Case Summary 7.5: Pepsi-Cola Co. v. Steak ‘N Shake, Inc., 981 F.Supp. 1149 (S.D. Ind. 1997)
(p. 242)
Facts: The Steak 'n Shake restaurant chain entered a contract with Pepsi to replace King Cola
with Pepsi in all its stores. Several issues surrounding the contract's execution strained the
agreement, and Steak 'n Shake cancelled the contract and refused to perform. Pepsi sued, and
in court Steak 'n Shake insisted that Pepsi had no “legally cognizable” damages because all
potential profits were purely speculative. Pepsi argued that it stood to gain from the contract and
that they should be compensated for the breach even though damages could not be calculated
exactly. The damages could be equal to what it reasonably stood to gain from the contract if not
for Steak 'n Shake's breach.
1. Will a court award damages to Pepsi even though they admitted the damages could not be
calculated exactly?
No, the court refused to grant Pepsi damages since all future earnings were simply
hypothetical, making the damages legally inadmissible. A conflict or harm that may be
adjudicated or tried before a particular tribunal is one that satisfies the fundamental
viability requirements. Given that there are several other viable choices supplied under
the contract and that Pepsi's assessment of losses is imprecise and simply hypothetical,
the damages are speculative. Additionally, there is insufficient evidence to establish the
contract's violation and the appropriate damages, making it impossible to offer an
estimate of the amount of losses with certainty.
2. What other types of damages or relief could Pepsi seek?
Pepsi has the right to demand damages or compensatory remedy. When a loss results
from the illegal or careless actions of another person, compensatory damages are
granted. Pepsi perished in the hypothetical situation as a result of Steak 'n Shake's
carelessness and unlawful behavior. As a result, Pepsi may demand compensatory
(actual or direct) damages to account for prospective profits and out-of-pocket expenses.
