DePalma

This is a case of first impression in California.

The principal issue before us is whether evidence of tax benefits which a plaintiff may have received because of the expense of a contract should be considered in determining compensatory damages for the defendant’s breach of that contract. For the reasons stated below, we hold that such evidence is irrelevant.

Facts and Proceedings Below

In 1980 the parties entered into contracts by which the respondent physician purchased and licensed computer hardware and software from the appellant for $50,009.40. Appellant, a computer hardware and software supplier, promised the equipment could be used for accounting and billing purposes at both the respondent’s medical practice and dialysis facilities. The equipment was installed; however, it did not function as promised.

In July 1982 the respondent filed causes of action for breach of contract, failure of consideration, restitution, breach of warranty, and unlawful business practices.

The parties agreed to a summary trial: there would be no live witnesses or jury; counsel could offer documentary and physical evidence, and depositions by stipulation, argument, and offers of…