sum as damages, the court cannot increase or diminish the amount, except to add interest, where it is allowed by law and. has not been included in the findings of the jury.\u2019 2 McIntosh, North Carolina Practice and Procedure. \u00a7 1691 (2d ed. 1956) ; Durham v. Davis, 171 N.C. 305, 88 S.E. 433.\u201d\nWe find nothing in the new Rules of Civil Procedure which would grant to the court the authority to modify the verdict by changing the amount of the recovery. See 2 McIntosh, North Carolina Practice and Procedure, \u00a7\u00a7 1596, 1691 (2d ed. 1956) and \u00a7\u00a7 1596, 1691. (Phillips Supp. 1970).\nEach appellant purportedly excepts to the action of the court in reducing the verdict, although no objection or exception thereto appears in the record until after the notice of appeal, appeal entries, and orders extending time for serving case on appeal. However, the appeal itself is considered as an exception to the judgment. 1 Strong, N. C. Index 2d, Appeal and Error, \u00a7 24, p. 147. There must be a new trial 'on the issue of damages.\nWe are of the. opinion that the court' was correct in instructing the jury to exclude from its consideration of damages the amount charged by plaintiff as the \u201cbill back\u201d item. The measure of damages is controlled by the applicable portions of the Uniform Commercial Code. In this case G.S. 25-2-708(2) is applicable and provides that the measure of damages \u201cis the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this article (\u00a7 25-2-710), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.\u201d\nG.S. 25-2-710 provides:\n\u201cIncidental damages to an aggrieved seller include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer\u2019s breach, in connection with return or resale of the goods or otherwise resulting from the breach.\u201d\nAs is stated in G.S. 25-1-106, the remedies of the Uniform Commercial Code are to be \u201cliberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special nor penal damages may be had except as specifically provided in this chapter or by other rule of law.\u201d\nThe Code, however, does not change the measure of damages in North Carolina in cases such as the one before us. The measure of damages suggested by the Code was substantially the measure of damages effective in this State prior to the adoption of the Code. The Supreme Court in Service Co. v. Sales Co., 259 N.C. 400, 415-417, 181 S.E. 2d 9, 21-28 (1963), spoke to the subject in a clear and unambiguous manner. Speaking through Justice Moore, the Court said:\n\u201cFor a breach of contract the injured party is entitled as compensation therefor to be placed, insofar as this can be done by money, in the same position he would have occupied if the contract had been performed. The amount that would have been received if the contract had been kept and which will completely indemnify the injured party is the true measure of damages for the breach.. Where one violates his .contract he is liable for such damages, including gains prevented as well as losses, sustained, which may fairly be supposed to have entered into the contemplation of the parties when they made the contract. Tillis v. Cotton Mills, 251 N.C. 359, 111 S.E. 2d 606; Chesson v. Container Co., 215 N.C. 112, 1 S.E. 2d 357.\nBy \u2018gains prevented\u2019 is meant loss of profits, if any would have been realized from the completed transaction. In determining loss of profit, the following rules are applicable in appropriate circumstances: The measure of damages for the buyer\u2019s breach of a contract for the manufacture of goods, where the goods have already been manufactured or produced and where there is an available market therefor, is the difference between the contract price and the market price at the time fixed for delivery. However, if the goods are manufactured for a particular purpose, or for other reasons have no general market value, the rule of damages based on the difference between the contract price and the market price does not apply. In such case, the measure of damages has been generally stated to be the difference between the contract price and the cost of manufacture. If at the time of the breach a part of the goods has been manufactured and delivered, the seller may recover as damages the full contract price (less any credits) for the goods delivered and, as to the portion of the goods not delivered, may recover the difference in the contract price of the undelivered goods and what it would have cost the seller to manufacture and deliver the undelivered portion. Springs