Contracts Remedies Flashcards
Goal of Contract Remedies
The goal of contract remedies is to put the nonbreaching party in the position they would have been in had there been no breach
Compensatory Damages - Types
The purpose of contract damages is to give compensation for the breach - i.e., to put the nonbreaching party in the position they would have been in had the promised been performed so far as money can do this. The most common measure of this is the value of the breaching party’s performance that was lost (expectation damages), plus incidental and consequential damages, less any loss or cost saved by not having to perform
Expectation Damages
Damages based on what the nonbreaching party expected to get out of the contract
Incidental Damages
Costs reasonably incurred as a natural consequence of any breach
ex: inspection costs, transportation costs, storage costs, etc.
Consequential Damages
Losses resulting from particular circumstances - damages that were reasonably foreseeable at the time the contract was made
*to recover the plaintiff must show that the breaching party knew or had reason to know of the special circumstances that gave rise to the damages - and they had to know about it at a time that would impact the contract price
Reliance Damages
Losses suffered in reasonable reliance on the contract - if P didn’t rely on the contract, he would not have incurred damages (when expectation damages are too speculative)
ex: opening a new business - someone breaches a contract and prevents the business from opening
essentially talking the plaintiff back in time to before the contract was formed, restoring the plaintiff to his pre-contract position
Liquidated Damages
Clause on contract to set out in advance what the damages would be
Only allowed if 2 conditions are met:
(1) Damages for contractual breach must have been difficult to estimate or ascertain at the time the contract was formed; AND
(2) The amount agreed on must have been a reasonable forecast of compensatory damages in the case of breach
Can’t be a penalty - will be obvious
UCC - Buyer’s Damages - Seller Does not Deliver or Buyer Rejects or Revokes Acceptance
The buyer’s basic damages where the seller does not deliver or the buyer properly rejects or revokes his acceptance of tendered goods consist of the difference between the contract price and either the market price or the cost of buying replacement goods (cover), plus incidental and consequential damages, if any, less expenses saved as a result of the seller’s breach.
Buyer’s Damages - Difference btwn Contract Price and Market Price
If the buyer measures damages by the difference between contract price and market price, market price usually is determined as of the time the buyer learns of the breach and at the place of tender
Buyer’s Damages - Difference between Contract Price and Const of Replacement Goods (cover)
Cover is the usual measure of damages for a buyer. Typically, if a buyer is not sent the goods contracted for, he will go out into the marketplace to buy replacement goods. If the buyer chooses the cover measure (i.e., difference between contract price and cost of buying replacement goods), the buyer must make a reasonable contract for substitute goods in good faith and without unreasonable delay
Buyer’s Damages - Seller Delivers Nonconforming Goods that Buyer Accepts
Warranty Damages
- if the buyer accepts goods that breach one of the seller’s warranties, the buyer may recover as damages “loss resulting in the normal course of events from the breach.” The basic measure of damages in such a case is the difference between the value of the goods as delivered and the value they would have had if they had been according to contract, plus incidentals and consequentials.
Notice Requirement
- to recover damages for any defect as to accepted goods, the buyer must, within a reasonable time after he discovers or should have discovered the defect, notify the seller of the defect. If he does not notify the seller within a reasonable time, he loses his right to sue.
UCC - Seller’s Damages - Buyer Refuses to Accept goods
The seller’s basic damages when the buyer refuses to accept goods or repudiates are either the difference between the contract price and the market price or the difference between the contract price and the resale price of the particular goods, plus incidental (but not consequential) damages, if any, less expenses saved as a result of the breach. If damages based on the difference between the contract price and market or resale price do not put the seller in as good a position as performance would have, then the seller may recover lost profits plus incidental damages.
Seller’s Damages - Difference between contract price and market price
the market price is measure as of the time and at the place for delivery
Seller’s Damages - Difference Between Contract price and Resale price
This is the usual measure of a seller’s damages. If the seller chooses to resell, he must do so under the provisions of section 2-706, which requires a good faith, commercially reasonable sale that may be either private or public (auction). In the case of a private sale, the breaching buyer must be given reasonable notice of intention to resell. In the case of an auction sale, the sale must be at a usual market for such goods if such a market is reasonably available. Notice of the sale must be given to the breaching buyer unless the goods are perishable or threaten to decline rapidly in value. Only existing and identified goods may be sold, unless there is a market in futures for the particular goods. The seller may buy the goods at an auction sale.
Seller’s Damages - Damages based on Lost Profits
The previous two measures of damages might not give adequate compensation for the buyer’s breach in situations where the seller can obtain or manufacture as many goods as he can sell. In such a case, the seller is know as a lost volume seller, because although he is able to resell the goods for the same or similar price as in the initial contract, he loses volume of business: But for the buyer’s breach, the seller would have made two sales instead of one. Generally, lost profit is measured by the contract price with the breaching buyer minus cost to the seller.
