Damages Flashcards
Expectation Damages
Purpose of contract damages = put nonbreaching party in economic position it would’ve been in had the promise been performed (usually expectation damages)
* Certainty: Damages must be certain and NOT speculative (as is often the case with lost profits).
Expectation Damages: benefit of the bargain + incidental damages + consequential damages - any expenses saved due to breach
Cover: Purchase of replacement goods by buyer
Consequential Damages
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.
* Used for lost profits - may depend on whether business is existing business (long history of records to prove damages) vs. a new business (very speculative)
- Sale of goods: Only BUYER can recover consequential damages
Consequential damages are a special type of goods that go over and beyond expectation damages. They are only recoverable if a reasonable person could have foreseen that they would be a probable consequence of the breach, and the breaching party knew or had reason to know of special circumstances that led to the damage.
Under the U.C.C., a seller is liable for consequential damages if he had reason to know of the buyer’s particular requirements, and the subsequent loss resulting from those needs could not reasonably have been prevented by cover. Particular needs must be made known to the seller, but general requirements need not be.
Incidental Damages
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
Avoidable Damages
Avoidable Damages: Nonbreaching party must try and get substitute goods/performance at fair price; can’t recover damages that could’ve been avoided
Breach of Sale of Goods Contract
Buyer’s Damages
* Failure to deliver goods: contract price - market price
* Cover damages: cover price - contract price
* Warranty damages: goods warranted - goods actually received (if there were nonconforming goods)
* Consequential damages
Seller’s damages
* Contract price - resale price
* Contract price - market price
* Lost Volume Seller: lost profits
Breach of Sale of Land Contract
Sale of Land Contract:
* Seller: contract price - FMV of land
* Buyer: FMV of land - contract price
Breach of Employment Contract
Breach by employer: standard damages is full contract price - any amount already paid to employee
Breach by employee: cost to replace employee
Breach of Construction Contracts
Breach by owner
* Before construction: builder’s prospective profits
* During construction: contract price - cost of completion
* After completion: full contract price + interest
Breach by builder
* Before/during construction: cost of completion + compensation for delay
* Late completion: value of lost use
Promissory Estoppel
Some courts award only reliance damages: cost of plaintiff’s performance (amount promisee spent in reliance on promise)
* Other courts might award expectation damages (what was promised)
Restitutionary Remedy
Restitution (prevent unjust enrichment)
If there’s no enforceable contract but defendant gained benefit, P can recover value of the benefit conferred, which can be:
(1) value of benefits received by D (increase in value of D’s property, value of services/goods received), or
(2) detriment suffered by P (reasonable value of work performed/services rendered)
* Only get this is too hard to calculate value of benefits received
If P fully performed: limited to damages under contract
Restitutionary Remedy
Restitution - Quasi-Contract
Quasi-Contract; NO contractual relationship between parties but can recover if:
1. P conferred benefit to D
2. P had reasonable expectation of being paid
3. D knew P expected to get paid
4. D would be **unjustly enriched **if allowed to keep benefit without paying P
Equitable Remedy
Specific Performance
Equitable remedy where court orders breaching party to perform what it promised to perform under contract. Available when damages are inadequate remedy (unique/rare product)
* Requires enforceable contract that passes SOF or falls under SOF defense (estoppel)
Examples
* Land Sales: land is unique so damages always inadequate (but NOT if sold to BFP)
* UCC sale of goods: only if buyer made reasonably efforts to buy subsitute goods OR goods are unique
NO specific performance (generally)
* Employment contracts (by either employee or employer)
* Any personal service contracts (courts view as involuntary servitude, which is unconstitutional)
Equitable Remedy
Injunction
Party seeking preliminary injunction (interlocutory order) must show
1. It’ll suffer irreparable harm if injunction not granted
2. It’s likely to prevail on the merits
3. Harm to P outweighs harm D will suffer
4. Not against the public interest
(Must give notice to D)
Injunction: order to prevent D from acting
Specific Performance: order to force D to perform contract
Restitutionary Remedy
Replevin
Buyer can recover goods IF (a) goods are identified in contract and (b) buyer couldn’t get substitute goods even with reasonable effort
Rescission
Original contract voidable and rescinded (as if no K ever made) + seek restitution
* Grounds for rescission must have existed before or at time of contract formation
Grounds:
* Mutual mistake of material fact
* Unilateral mistake where other party knew or should’ve known (or where hardship to mistaken party is extreme)
* Fraudulent or innocent misrepresentation of a material fact and other party justifiably relied on it (if misrepresentation occurred at/before entering into contract)
* Duress, undue influence, illegality, lack of capacity, failure of consideration, equitable defenses
Fraudulent Misrepresentation - either rescission or damages
* (i) misrepresentation of material fact
* (ii) made with knowledge of falsity and intent to deceive
* (iii) upon which plaintiff justifiably relied
Innocent Misrepresentation - only rescission allowed
* Defendant honestly and in good faith asserts material fact that is not true
* Plaintiff actually relies on it