Co. v. Buggy Co., 148 N.C. 533, 62 S.E. 637; Clements v. State, 77 N.C. 142; 78 C.J.S., Sales, s. 479(c), pp. 145-6; 44 A.L.R., Anno; Damages \u2014 Sales\u2014Buyer\u2019s Breach, p. 215, supplemented in 108 A.L.R. 1482; 3 Williston, Sales (Rev. Ed. 1948) s. 583a, p. 246. covery of damages and expenses referred to in the two preceding sentences are limited to such as accrued prior to notification by the buyer that he would accept no further deliveries. Advertising Co. v. Warehouse Co., 186 N.C. 197, 119 S.E. 196. In determining damages for wasted materials, the market or salvage value of unused materials is to be deducted from the cost of the unused materials. The seller must use reasonable diligence to minimize damages. 78 C.J.S., Sales, s. 479(d), pp. 146-7; Bennett v. S. Blumenthal & Co., Inc., 155 A. 68 (Conn. 1931) ; Atalah v. Wilson Lewith Machinery Corp., 200 F. 2d 297 (4th Cir. 1952).\n\u2018In addition to lost profits, the seller may recover expenditures for labor and materials reasonably made in part performance of the contract, to the extent that they are wasted when performance is abandoned.\u2019 78 C.J.S., Sales, s. 479(d), p. 147; Leiberman v. Templar Motor Co., 140 N.E. 222, 29 A.L.R. 1089 (N.Y. 1923). In this category of damages \u2018any expenses which might be reasonably contemplated by the buyer as the probable result of his failure to comply with the contract are properly included\u2019 (78 C.J.S., Sales, s. 482, p. 150) \u2014 provided, of course, they are wasted expenses, expenses attributable to undelivered goods. But re-\nThere is also the question whether, in determining lost profits by ascertaining the difference between the contract price of the undelivered goods and what it would have cost to manufacture and deliver these goods, the cost should include overhead expenses and fixed charges reasonably applicable to the undelivered portion of the contract. In cases, such as the one at bar, where the seller has an established and going business and is manufacturing and selling goods to various buyers, overhead and fixed charges constitute elements of cost of manufacture and are the subject of proper inquiry, and they are susceptible of approximate ascertainment. Worrell & Williams v. Kinnear Mfg. Co., 49 S.E. 988 (Va. 1905). It follows, in such case, that overhead and fixed charges are elements of damages for wasted labor and expenses, insofar as they are reasonably applicable thereto. In passing, it should be noted that in cases where the contract requires the seller to build a factory or expend large sums in particular preparation to supply the particular buyer for a long period of time, the cost of production is computed without including therein any allowance for overhead or fixed charges. Georgia Power & Light Co. v. Fruit Growers Express Co., 190 S.E. 669 (Ga. 1937).\u201d\nApplying those rules the Court said that if defendant had breached the contract, plaintiff could recover as damages:\n\u201c (a) The unpaid balance of the contract price for the units manufactured and delivered; (b) lost profits with respect to the undelivered portion of the purchase order, that is, the difference between the contract price of the undelivered units and what it would have cost to manufacture and deliver them. The cost of manufacture is to include the cost of materials necessary to manufacture the undelivered units, the cost of direct labor thereon, and overhead and fixed charges. Overhead, of course, includes such items as factory-overhead, administrative costs and selling costs, (c) Cost of materials, labor, overhead and fixed charges wasted by reason of the breach, but only such as accrued prior to the notification to cease deliveries. The amount of damages for materials wasted is to be determined by the difference between the cost of the materials on hand at the time of notification and the market or salvage value of such materials.\u201d\nWe think the measure of damages set out by the court is the same as that prescribed by the Code. Of course, in the case before us, defendant would be entitled to credit for goods returned.\nIn addition to the question of reducing the verdict of the jury raised by both plaintiff and defendant on appeal and questions with respect to the measure of damages presented by both parties on appeal, defendant appellant contends that the trial court erred in refusing to grant its motion for a directed verdict, in its phrasing of the first issue submitted to the jury, and in its charge to the jury on the first issue.