Limitations of Damages Flashcards
What is the rule of avoidability?
After plaintiff has received notice of a breach, it is their duty to do nothing to increase the damages flowing therefrom.
After an absolute repudiation or refusal to perform by one party, the other party cannot continue to perform and recover damages based on full performance.
Restatement 350: Avoidability as a limitation on Damages:
(1) Damages are not recoverable for loss that the injured party could have avoided without undue burden, risk, or humiliation.
(2) The injured party is not precluded from recovery by the rule stated in (1) to the extent that he has made reasonable, but unsuccessful efforts to avoid loss.
What are the two types of damage awards?
1) Cost of performance
2) Substantial Performance with Diminished Value
UCC 2-713: Buyers Damages for Non-Delivery or Repudiation
The measure of damages for non-delivery or repudiation is the difference between market price at the time when the buyer learned of the breach and the contract price together with incidental and consequential damages but less expenses saved in consequence of the seller’s breach.
What is the general rule about wrongful termination of employment contracts and the exception to the rule? (Parker v. Twentieth Century Fox)
General Rule: The measure of recovery by a wrongfully discharged employee is the amount of salary agreed upon for the period of service, less the amount which the employer affirmatively proves the employee has earned or with reasonable effort might have earned from other employment.
Exception: The employer must show that the other employee has been deprived or the employee’s rejection of or failure to seek other available employment of a different or inferior kind may not resorted to in order to mitigate damages.
What does market damages measure?
What does lost profits measure?
Market Damages: Measured the expectancy ex ante, and thus reflect the value of the option.
Lost Profits: measure losses ex post, and thus only reflect the value of the completed exchange.
When do courts use the Cost of Performance remedy?
When the breach was done willfully or intentionally.
When do courts use the Substantial performance remedy?
The courts will order substantial performance with diminished value when the breach was done negligently.
What is the general rule as to the remedy given and what are the exceptions and when will they be used?
The general rule is that Cost of Performance will always be required because it protects the parties expectation interests.
But there are two exceptions:
1) Substantial performance: essence of the contract has been performed.
2) Peevyhouse exception: Even if the contract was breach intentionally, the increase in value rule will apply because:
a) disproportionate value
b) Breach is not material to the contract.
What happens when the essence of the contract has been performed and the contract is negligently breached?
Court will order substantial performance and the award will be diminished based on what the value of the property would be if it was fully completed.
What happens if the essence of the contract is not performed?
Then the full cost of performance will be ordered.
What happens if the contract is willfully or intentionally breached?
The court will order full cost of performance.
Substantial Performance is used under the _____ law.
Perfect Tender Rule is used for the _____.
Substantial performance is used for the common law or restatement and covers real estate, services, etc.
Perfect Tender is used under the UCC and covers goods. Under this rule, goods must be exactly as ordered. See UCC 2-601.
What are incidental damages?
Those reasonably foreseeable between contracting parties.
What are consequential damages?
Those not reasonably foreseeable between contracting parties.
