Contracts - Legal Remedies

Question 1

Expectation Damages

Answer 1

Purpose of contract damages = put nonbreaching party in economic position it would’ve been in had the promise been performed (usually expectation damages)

Expectation Damages: benefit of the bargain + incidental damages + consequential damages - any expenses saved due to breach
* Failure to deliver goods: contract price - market price
* Cover damages: cover price - contract price
* Seller’s anticipatory repudiation: damages based on time buyer learned of breach

Sale of Land Contract:
* Seller: contract price - fair market value of land
* Buyer: FMV of land - contract price (modern benefit of the bargain rule)
* Buyer: out-of-pocket costs (down payment, title search, escrow cost) under common law

Question 2

Consequential Damages

Answer 2

Special damages (beyond expectation damages) that nonbreaching party can recover if (a) reasonable person could’ve foreseen damages as a probable result of the breach AND (b) breaching party knew or had reason to know of special circumstances that led to damages.
* Usually lost profits
* Cannot be speculative
* Sale of goods: Only BUYER can recover consequential damages

Question 3

Incidental Damages

Answer 3

Expenses that buyer reasonably incurred because of the breach in inspection, receipt, transportation, care, custody of goods rejected, and other expenses reasonably incident to seller’s breach.

Ex. Warehouse storage costs, substitute goods, delivery costs

Question 4

Liquidated Damages

Answer 4

Damages specified in contract that’s valid if:
* (a) actual damages are difficult to calculate and
* (b) amount in liquidiation clause is a reasonable approximation

If clause is invalid, it is a “penalty” and thus struck down