Damages

Question 1

What is the formula for expectation damages?

Answer 1

(plaintiff’s loss in value) + (Other losses) - (plaintiff’s costs avoided) - (loss avoided)

Question 2

What is often the problem with expectation damages?

Answer 2

They are too speculative and it’s hard to establish them with reasonable certainty

The losses suffered had to have been foreseeable, and courts don’t want injured parties to collect more from a breach than they would have gained had the contract been fully performed

Question 3

What happened with the expectation damages in Freund v. Washington Press

Answer 3

In Freund, plaintiff expected royalties from manuscript publishing, court was uncertain what amount that would have been, too speculative

Question 4

How do expectation damages work in the context of unfished or defective construction - Peevyhouse

Answer 4

A court will not impose expectation damages if the cost to fix the problem would end up being significantly more than the improvement to the value of the property

Question 5

What are a seller’s damages after he has delivered goods and the buyer accepted but refused to pay for them?

Answer 5

The original contract price for the goods 2-709

Question 6

What are a seller’s damages for reselling goods after a buyer’s breach?

Answer 6

Original contract price minus the resale price 2-706

Question 7

What are a seller’s damages for a hypothetical resale of the goods where he doesn’t or can’t do so after a buyer’s breach?

Answer 7

Original contract price minus the market price of the good 2-708(1)

Question 8

What are a lost volume seller’s damages for reselling goods after the buyer’s breach?

Answer 8

Original contract price minus the seller’s direct costs 2-708(2)

Question 9

What is a lost volume seller?

Answer 9

1. A seller who had the capacity to make an additional sale at the time of the breach
2. A seller who intended to make additional sales

Question 10

What must a seller show regarding a resale to prove that they were lost volume?

Answer 10

They must show that the additional sale they made was logically independent from the buyer’s breach

E.G., if there is only one item of a certain kind left at a dealership, then the sale of that good to someone else is logically dependent on the breach

Question 11

What other damages to sellers get?

Answer 11

Incidental damages relating to the costs of reselling the goods, but not consequential

Question 12

What are a buyer’s damages for covering after a seller’s breach?

Answer 12

Original contract price minus the cover price 2-712

Question 13

What are the general rules of cover?

Answer 13

A buyer must cover reasonably and in good faith without unreasonable delay

Question 14

What are a buyer’s damages if he refuses to cover or simply can’t after a seller’s breach?

Answer 14

Market price at the time the buyer learned of the breach minus the original contract price 2-713

Question 15

What affect does refusing to cover have on a buyer’s damages?

Answer 15

If a buyer chooses not to cover, they do not get consequential damages

Question 16

What will a court do regarding a buyer’s hypothetical cover under 2-713 if the market price ends up being the same as the original contract price - American Mechanical v. Union Mach

Answer 16

The court will default to a different measure of damages since a market price that’s the same as the original contract price would leave a buyer with 0 damages

They may also choose to impose a different market value

Question 17

When we use the term market value, which market are we talking about - Simeone v. First Bank

Answer 17

Market should be the same as the one revolving around the original contract. In Simeone, the proper market was the one for collectible cars, not the market for a bank reselling collectible cars

Question 18

What are a buyer’s damages for receiving goods which breached a warranty?

Answer 18

Price of the goods if they had been as warranted minus the price they were at the time and place of acceptance

Question 19

What other kinds of damages do buyers get?

Answer 19

Incidental damages related to effectuating cover and consequential damages

Question 20

What is the rule for consequential damages - Hadley v. Baxendale

Answer 20

They must have been foreseeable at the time the contract was made. Foreseeable damages are divided into those that follow from the ordinary course of events and those that result from special circumstances that the breaching party had reason to know of

Consequential damages are those that follow on as a consequence of the breach - New Valley v. US

Question 21

How does causation factor into a determination of damages resulting from breach of contract?

Answer 21

Damages are only recoverable that would not have happened “but for” the breach - RS 347

Contract damages must arise naturally from the breach or be a kind that may have been reasonably anticipated by the parties when they entered the contract. Evidence for causation must be shown to prove whether losses were the result of a breach or were related to other independent factors – Redgrave v. Boston Symphony

Question 22

Do all parties have a responsibility to mitigate? If not, who is excluded?

Answer 22

Most parties have a duty to prevent any further loss resulting from a breach of contract - RS 351

Lost volume sellers have no duty to mitigate - In re World Com

Question 23

What is the general rule regarding mitigation and cover?

Answer 23

1. Damagers are not recoverable for loss that the injured party could have avoided without undue risk, burden or humiliation
2. A party may still recover if they made reasonable, but unsuccessful efforts to mitigate their losses

Question 24

What are reliance damages?

Answer 24

Expenditures made in preparation for performance or in performance minus any loss that the party in breach can prove with reasonable certainty that the non-breaching party would have suffered had the contract been performed.

Question 25

How does mitigation relate to reliance damages - Hightower v. Wartzman

Answer 25

A non-breaching party seeking reliance damages is not required to expend extensive sums or incur substantial obligations to mitigate

Question 26

How do you measure restitution damages?

Answer 26

1. The reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimant’s position
2. The extent to which the other party’s property has been increased in value or his other interests advanced

Question 27

When is restitution available as a remedy - RS 373

Answer 27

1. When a party totally breaches a contract. If the breach is insubstantial, or the non-breaching party accepts continuing performance or performance in substitution, then restitution is no longer available.
2. When a party repudiates a contract - Mobil Oil v. US

Question 28

Is there a cap on restitution damages for a non-breaching party?

Answer 28

No

Question 29

Is there a cap on restitution damages for a breaching party?

Answer 29

Yes, damages are capped at the price of the contract minus the marginal cost of completion or benefit conferred - Palmer Construction v. Cal State Electric

Question 30

When is specific performance appropriate under the common law?

Answer 30

When monetary damages are inadequate to fix the problem - primarily for the sale of real estate

Question 31

When is specific performance appropriate under the UCC

Answer 31

1. Unique goods

2. Requirements contracts for sole sources of supply - Almetals v. Wickeder

Question 32

What are liquidated damages?

Answer 32

Liquidated damages are basically fixed amounts that the parties agree to pay in the event of a breach. Saves time and makes it easy when a party breaches the contract.

Question 33

When is a liquidated damages provision enforceable under common law?

Answer 33

The clause must be an amount that is reasonable in light of the anticipated or actual loss caused by the breach of contract and there must be difficulties in proving loss

Question 34

When is a liquidated damages provision enforceable under the UCC?

Answer 34

Exactly the same as common law except that other remedies must be non-feasible or inconvenient - 2-718

Question 35

Can parties fix a non-monetary liquidated damages provision for repair and replacement under the UCC?

Answer 35

Yes, however such a provision must be made exclusive. For example, a remedy for repair or replacement must make such a remedy exclusive - 2-719

Question 36

When can parties challenge a non-monetary liquidated damages provision?

Answer 36

If the remedy fails its essential purpose. Like a provision for repair or replacement but the party who made the provision never can actually fix the thing