Murrey & Sons Company, Inc. (Murrey) was engaged in the business of manufacturing and selling pool tables. Erik Madsen was working on an idea to develop a pool table that, through the use of electronic devices installed in the rails of the table, would produce lighting and sound effects in a fashion similar to a pinball machine. Murrey and Madsen entered into a written contract whereby Murrey agreed to manufacture 100 of its M1 4-by-8-foot six-pocket coin-operated pool tables with customized rails capable of incorporating the electronic lighting and sound effects desired by Madsen.

Under the agreement, Madsen would design the rails and provide the drawings to Murrey, who would manufacture them to Madsen’s specifications. Madsen was to design, manufacture, and install the electronic components for the tables. Madsen agreed to pay $550 per table or a total of $55,000 for the 100 tables and made a $42,500 deposit on the contract. Murrey began the manufacture of the tables while Madsen continued to work on the design of the rails and electronics. Madsen encountered significant difficulties and notified Murrey that he would be unable to take delivery of the 100 tables. 

Madsen then brought suit to recover the $42,500 he had paid Murrey. Following Madsen’s repudiation of the contract, Murrey dismantled the pool tables and used salvageable materials to manufacture other pool tables. A good portion of the material was simply used as firewood. Murrey made no attempt to market the 100 pool tables at a discount or at any other price in order to mitigate its damages. It claimed the salvage value of the materials it reused was $7,488. 

There was evidence that if Murrey had completed the tables, they would have had a value of at least $21,250 and could have been sold for at least that much, and that the changes made in the frame to accommodate the electrical wiring would not have adversely affected the quality or marketability of the pool tables. Murrey said it had not completed manufacture because its reputation for quality might be hurt if it dealt in “seconds” and that the changes in the frame might weaken it and subject it to potential liability. Was Murrey justified in not completing manufacture of the pool tables?