General Damages for Breach of Contract→ Expectancy Measure Flashcards

1
Q

Expectancy Measure

Purpose

A

Purpose is to put the non-breaching party in the position they would have been in had the contract been performed.

  • This is the preferred method because it generally yields the most money for the non-breaching party. (What was promised-What was received).
  • Rule: _If you breach the contract, you cannot use the Expectancy Measure to recover damages. _
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2
Q

Expectancy Measure

Formula

A

Formula –> LOV + OL – CA – LA

  • Loss of Value (VE – VR) + Consequential damages – Cost avoided – Loss avoided

Common Law Formula FOR SERVICES. Goods controlled by UCC

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3
Q

Expectancy Measure

LOV

A

Loss of Value: Value Expected – Value Received

Value Expected

  • Evaluation of returned performance
  • Includes expected profit and costs
  • Find in contract

Value Received

  • Amount of value actually received at the time of breach
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4
Q

Expectancy Measure:

Other Losses

A

Other Losses:

  • Loss caused by breach, beyond the loss of performance value
  • Losses in addition to the costs from the contract that occur as a result of the breach;
  • Loss caused by the breach beyond the loss of performance value

NOTES:

  • Only recover for damages that the breaching party had reason to foresee as a probable cause of the breaching of the contract.
  • This does not include pre-contract expenses…any expenses made in anticipation of a contract are not compensable

Use Value: Determined by the rental value

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5
Q

Expectancy Measure:

Other Losses

Requirements

A
  1. Foreseeability: Damages from other losses are not recoverable for loss the party did not have reason to foresee as a probable result of the breach.
    • Causation: Must be caused by the breach.
    • But for the ∆’s failure?​
    • Presumed – naturally follow a breach of that kind of k
      Notice - special damages
  2. Certainty: Damages are not recoverable for loss beyond an amount that the evidence permits to be established with reasonable certainty
  3. Avoidability: Once contract is breached, non-breaching party has duty to not make damages worse
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6
Q

Expectancy Measure

2 Categories of Foreseeable Damages

A
  1. General Damages: those that “arise naturally” from the breach
  2. Special Damages: Damages that are beyond the ordinary course of events
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7
Q

Expectancy Measure

2 Kinds of Other Losses

A
  1. Consequential: any loss caused by breach
  2. Incidental: expenses incurred because of breach
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8
Q

Expectancy Measure:

Forseeability

Does it matter whether the breach was foreseeable?

A

No. The Expectancy Measure deals with the foreseeability of the harm; not foreseeability of the cause of breach

  • So as long as the harm was foreseeable, it doesn’t matter how it happened
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9
Q

Expectancy Measure

Forseeability

General Damages

A
  • General Damages: Naturally arising damages that are likely to flow from the ordinary course of the breach. These must be reasonably foreseeable at the time of the breach.
  • Reasonable test: must have been reasonably foreseeable
  • Use Value: Capital goods/machinery have value alone, which may be equal to the rental valueà deprivation of a machine’s use due to delay of delivery is foreseeable
  • Hadley: Lost profits from delay in shipping part to factory do not arise naturally…Within the contemplation of the parties. Knowledge of the circumstances.
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10
Q

Expectancy Measure: Other Losses

Forseeability: General Damages

Tacit Agreement:

A

Tacit Agreement: [Minority Rule –> Only in Arkansas]:

The plaintiff must prove more than mere knowledge that a breach of contract will result in damages. They must also show that the defendant at least tacitly agreed to assume responsibility.

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11
Q

Expectancy Measure

Forseeability

Special Damages

A

Special Damages: Damages that are beyond the ordinary course of events.

  • Rule: Party in breach must have had actual notice of the possibility of damage, such that they would be in the contemplation of a reasonable person.
  • Most times, lost profits are going to go in this category
  • But sometimes lost profits will arise naturally from the breach –> if we have a contract where I promise to give you rights to sell t-shirts and I breach, you have lost the profits you would get from selling the shirts…that arises naturally
  • Have to look at the nature of the contract
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12
Q

Expectancy Measure

Costs Avoided

A

Costs Avoided: Costs that non-breaching party avoided because of the breach

Rule: When a contract is breached, then the non-breaching party has a duty to not make damages worse by continuing performance.

If non-breaching party was going to have $100K worth of expenses, and he had only spent $30K when breach occurred, CA= $70K

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13
Q

Expectancy Measure

Other Losses

Certainty

A

Rule: Damages are not recoverable for loss beyond an amount that the evidence permits to be established with reasonable certainty

  • Lost profits that are purely speculative are not awardable
  • Doesn’t need to be exact
    • in case of boxing match, with no prior history, anticipated profit would be entirely speculative
    • If anticipated profit is based on figures from similar situations, that can be certain enough for the court to award

NOTE: often times when profits are uncertain so as to not allow use of expectancy damages, injured party will use reliance measure

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14
Q

Expectancy Measure

Other Losses

Avoidability

A

Avoidability

  • Rule: Once contract is breached, non-breaching party has duty to not make damages worse
  • Duty exists as long as loss could have been avoided without undue:
    • Risk
    • Burden
    • Humiliation
  • Injured party is not precluded from damages in the event he has made reasonable but unsuccessful efforts to avoid loss
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15
Q

Expectancy Measure

Other Losses

Avoidability

Exployment Contracts

A

Employment Contracts

Formula for calculating damages in employment contract: Contract compensation - Actual Earnings – What Employee might have earned from reasonable effort to get another job

  • Exception: Rejection/failure to seek employment of different or inferior kind may not be used to mitigate damages. Employment must be comparable or substantially similar
  • Defendant has burden to prove availability of substantially similar employment
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16
Q

Expectancy Measure

Losses Avoided

A

Losses Avoided: Value retained by the plaintiff as a result of not having to complete performance.

  • Any loss the plaintiff incurred because of the breach that can be redeemed
  • EX: leftover cabinets can be resold for $X, thus reducing the damages from the breach
17
Q

Expectancy Measure

Remedies at Law

A

Remedies at Law (money damages):

  • Ordinarily in contracts cases the remedy will not be equitable.
  • The remedy will consist of money damages.
  • There are three main measures of money damages in contracts cases: Expectancy damages, reliance damages and restitution.