Effects of Contracts - Damages; Compensatory Damages

Question 1

Compensatory Damages - In General

Answer 1

In contrast to damages for delay (moratory damages), damages for nonperformance or defective performance are called “compensatory” damages.
-Compensatory damages are split between Pecuniary and Non-Pecuniary

Question 2

Pecuniary Damages - definition

Answer 2

(i) Definition—“Pecuniary” damages are those intended to compensate pecuniary loss, or loss that is measurable in money. Pecuniary damages are contrasted from nonpecuniary damages, which are damages intended to compensate nonpecuniary loss (e.g., emotional distress, annoyance)

Question 3

Measure of Damages

Answer 3

“Damages are measured by the loss sustained by the obligee and the profit of which he has been deprived.”
a.
Elements
i. damnum emergens (loss sustained)—This is the loss actually suffered by the obligee, as in the case of out of pocket expenses incurred as a result of the contract.
ii. lucrum cessans (deprivation of profit)—Lost profits can be difficult to calculate. The jurisprudence provides us with some guidance.

Question 4

Effect of Bad Faith

Answer 4

An obligor in “bad faith” is liable not only for foreseeable damages but all damages resulting from the breach.

							i. Obligor in Good Faith—La. Civ. Code art. 1996 provides: “An obligor in good faith is liable only for the damages that were foreseeable at the time the contract was made.”  When are damages foreseeable?  See CC 1996, cmt. (b).
							ii. Obligor in Bad Faith—La. Civ. Code art. 1997 provides, “An obligor in bad faith is liable for all the damages, foreseeable or not, that are a direct consequence of his failure to perform.”  When is an obligor in “bad faith”? See CC 1997, cmts. (b) & (c).
							- Example from the Bar Exam: a seller is selling farmland that produces crops, but unknown to the buyer, he wants to convert it to a horse farm, and incurs expenses buying fancy arabian horses. The buyer, having gotten a better deal elsewhere, intentionally breaches the contract with the seller. The buyer, because he is in bad faith, is still liable for the expenses incurred by the seller, regardless of whether or not they were forseeable.