\nAccording to the record before us, the defendant made no objection at the time of trial to the court\u2019s denial of its motions for directed verdict made at the close of plaintiff\u2019s evidence and renewed at the end of all the evidence. Exception to the ruling of the court appears for the first time at the end of plaintiff appellant\u2019s grouping of exceptions and assignments of error and just before defendant appellant\u2019s grouping of exceptions and assignments of error. Nor does the record reveal defendant\u2019s objection to the issues submitted by the court. The order on final pre-trial conference does indicate that each party had its own idea of the issues to be submitted and were not, at that time, in agreement on the issues. However, the record does not reveal that either party ever tendered issues to the court and excepted to the court\u2019s refusal to submit the tendered issues. Nor does the charge of the court contain exceptions thereto raised by either party. Defendant\u2019s exceptions to the charge appear for the first time in the record in the same manner as its exceptions to the court\u2019s failure to grant its motion for directed verdict. Even there, the Court is not referred to the page of the record where the alleged error in the instructions appear, nor does the assignment of error indicate what appellant contends the court should have charged. Nevertheless, in spite of the failure properly to bring exceptions to the attention of the Court, we have chosen to discuss defendant\u2019s purported exceptions, as we did plaintiff\u2019s purported exceptions which are subject to the same criticism.\nThe parties stipulated as follows: \u201cPlaintiff and Defendant entered into a contract on or about March 17, 1970, for Plaintiff to manufacture and sell to Defendant certain \u2018PC Boards.\u2019 These goods are printed circuit boards containing series of interrelated and connecting circuits. These boards were components of computer terminals manufactured by Defendant.\u201d Plaintiff introduced evidence tending to show that the contract between the parties provided that plaintiff would produce 1000 \u201cPC Boards\u201d in accordance with each of five designs submitted by defendant for a total of 5000 boards. Defendant would pay plaintiff $21 per board for a total price of $105,000. The contract was later changed by purchase order dated 13 May 1970 to add a sixth design, denominated as #0231 PC Board, from which 1000 boards would be manufactured. The price for this design would be $10.50 per board and the price for #0230 PC Board was changed to $10.50, leaving the total price at $105,000. It was not contemplated that all 6000 boards would be delivered in one shipment. Rather, defendant had the right to request a specified number which would be manufactured, shipped, and payment made upon delivery. The contract provided that if defendant should request less than 1000 boards of any design the charge would be more than the amount designated therefor in ascending scales from 200 to 999. This is referred to as the \u201cbill back\u201d provision, the additional charge to be billed back to defendant when performance of the contract was completed. Plaintiff testified that the reason for this provision was that it could produce larger quantities at a lower cost per board than it could a small quantity. Defendant requested and plaintiff shipped a total of 338 boards for all six designs, less than 200 of any one design. Defendant paid for these boards $6,268.50. Defendant then repudiated the contract. Since the bill back clause did not cover quantities less than 200, plaintiff computed a bill back charge based on its normal sales price for an order of the size filled and billed defendant for $8,168.50. Plaintiff further testified that defendant, prior to repudiating the contract, repeatedly requested more prompt delivery after request. Accordingly, plaintiff began to manufacture boards ahead of request so that requests could be filled more quickly. When defendant repudiated, plaintiff had a supply of boards on hand and its expense in producing them was $3,413.15. Plaintiff further testified, without objection, that its hormal profit on an order-. the . size of this one was. 10%. We. think the. evidence is' sufficient to withstand a motion for directed verdict...\nDefendant\u2019s evidence tended to show that the boards manufactured by plaintiff were defective in many ways, that delivery was not as promised and that defendant was justified in repudiating the contract. Defendant further testified that it was common practice in the industry \u201cto have a bill back clause with a purchase agreement\u201d; that it did not assume that defendant was obligated to purchase 1000 of each of the six type boards; and that although the contract might say 1000 it really meant something less than that.