Contracts Damages + 3rd parties

Question 1

What are the three kinds of contractual interests protected by damages rules?

Answer 1

(1) Expectation
(2) Restitution
(3) Reliance

Question 2

What is are damages in recognition of an expectation interest?

Answer 2

(1) Value expected - Value received = damages

Question 3

What are damages in recognition of reliance interest?

Answer 3

(1) Value of condition of damagee after performance + value damages received = Value of condition of damagee before performance

Question 4

What are damages in recognition of restitution interests?

Answer 4

(1) Value of damager after perfomance - Value of damages = Value of damager before performance

Question 5

What are the three limitations on damages?

Answer 5

(1) Mitigation
(2) Foreseeability
(3) Certainty

Question 6

What is a faliure to mitigate?

Answer 6

(1) Damages which could have been avoided
(i) missing undue risk
(ii) burden
or;
(iii) humiliation
(2) are not recoverable
but;
(3) reasonable efforts will exclude an injured party from the rule above

Question 7

What effect does forseeability have on damages?

Answer 7

(1) An injured party cannot recover damages where a breaching party
(2) did not have reason to forsee those damages as a probable result of breach
(3) at the time of contract

Question 8

What will make a particular losses forseeable?

Answer 8

(1) When a loss follows from the ‘ordinary course of events’
or;
(2) as a result of special circumstances that the breaching party ‘had reason to know

Question 9

Tell me a special rule when it comes to recovering for lost profits

Answer 9

(1) Lost profits can be precluded from damage amounts as justice requires in light of the possibility of disproportionate compensation
(2) Though, they may still grant damages for those lost profits ‘incurred in reliance’

Clarify what is meant by these two terms

Question 10

What limitations will certainty put on damages?

Answer 10

(1) Injured party must prove damages with reasonable certainty, this precludes
(i) speculative damages
or
(ii) uncertain damages
(2) ‘Restatement Comments’ state that the when there is doubt, generally resolve against the party in breach

Question 11

Facts from ‘union machine’

Answer 11

(1) Machine company going thru hard time plans to sell to other machine company, K is made for 135,000 and $5,000 is in escrow
(2) Better machine company bounces check, back out of K and breaches. Hard time machine company stuff is sold for merely $90,000
(3) Hard time machine company sues, but is awarded only nominal damages in trial court
(4) because $90,000 is not indicitive of market price, so you cant prove actual damages

Question 12

Rule from ‘Union Machine’

Answer 12

Formulas can be Futzed with to ensure the spirit of protecting a particular interest is satisfied

Question 13

‘Parker’ Facts

Answer 13

(1) Shirley MacLaine entered into a contract with Fox to star in a musical film.
(2) Later, Fox backed out, and said that they wouldn’t make the film.
(3) Fox offered her a part in another movie, a western, for the same price.
(4) MacLaine turned down the part and sued.

Question 14

‘Parker’ Rule

Answer 14

(1) Don’t need to take inferior substitutes to mitigate
(2) Inferiority was established by:
(i) different genre
(ii) Film Location
(iii) “Veto power”

Question 15

What other bases may an injured party sue for when ‘loss in value’ is unprovable?

Answer 15

(1) When breach results in
(i) defective construction
or;
(ii) unfinished construction
(2) The injured party may recover based on
(i) reduction in market price caused by the breach
or;
(ii) reasonable cost of completing performance/remedying defects if roughly proportional to the ‘probable loss’ in value of the property

Is loss in value actually loss in expected value? v. market price

Question 16

‘Jacobs’ Facts

Answer 16

(1) Dude wants another dude to build a house , specifies he wants a specific brand of pipe
(2) Other dude builds the house, doesn’t use brand of pipe specified but the brand used is functionally equivalent and has same market value
(3) Dude #1 sues

Question 17

‘Jacobs’ Rule

Answer 17

Difference in market value decides damages value

Question 18

What is the default rule in deciding the damage standard to use for building errors?

Answer 18

(1) Cost of completion
(2) as opposed to
(3) reduction in value

Question 19

(1) whether the nonconformity was willful or accidental
(2) whether the case involves subjective or objective value
(3) centrality of the omission to the original agreement

Answer 19

I cant figure this one out

Question 20

What makes a contract divisible?

Answer 20

(1) When the intention of the parties dictates
(2) that performance of the obligations can be separated into equivalent pairs on either side
(3) taking into account mainly the injured parties expectations in the context of the entire exchange as stated in the ‘restatement comments’

Question 21

What are liquidated damages?

