Court holds real estate agents representing sellers are not required to investigate the seller’s representations about the property.

Intuitively, contracting parties in commercial transactions understand that legal consequences follow a breach of contract: If a party fails to deliver a product as promised, the breaching party can be liable for the cost to correct the breach; but what is that cost?

Say, for example, a business cancels an order to provide parts to a long-time customer because the relationship has gone sour. Legally, the liability for that breach of contract may extend beyond the cost of the order. A breaching party is liable for damages that are a direct consequence of the failure to perform and that were foreseeable at the time the contract was made, which may include lost profit. If the breach was intentional or malicious, the party's liability may extend even to direct damages that were not foreseeable.

The business that cancelled the order now faces a jury’s decision to identify the direct and foreseeable losses, a decision that, by its nature, is vague. However, the law imposes a limit on the jury’s prerogative to decide the damages. Even for a bad faith breach of contract, liability arises only for the direct, immediate consequences of the breach and there should be no liability for damages determined to be remote, indirect, or that have no necessary relation to the breach.

In a recent case, a jury found that a defendant boat engine manufacturer breached its contract with plaintiff boat manufacturer by cancelling a purchase order for engines, and further, that the engine manufacturer was in bad faith. The jury awarded $1.8 million in foreseeable lost revenues and $1.3 million in unforeseeable lost profits. The trial court threw out the “unforeseen” portion of the award because it was not a direct damage, and emphasized that a breaching party does not “become the insurer for all misfortunes that may arise from the breach.”

The boat manufacturer had argued that the cash flow expected from the sale of the boats rendered engine-less by the breach would have been invested in more personnel and capital to grow its northwest division. But, because of depleted cash flow from lost sales, that opportunity was lost. The court found, as a matter of law, that this loss was not a direct consequence of the breach, and thus, regardless of the bad faith, was not a recoverable contract damage. Simply, loss of cash flow in one part of the business that had a ripple effect in a separate division was too indirect to be a recoverable damage. See Marine Power Holding, LLC v. Malibu Boats, LLC, 2016 WL 7241560 (E.D. La. 12/15/2016).

By contrast, courts have found that loss of cash flow is recoverable where directly related to the damages suffered, such as where breach of a contract to deliver chickens to a chicken farmer caused the forced sale of the chicken farm. See Volentine v. Raeford Farms of La., 50-698 (La.App. 2 Cir. 8/15/16), 201 So.3d 325.

Failure to perform on a contract exposes a business to more than it may realize. Understanding this risk allows for smarter decisions before the breach.

In Louisiana, we are all too familiar with natural disasters. Every “hurricane season,” we hope the storm causes only minor inconvenience; but history teaches us to prepare for more. When these storms come, home and business owners inevitably make post-disaster insurance claims to repair the damage. While the specific amount owed for property damage is determined by the terms of the policy, the amount received may be affected by when (and if) the damage is repaired.

An insurer will work with you to identify the “actual cash value” or “ACV” of the damaged property when handling your claim. “ACV” is defined as the cost to repair/replace the damage, less depreciation. Jouve v. State Farm Fire and Cas. Co., 2010-1522 (La.App. 4 Cir. 8/17/11), 74 So.3d 220. Many policies provide that an insurer is not obligated to provide you with more than the “ACV” of the damage, unless and until you actually make repairs. Later, you can recover the depreciation amount once you submit proof that the repairs are complete. Courts have enforced such provisions in many cases, regardless of the type of loss.

So, what happens if you never make the repairs? Simply, the insurance company may never owe the depreciation. In Hackman v. EMC Ins. Co., 07-552 (La.App. 5 Cir. 3/25/08), 984 So.2d 139, the plaintiff’s property was damaged by a fire. The insurer paid the ACV of the loss but withheld depreciation pending repairs. The plaintiff never made the repairs and ultimately sold the property. The Court ruled the plaintiff was not entitled to recover the difference.

Similarly, in Jouve v. State Farm Fire & Cas. Co., supra, the plaintiffs’ home was damaged by wind during Hurricane Katrina. Their insurer paid the ACV of the loss. Thereafter, the plaintiffs sold the home “as is” and sought recovery for the depreciation. The court reviewed the policy and found the plaintiffs’ sale of the home without repairs limited their recovery to ACV.

As with any insurance claim, you should always read your policy before losses occur to ensure you understand its terms and conditions. Maybe add this as an unusual step to your hurricane checklist. As these cases show, your ultimate recovery can be affected by what you do, or do not do, following the loss.

The First Circuit Court of Appeals affirmed the Trial Court’s ruling that granted summary judgment in a premises liability case filed following an accident that occurred at the LSU Hilltop Arboretum. The Louisiana Supreme Court recently denied writs seeking review of the lower courts’ rulings. Keogh Cox attorneys, Brian T. Butler and C. Reynolds LeBlanc, defended the case.

In Hebert v. Louisiana State Univ. Sys. Bd. of Supervisors Through Louisiana State Univ., the plaintiff went to the LSU Hilltop Arboretum to attend a wedding. Before the wedding, she went to the ladies’ room located in the outdoor pavilion area. The door to the restroom is controlled by an automatic door closer. The plaintiff alleged that the door began to close with “excessive force” when she exited the ladies’ room, and her finger was injured when it slid into the hinge-side of the door.

The plaintiff claimed the automatic door closer was defective because it was not properly adjusted at the time of the accident. The plaintiff retained an expert professional engineer to support her claims. The expert inspected the door and the door closer approximately 19 months after the incident. He testified that when he inspected the door, it was closing too fast, was out of adjustment, and had been improperly maintained. The plaintiff argued these findings showed the door was also defective at the time of the accident.

The expert also said the doors should have been inspected and adjusted every six months. The plaintiff argued the alleged problem with the door would have been discovered if it was inspected as her expert recommended.

Keogh Cox filed a Motion for Summary Judgment on behalf of the defendants. First, we argued the plaintiffs failed to produce evidence that the door was defective on the date of the accident. While the expert opined the door was defective when it was inspected nineteen months after the accident, the plaintiff had no evidence to show the alleged defect existed at the time of the accident. Keogh Cox asserted that the expert’s testimony claiming a defect was pure speculation. The court agreed and found the plaintiff failed to show the door presented an unreasonable risk of harm.

Second, we argued the plaintiff could not show LSU had prior notice that the door was defective at the time of the accident. As the door to the primary restroom on the premises, it was frequently used. There was no evidence of any prior complaints or reports of problems with the door before the accident. The plaintiff argued that notice could be found because LSU did not have a set inspection plan for the door as her expert recommended.

The court rejected this argument, stating “The opposite is true; in the absence of other facts such as recorded complaints about a defect or hazard, the lack of a plan of inspection implies that the public entity has no knowledge of dangerous defects or conditions.” Thus, the court found the plaintiff failed to show LSU had notice of the alleged problem with the door.

Reference:

Hebert v. Louisiana State Univ. Sys. Bd. of Supervisors Through Louisiana State Univ., 2025-0246 (La. App. 1 Cir. 11/7/25), 424 So. 3d 809, writ denied, 2025-01542 (La. 2/10/26), 425 So. 3d 1205.