Exclusions & Limitations <----∆

Question 1

“In a CONTRACTUAL obligation they……….”

Answer 1

“alter the remedies that would normally be available to the non-breaching party.”

-These limitations if enforceable, will preclude a non-breaching party form recovering what the law would have otherwise allowed for the breach.

Question 2

Exclusions and limitations are allowed because…..

Answer 2

they further the policy of freedom to contract

Question 3

What is the result of limitations and exclusions—what do they do?

Answer 3

They barr certain types of recovery (for instance, lost profits, consequentials, etc) or use words of limitation to restrict the AMOUNT that certain types of recovery will be.

Question 4

RULE for Limitation

** remember to use for all of them

Answer 4

Generally a Limitation of Remedy is enforceable if reasonable in light of anticipated loss. Will usually be good UNLESS it has:
1) failed its essential purpose
or
2) it is unconscionable (can’t be unreas. large–so high looks like a penalty or so low is unconscionable)

Question 5

Types of Exclusions and Limitations

Answer 5

1) Disclaimers
2) Limits w/in K itself
3) Liquidated Damages

Question 6

What are Liquidated Damages?

Answer 6

LD are agreed damages that the parties have assented to prior to breach

• fixed in K in event of B
• used when D are difficult to ascertain
• keep parties out of court
• shifts burden of calculating D on parties instead of court (*Q)

Question 7

RULE for Liquidated Damages

Answer 7

If damages are difficult or impossible to ascertain, a liquidated damages clause is enforceable if:
√ the agreed amount to be paid bears a reasonable relationship to the anticipated loss.

Question 8

6 Default LIMITATIONS by Law

Answer 8

1) Avoidability (or Mitigation-torts)
2) Offset Benefits
3) Collateral Source
4) Scope of Liability (***ONLY for TORTS)
5) Foreseeability
6) Certainty

Question 9

Avoidability (rule)

Answer 9

π must make a reasonable effort to minimize injury from a tort or breach of contract

Question 10

Offset (tort)

aka Credit for Benefit

Answer 10

“If goal is to restore π to rightful position then offsetting benefits must be taken into account…..”
Rule:
When the ∆’s tortious act results in an injury to the π or π/s property, BUT such act also directly benefits π, the value of the benefit will be credited to offset damaged ∆ must pay.
¿remarriage–offset?
(but…remember collateral source rule)

Question 11

Offset (contract)

aka Credit for Benefit

Answer 11

If the ∆’s breach enables the π to enter a more advantageous contract, that factor must be taken into account in computing damages for the breach.

Question 12

Collateral Source

Answer 12

∆’s liability CANNOT be reduced because the π received payments from collateral sources. Collateral sources do not purport to act on the ∆’s behalf (that would be messed up)

Question 13

Common Collateral Sources

Answer 13

• Insurance
• Grants & Scholarships
• Unemployment Compensation
• Disability Payments

Question 14

Why do we allow limitations (this change from default?)

Answer 14

to prevent a π windfall, promote fairness and discourage the possibility of false claims. We want an honest system.

Question 15

What is Difference between Limits and Liquidated Damages?

Answer 15

Limits= ??

Question 16

Scope of Liability/Remoteness

*TORT only

Answer 16

indirect economic damages are not recoverable and traditionally, courts will only compensate for physical harm.

Pruitt v. Allied Chemical (Fisherman, restaurants-Ketone in water killing wildlife) Ct followed traditional rule for restaurants but modern rule for boats/fisherman. [direct harm–>less direct–>remotely less direct]
(<–however in practice, there is environmental case law that allows for more indirect harm in an effort to be more equitable. Courts may use traditional and modern rule)

Question 17

Avoidability/Mitigation RULE (quote)

Answer 17

The rule is ≠ the best choice; it = THE MOST REAS CHOICE
“the contract breaker cannot proceed with a ‘hypercritical examination’ of the injured party’s conduct or try and show that the injured party might have taken better steps. ONE IS NOT OBLIGATED TO EXALT THE INTEREST OF THE DEFAULTER TO HIS OWN PROBABLE DETRIMENT.”
(S.J. Groves & Sons v. Warner Co.)

Question 18

Avoidablity in K is to——

different lang

Answer 18

Recover Losses.
vs.
In Tort= Mitigation of Damages and “DUTY to mitigate”

Question 19

The However (counter) for your collateral source argument
(*jurisdictions eroding collateral source rule)

Answer 19

“However, sometimes π gets a windfall so unworkable that it takes π outside her rightful position. So courts have been doing away with this rule.” (Insurance industry trying to revise tort law)

Question 20

Using offsetting benefits rule in light of collateral source rule

Answer 20

c/l rule (Oden)= personal injury can’t be offset/reduced by the amount of any compensation from collateral sources.
(*here, retirement money doesn’t replace future lost earnings.)

Question 21

How to figure out if a collateral source or offset?

Answer 21

Look at the SOURCE of $:
-did Tort do it/create it?
or
-was it pre-existing already?

Question 22

Foreseeability

TORTS

Answer 22

Where there is injury, damages are foreseeable if such harm was or should have been reasonably anticipated. Foreseeabliity is assessed at the time when tortfeasor sets in motion the actions that resulted in injury.

Question 23

Foreseeability

In Contracts

Answer 23

Where there is breach, foreseeable losses which the non-breaching party ought to receive should be losses that are either:

1) naturally arising from the contract breach (or)
2) such that follows from the breach as a result of SPECIAL CIRCUMSTANCES beyond the ordinary course of events (rest 351)

Question 24

Naturally Arising

K-forseeablility

Answer 24

=losses that follow from the breach in the natural course of events

Question 25

Special Circumstances

k-forseeability

Answer 25

majority rule: π need only show that a reasonable person in the breaching party’s position would have known about the special circumstances.
minority rule: (tacit agreement test) π must show notice was given of the special circumstances AND that the breaching party impliedly or expressly assented to the bearing the risk of these damages.
(*Hadley v. Baxendale)
(also, Swiss Bank case-wire transfer/charter prices)

Question 26

Tort battle of policies

Answer 26

Deterrence vs. Compensation
SO PAY ATTN TO JURISDICTION YOU IN
(ex. KS or CA)

Question 27

Certainty Rule

Answer 27

Rule: generally damages will not be awarded if they cannot be proven to a reasonable certainty.

Question 28

Two Requirements of Certainty

Answer 28

1) certainty as to the EXISTENCE of damages (that there are damages) AND
2) certainty as to the AMOUNT of damages (can be calculated)
*** “plus, we want rules promulgated by a majoritarian democracy to be reflected in damages. This requires that they match up with the substantive goals of damages to put the π back in the rightful position and to pursue justice.”
<–argue–its reasonable & justice must be pursued!

Question 29

New Business Rule (of Certainty)

Answer 29

Some courts do not allow new businesses to recover lost profits as consequential damages for contract breach because the amount of loss is too speculative.
(***pay attention to new technology w/old business entity)

Question 30

treble damages?

Answer 30

= triple damages
Brunswick Corp/antitrust case(∆owned all bowling cars/default loan) (also, movie theater loop case-was evidence of conspiracy but D still uncertain)
antitrust law– protect consumer; no monopolies; goal to foster competition