\nThe contract itself provides in paragraph 9:\n\u201cMinimum Order Quantities:\nTo qualify for pricing under this purchase order, the following minimums shall be observed:\nPer Order\nEach release issued must have a dollar value of not less than NA.\nPer Item\nEach item ordered must be ordered in a dollar value of not less than NA\nParagraph 10 provides:\n\u201cIn the event that the reject rate for any item is in excess of one percent at Terminal Communications, Inc. receiving inspection, the price adjustment schedule in paragraph 12 for that item will no longer apply, regardless of quantities released, since this reject rate can cause the release schedule to change.\u201d\nParagraph 11 is entitled \u201cDelivery Schedule\u201d and immediately following the title the words \u201cPlanning Purposes only\u201d appear in parenthesis. The paragraph sets up a schedule of delivery dates beginning with 3-31-70 and ending with 4-30-71. The contract in paragraph 1 thereof apparently was for deliveries from 3 March 1970 through 3 March 1971. The delivery schedule provides for delivery of four of each item on 3-31-70 and provides for deliveries each month thereafter to and including 3.0 March 1971 and 30 April 1971 \u2014 both dates presumably after the time for performance \u2014 and provides for a delivery of a total of 1004 of each item.\nParagraph 12 is entitled \u201cPrice Adjustment Schedule.\u201d It is the \u201cbill back\u201d clause referred to and provides:\n\u201cIn the event Terminal Communications, Inc. does not purchase the estimated total quantity from March 3, 1970 through March 3, 1970 the following adjustment schedule will be applied. Terminal Communications, Incorporated will be invoiced for the difference between the price for the quantity range actually purchased and the lower initial price.\nQuantity\nItem No. 200-499 500-999 1000\n#0226 30.00 25.00 21.00\n#0227 30.00 25.00 21.00\n#0228 30.00 25.00 21.00\n#0229 #0230 30.00 30.00 25.00 25.00 21.00 21.00.\u2019\nIt is obvious that the contract is ambiguous. The jury ascertained its meaning in favor of plaintiff upon an issue submitted without objection and without tender of an alternative issue. Goodyear v. Goodyear, 257 N.C. 374, 126 S.E. 2d 113 (1962). Ordinarily, \u201c[t]he number, form and phraseology of the issues lie within the sound discretion of the trial court,\u201d and where the' issue is \u201csufficiently comprehensive\u201d to resolve the controversy, its submission will not be held for error. Chalmers v. Womack, 269 N.C. 433, 435-436, 152 S.E. 2d 505, 507 (1967). The issue submitted was sufficient to resolve the controversy arising upon the pleadings and the evidence.\nDefendant contends that the court erred in charging the jury that under the evidence they might find that plaintiff\u2019s reasonably anticipated profit from the full performance of the contract was 10% of the total value of the contract. Plaintiff was allowed to testify in this vein, without objection by defendant. As we have previously noted, the charge contains no bracketed or otherwise identifiable portions to which defendant excepts. However, since the matter will be for retrial on the issue of damages, this question on this appeal is moot. Perhaps upon retrial defendant will, by proper objection, be able to prevent what it deems incompetent evidence from being presented to the jury. In any event, proper objection and exception in the record will allow the question to be presented on appeal.\nDefendant also raises the question of the impropriety of the court\u2019s order reducing the verdict. This question has been discussed; and, as previously indicated, the error of the court results in the necessity of a new trial on the issue of damages.\nNew trial on damages issue only.\nJudges Vaughn and Clark concur.", "type": "majority", "author": "MORRIS, Judge." } ], "attorneys": [ "Allen, Steed and Pullen, P.A., by Arch T. Allen III, for plaintiff appellant Industrial Circuits Company.", "Joslin, Culbertson & Sedberry, by William Joslin, for defendant appellant Terminal Communications, Inc." ], "corrections": "", "head_matter": "INDUSTRIAL CIRCUITS COMPANY v. TERMINAL COMMUNICATIONS, INC.