Damages Flashcards
Standard Money Damages
Expectation damages - standard measure of money damages
* Puts the parties in the economic position they would be in if the K had been performed
* Note - Look for the answer that most closely gives the non-breaching party (P) the money she would have recieved absent the breach
Reliance damages - alternative meausre used when expectation damages are too speculative
* Designed to compensate P based on the value of her performance
* A party cannot recover both reliance and expectation damages
Consequential damages - foreseeable losses indirectly resulting from a breach (e.g., lost profits); recoverable if:
1) Damages are a foreseeable result of the breach; and
2) When K was formed, D had reason to know P would suffer special, unpreventable, or unexpected damages in the event of a breach
3) UCC Ks - only buyers can recover
Incidental damages - commercially reasonable expenses incurred by the non-breaching party in UCC Ks (e.g., costs of inspecting, returning, storing, reselling goods)
Non-Monetary Remedies
In the event of a breach, certain non-monetary damages (i.e., equitable relief) may be available if money damages are unavailable or inadequate
Specific performance - usually only available for Ks involving real estate or unique goods (e.g., antiques, art)
* For service Ks, injunctions preventing breach may be available (e.g., injunction enforcing non-compete clause)
Rescission - cancellation of a K
* Purpose is to resotre parties to their positions before K was made
* Often arises where there is mistake, misrepresentation, duress, or some other defense to K enforcement or formation
Reformation - remedy whereby a K is changed so that it reflects parties’ original intent
* Can arise where there is a mistake in K formation such that the final K varies from a prior written agreement of parties
* Can also arise where K is inaccurate due to some misrepresentation
Reclamation - in UCC Ks, unpaid sellers may stop delivery or reclaim goods from an insolvent buyer
* Unpaid seller can never reclaim goods from subsequent buyers
Restitution, Liquidated Damages, & Duty to Mitigate
Restitution and liquidated damages are additional damage types that may be available
Restitution damages - arise in quasi-K situations
* Applies if there is no enforceable K, but a party has been unjustly enriched
* Awarded based on value of the benefit wrongfully conferred
* Party cannot recover both expectation damages and restitution damages
Liquidated damages - agreed-upon K provisions that stipulate specified damages upon the occurrence of a breach
Requirements - liquidated damages provisions are valid only if:
1) Damages are difficult to project at time of K formation; and
2) The provision is a reasonable estimate of actual damages
Duty to mitigate - all parties must mitigate damages (i.e., avoid incurring excessive losses)
* A party may not recover for avoidable damages
* D bears the burden of showing P’s failure to mitigate
Damages for UCC Contracts
Breach by seller & buyer keeps goods:
* Damages = fair market value (FMV) of perfectly-delivered goods minus FMV of the goods actually delivered
* Note - if seller breaches by delivering non-conforming but superior goods, buyer is not responsible for value of superior goods
Breach by seller &seller keeps or buyer returns goods:
* Damages = whichever of the following is higher:
1) FMV of goods at the time of breach minus K price, or
2) Buyer’s costs of covering/replacing goods minus K price
Breach by buyer & buyer has goods:
* Damages = K price
Breach by buyer & seller has goods:
* Damages = either;
1) K price minus market price at the time of delivery, or
2) K price minus resale price plus provable lost profits
Lost profits - a seller can recover the lost profits from a buyer’s breach, even though she resold the item that was the subject of buyer’s breach, if she can prove that she would have made a sale to the second buyer regardless of the first buyer’s breach
Note - Incidental and consequential damages may be available
