Contracts Flashcards
Rancher is entitled to cost-of-completion damages because the breach appears to be willful and only cost-of-completion damages will enable Rancher to use Ranch for its intended purpose.
For breach of contract, the injured party may be entitled to expectation damages. These damages are intended to put the injured party in the same position as if the contract had been performed. Since Ranch was not restored to its pre-exploration condition, Rancher is entitled to damages. One measure of damages is the cost of restoration—here, $500,000. Id. § 12.13. However, where an award might be wasteful, such as when the cost to restore (here $500,000) would greatly exceed the difference in value (here $20,000), damages may be measured by the difference in value. But when the breach appears to be willful, as is the case here, and only completion of the contract will enable the non-breaching party to use the land for its intended purposes, the cost of completion is considered the appropriate damage award. Therefore, the court probably did not err in awarding Rancher the cost of returning Ranch to its pre-exploration condition.
Rancher’s losses based on his failure to conduct roping clinics were foreseeable.
Contract damages must be foreseeable to be recoverable. Damages are foreseeable if a reasonable person in the position of the breaching party would have known at the time the contract was made that the damages were likely to occur as a result of the breach.
Rancher can recover foreseeable losses from his inability to conduct the roping clinics only if those losses also were sufficiently certain.
Contract damages must be proved with reasonable certainty to be recoverable. Here, Rancher faces the problem of a “new business.” Although Rancher had conducted clinics on the road in the past, Rancher had not conducted clinics on Ranch. While most states no longer apply a per se rule denying recovery to all new businesses, courts still are reluctant to award lost profits to new businesses, because such profits “are regarded as being too remote, contingent and speculative to meet the standard of reasonable certainty.
Rancher’s award should have been reduced by the expenses Rancher would have incurred in conducting the roping clinics.
Contract damage awards must take into account costs avoided because of the breach. Here, even if Rancher’s claimed damages of $300,000 were fore-seeable and certain, that amount represents the gross amount that Rancher would have received. In order to receive that amount, Rancher would have incurred expenses. Gasco’s breach saved him those expenses. Therefore, even if the award of $300,000 was foreseeable and reasonably certain, it should be reduced to the net amount Rancher would have earned after expenses.
It is uncertain whether Rancher’s award should have been reduced by the amount of loss Rancher could have avoided by going on the road with his roping clinics.
The $300,000 award of damages may be reduced by the amount Rancher could have earned by mitigating his loss. Mitigation requires the injured party to take reasonable steps to reduce the damages. Here, Rancher offered clinics on the road before he bought Ranch. After the breach Rancher could have resumed these activities as mitigation, as that alternative may not be viewed as substantially different from or inferior to the clinics he planned to offer on the ranch. Id. However, the need to travel might make this alternative inferior. Therefore, it is uncertain whether Rancher’s award should be reduced by the amount he could have earned by offering the roping clinics on the road.
