I have no idea whats going on in this contracts case:
"Vitex Manufacturing Corp. v. Caribtex Corp. – (1967, 472-475) [Nov. 3]
Manufacturer, P, contracted with D to manufacture wool product. D breaches. At trial, P won lost profits and D appeals because the trial court didn’t deduct overhead expenses.
• P’s factory was shut down before the contract, but P started it up to fulfill its contract with D.
• <court says>
• damages = revenue from the contract – variable costs from the contract
o “Since overhead expenses are not affected by the performance of the particular contract, there should be no need to deduct them in computing lost profits.”
o Overhead is “fixed and independent” of performance of contract, so should be excluded.
o This is consistent with UCC 2-708 which allows for recovery of overhead.
• Rule: fixed costs are not included when measuring damages."
Could someone give me another concrete example of this in action? I'm confused!
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