\nNo. 7510SC290\n(Filed 16 July 1975)\n1. Rules of Civil Procedure^ 59\u2014 disregard of jury instructions \u2014 change of verdict by court improper \u2014 new trial proper\nWhere the jury manifestly disregarded the trial court\u2019s instructions with respect to damages, it was not within the authority of the court to enter an order, \u201cas an alternative to entering a new trial,\u201d eliminating an item of damages awarded by the jury and reducing -the verdict by that amount; therefore, the action must be remanded for a new trial on the issue of damages. G.S. 1A-1, Rule 59.\n2. Uniform Commercial Code \u00a7 20\u2014 breach of contract \u2014 measure of damages\nIn an action for breach of contract where plaintiff agreed to.produce for defendant 6000 printed circuit boards at a stat\u00e9d price' p\u00e9r board, six designs were to be used, if defendant requested less than 1000 boards of any design the charge would be more than the amount designated therefor .in ascending scales from 200 to 999, this arrangement was referred to as the \u201cbill back\u201d provision, defendant purchased less than 200 boards in each design and then repudiated the contract, and plaintiff computed a \u201cbill back\u201d charge based on its normal sales price for an order of the size filled since the \u201cbill back\u201d provision did not cover quantities of less than 200, the trial court properly instructed the jury to exclude from its consideration of damages the amount charged by plaintiff as the \u201cbill back\u201d item, since the proper measure of damages in the action was the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in G.S. 25-2-710, due allowance for costs reasonably incurred and due credit for payments or proceeds of resale. G.S. 25-2-708(2).\n3. Contracts \u00a7 27\u2014 breach of contract \u2014 motion for directed verdict, properly denied\nThe trial court did not err in denying defendant\u2019s motion Tor directed verdict in an action for breach of contract where plaintiff offered evidence of the contract between the parties for the .production and sale of printed circuit boards, plaintiff\u2019s compliance with the contract and defendant\u2019s breach' thereof, and plaintiff\u2019s items 'of damage.\nBoth plaintiff and defendant appealed from McLelland, Judge. Judgment entered 20 November 1974 in Superior Court, WAKE County. Heard in the Court of Appeals 11 June 1975.\nIn its complaint filed 8 May 1972, plaintiff alleged that on or about 17 March 1970 the defendant had entered into a contract to buy printed circuit boards, a type of equipment used in the electronics industry, from the plaintiff, and that the der fendant subsequently had breached the contract. In its answer defendant denied it had breached the contract and counterclaimed alleging the plaintiff had breached the contract by failing \u201cto manufacture printed circuit boards of the quality required\u201d and by failing \u201cto comply with agreed delivery schedules.\u201d\nAt the trial plaintiff offered evidence tending to show the following: Printed circuit boards are designed by the buyer and are produced by the manufacturer in strict accordance with the specifications of the buyer. Therefore, a printed circuit board produced for one buyer ordinarily cannot be used by any other buyer and has no market price. On 17 March 1970 plaintiff and the defendant entered into a contract providing that plaintiff would produce \u201cone thousand pieces each of five different printed circuit boards\u201d for a total of 5000 boards and defendant would pay \u201ca price of $21.00 for each with a total dollar value of $105,000.\u201d The contract was later modified to provide that a \u201c6th type of circuit board\u201d would be added to the purchase order \u201c [a] gain, for a thousand pieces,\u201d but that the dollar value of the order would remain \u201croughly the same, $105,000\u201d due to an adjustment in the pricing on one of the parts.\nThe contract did not contemplate that all 6,000 boards Would be sent to the defendant in one shipment; instead, the defendant would have the right to request that a specified number of boards be shipped at any time. Defendant then would pay the plaintiff $21.00 for each board shipped. The contract contained a \u201cbill back\u201d clause providing that if the total number of boards requested by the defendant for a particular design did not amount to 1,000, but instead was between 500 and 999, the price per board would be raised to $25.00. Similarly, if the defendant requested only 200 to 499 boards of a particular design, the price per board would be raised to $30.00. This additional charge would be \u201cbilled back\u201d to the defendant when the contract was completed. The reason for the \u201cbill back\u201d clause was that through economies of scale, plaintiff was able to produce a larger quantity of printed circuit boards at a lower cost per board than it could a small quantity.