Answer 21

(1) Damages agreed to as a part of the contract

Question 22

When will liquidated damages be enforcable?

Answer 22

Must be
(1) Reasonable in light of anticipated or actual loss
(2) the difficulties of proving loss
and
(3) cannot be unreasonably large so as to function as a penalty

Question 23

When can one recover for emotional that damages?

Answer 23

Only when
(1) Breach caused serious bodily harm
or;
(2) the contract or breach was of a kind
(3) that serious emotional harm was a likely result

Question 24

What are the three common restatement examples of emotional harm scenarios?

Answer 24

(1) Between common carriers/Innkeepers
(2) Contracts involving dead bodies
(3) Contracts involving delivery of messages about death

Question 25

When can punitive damages be given? From what case do we derive this rule?

Answer 25

(1) Only when the breach is also a willful tort that allows for punitive damages accompanied by:
(i) fraud
(ii) malice
(iii) wantonness
or;
(iv) oppression
(2) As laid out by ‘Magna Systems Inc.’

Question 26

Plotnik Facts

Answer 26

(1) Neighbors were fighting
(2) Had a contract with a mutual restrain clause, meaning they couldn’t harass each other
(3) One of the neighbors walked over to their place and hit their dog with a baseball bat
(4) Non batty neighbor sued for damages

Question 27

‘Plotnik’ Rule

Answer 27

(1) You can recover for emotional damages if the point of the contract is
(2) expressly
(3) to avoid emotional distress

Question 28

When will a third party be an intended beneficiary?

Answer 28

(1) When intended by the parties
and;
(2) performance will satisfy the obligee’s duty to pay money to the beneficiary or
(3) circumstances indicate the obligee intends to give the beneifts of the performance to the benefciary

Question 29

What is a beneficiary who is not intended?

Answer 29

An incidental beneficiary

Question 30

What power do intended beneficiaries have?

Answer 30

They may enforce the contract between the originating obligor and obligee

Question 31

Does an obligor’s duty to the intended beneficiary effect the obligee’s duties?

Answer 31

No, lol why would they?

So, the intended beneficiary is owed duties by them both, without being able to double dip

Question 32

When may a contractual duty be deligated to another party?

Answer 32

Generally, always
unless:
(1) contrary to public policy
(2) prohibited by contract
(3) or special skills or reputations are an essential reason for making the contract

Question 33

What rights does an obligee have toward the parties once obligor’s duties have been delegated?

Answer 33

(1) He still has the same rights unless
(2) Novation

Question 34

What is Novation?

Answer 34

Where Obligee agrees to release Obligor of their rights and instead creates a new contract with a different Obligor.

Question 35

What is required for a Novation to be valid?

Answer 35

(1) Prior obligation
(2) All parties must agree to the new contract
(3) The new contract must evidence the parties intent to extinguish the old contract
and;
(4) All criteria for contract formation must be satisfied

Question 36

When may an obligee assign their rights?

Answer 36

Generally always, unless
(1) Materially changed obligor’s duties
(2) Materially increases obligor’s burden or risk
(3) materially impairs obligors chance of return promise
(4) materially effects obligor’s expected value
(5) is validly precluded by the contract

Question 37

What are two other ways assignment may not be valid?

Answer 37

(1) If it is the assignment of a future right or for a future contract
(2) or if any defenses which the original Obligee could have asserted against them are asserted and found

Question 38

Do assignments require consideration?

Answer 38

(1) No, but gratuitous assignments are revocable

Question 39

The first person to give consideration in exchange for an assignment has the highest priorty, true or false?

Answer 39

False, a person who gives consideration has mid priority
A person who gives consideration, had no notice of prior assignments, AND is the first to receive payment/judgement will have highest priority

Question 40

When does an obligee have duties toward an assignee?

Answer 40

(1) Only once he has notice
(2) As stated in ‘continental purchasing co.’

Question 41

What do courts generally think about anti-assignment clauses?

Answer 41

(1) They heavily disfavor them by the following rules:
(2) Anti-assignment clauses only prohibit delegations unless circumstances indicate otherwise
(3) They see them as beneficial for obligor, so obligor can waive
(4) They are promises, not conditions, so assignments with these clauses are breaches, not invalid
(i) So, the contract must specifically state that assignment voids the contract for it to work otherwise

Question 42

What case for Specific performance?

Answer 42

Nipsco

Question 43

Hadley Facts

Question 44

Hadley Rule