16 Damages Flashcards
Types of Damages
Expectancy damages (benefit for the bargain)
-> to buy a substitute performance
-> losses because substitute not found
foreseeability, certainty, speculation
- *Reliance damages** (opportunity costs)
- > for a lost opportunity
- > costs preparing for performance
- > cannot exceed expectancy
- *Stipulated (contractual damages)**
- > expressly stated in the contract
- > specifies the limit of damages
- > public policy concerns; can not be a penalty
Liquidated Damages
-> Agreed Damages
Restitution
- > Value of the benefit conferred to the party in breach
- > Prevent unjust enrichment
Restitution interest
Restitution interest
“Prevent unjust enrichment” “Value of the benefit conferred”
The law of restitution is the law of gains-based recovery. It is to be contrasted with the law of compensation, which is the law of loss-based recovery. When a court orders restitution it orders the defendant to give up his/her gains to the claimant. When a court orders compensation it orders the defendant to pay the claimant for his or her loss.
Authority case: Attorney General v Blake
(Case where a former Spy started to publish secret information in his book and had to restore all the gains to the State)
Expectation interest
“Give the non-breaching/innocent party the benefit of their bargain”
- Expectation damages are damages recoverable from a breach of contract by the non-breaching party. An award of expectation damages protects the injured party’s interest in realizing the value of the expectancy that was created by the promise of the other party.
- The purpose of expectation damages is to put the non-breaching party in the position it would have occupied had the contract been fulfilled. Expectation damages can be contrasted to reliance damages and restitution damages, which are remedies that address other types of interests of parties involved in enforceable promises.
- The default for expectation damages are monetary damages which are subject to limitations or exceptions (see below)
- Expectation damages are measured by the diminution in value, coupled with consequential and incidental damages.
Examples:
- General contractor accepts an offer from a subcontractor and enters into a contract. The general contractor breaches / repudiates their contract part way through the subcontractor’s performance. Generally, the subcontractor is entitled to seek an amount equal to the contract price or unrealized value of the promised performance plus costs incurred in preparing or performing under the contract (and costs incidental to the breach e.g., storage costs, restocking fees for returns; penalties or costs for canceling contracts, supply orders etc.) minus any progress payments made by the general contractor and minus costs saved by the breach; can include anticipated profit.
- Neal signs a contract agreeing to buy 10 hours of landscaping services from John’s Landscaping for $50 an hour. If Neal breaks the contract and doesn’t use any of John’s Landscaping’s services, expectation damages paid to John’s Landscaping would be $500 minus any costs John’s Landscaping may have saved, which is the economic loss they suffered. If John’s Landscaping breaks the contract, and Neal is forced to hire another service for $60 an hour, expectation (direct) damages paid to Neal would equal $100 ($10 an hour, the difference in price between the original contract and the new contract).
Calculation of Expectation Damages:
Loss in Value + Other Losses – Costs Avoided – Loss Avoided
Reliance interest
Reliance interest: “Opportunity Costs”
- Reliance damages is the measure of compensation given to a person who suffered an economic harm for acting in reliance on a party who failed to fulfill their obligation.
- Reliance damages are valued by a party’s reliance interest for the foreseeable amount.
- They put the injured party in the same money position as if the contract had never been formed.
- Reliance damages are the type of damages awarded in promissory estoppel claims although they can also be awarded in traditional contract breaches. This is appropriate because even if there is no bargain principle in the agreement, one party has relied on a promise and thus is damaged to the extent of their reliance.
- These damages must be proven with reasonable certainty. It is not enough that one party simply guess as to how much they are actually damaged.
Example on reliance interest:
Neal and Matt formed a bilateral contract. Neal spent $100 in reliance on the contract, which was foreseeable. However, Matt breached the contract. Reliance damages protect a party’s reliance interest. Neal spent $100 in reliance on the contract, which constituted Neal’s reliance interest. Since reliance damages equal to the value of the reliance interest of the injured party, Matt owes Neal $100. This puts Neal in the same economic position as if the contract never happened.
Liquidated Damages
Makdesi v Cavendish Holding Ltd.