\nBetween 17 March 1970 and 1 December 1970' defendant requested, and plaintiff shipped, a total of 338 printed circuit boards to the plaintiff for all six designs. Defendant requested less than 200 boards of each design. For these 338 boards defendant paid the plaintiff $6,268.50. On 7 December 1970, plaintiff received a cancellation notice from the defendant, dated 1 December 1970, repudiating the contract \u201cdue to poor quality and nondelivery.\u201d Since a total purchase of only 338 boards for all six designs was not covered by the \u201cbill back\u201d clause of the contract, the plaintiff computed a \u201cbill back\u201d charge based on its normal sales price for an order of this small size, and this \u201cbill back\u201d amounted to $8,168.51.\nOther evidence introduced by the plaintiff tended to show that before repudiating the contract the defendant had repeatedly asked the plaintiff to ship the printed circuit boards more quickly after they were requested and therefore plaintiff had proceeded to build some boards in advance, so that they could be sent to the defendant immediately when a request was received. When the defendant repudiated the contract the plaintiff w\u00e1s \u201cstuck\u201d with boards which had cost it $3,413.15 to produce.\nThe plaintiff\u2019s President and General Manager testified that 10 % of the total contract price was the plaintiff\u2019s \u201cnormal profit on the large quantity type of order like this!\u201d On the basis of this testimony the plaintiff maintained it was entitled to lost profits in the amount of $9,853.65 [($105,805 \u2014 $6,268.50) X 10%,] 'for the unsold boards, not $10,500 ($105,000 X 10%) for the whole contract. As computed by the plaintiff it sustained total damages of $21,630.29 as a result of the defendant\u2019s breach of the contract:\n\u201c(a) Additional or bill back charges for lesser quantities than included in the original purchase order, as amended. $8,168.51\n(b) Charges for\n(I) Raw material $ 835.48\n(II) Work in Progress 3,413.15\n\u25a0 Subtotal $4,248.63\n(c) Loss of profits on cancellation of balance of entire purchase order computed as follows:\nGross amount of purchase order $105,805.00\nLess boards shipped 6,268.50\nBalance of order at time of $ 98,536.50 cancellation\nMargin of profit 10%\nLoss of profits $9,853.65\nSubtotal $22,270.79 '\nLess credit for boards paid for and returned 640.50\nPlaintiff\u2019s asserted cancellation charges $21,630.29\u201d\nDefendant\u2019s evidence tended to show that the plaintiff breached the contract by failing to manufacture printed circuit boards of the quality required and by failing to comply with agreed delivery schedules; that as a result of the breach defendant incurred extra costs and expenses incident to the use of the plaintiff\u2019s boards in its terminal computers; that defendant was finally forced to obtain its printed circuit boards from another supplier at additional expense to itself; and that later defendant purchased equipment and began producing its own boards. As a result of the plaintiff\u2019s breach defendant contended it was justified in terminating the contract and that it was entitled to damages of $32,656.00.\nThe jury found that the defendant had wrongfully breached its contract with the plaintiff. On the issue of damages,' the jury found that the plaintiff was entitled to a total recovery of $20,794.81, apparently computed as follows:\n(1) Bill back charge for reduced quantity releases $8,168.51\n(2) Charge for work in progress 3,413.15\n(3) Charge for lost profit on the order Subtotal 9,853.65 $21,435.31\n(4) Less: Credit for boards returned \u2014 640.50 $20,794.81\nIn its charge the trial court had instructed the jury that the plaintiff was not entitled to recover the \u201cbill back\u201d charge of $8,168.51. Because the jury violated the trial court\u2019s instructions the court reduced the plaintiff\u2019s damages by $8,168.51 and entered judgment for the plaintiff in the amount of $12,626.30. Both parties appealed.\nAllen, Steed and Pullen, P.A., by Arch T. Allen III, for plaintiff appellant Industrial Circuits Company.\nJoslin, Culbertson & Sedberry, by William Joslin, for defendant appellant Terminal Communications, Inc." }, "file_name": "0536-01", "first_page_order": 564, "last_page_order": 576 }