Monetary Remedy - Damages Flashcards
Damages - Basics
- recovered only to extent they can be proved w/ reasonable certainty + couldn’t be avoided w/ reasonable effort
Compensatory Damages
- usual goal of damages for breach = put the nonbreaching party in position they’d have been in had the promise been performed, so far as money can do this
Standard Measure of Damages
- expectation damages
- in most cases, pl’s standard measure of damages will be based on an “expectation” measure -> sufficient damages for them to buy a substitute performance
Reliance Damage Measure
- if pl’s expectation damages = too speculative, pl can elect to recover the damages they’ve suffered based on their reasonable reliance on the K
- award pl cost of their performance -> designed to put pl in the position they would’ve been in had K never been formed
Incidental Damages
- most commonly associated w/ Ks for sale of goods
- typically include expenses reasonably incurred by buyer in inspection, receipt, transportation, care + custody of goods rightfully rejected + other expenses reasonably incident to seller’s breach
-> by seller in storing, shopping, returning + reselling goods as result of buyer’s breach
Consequential Damages - General Concept
- special damages
- reflect losses over + above standard expectation damages
- arise b/c of nonbreaching party’s particular circs
- most often consist of lost profits
Consequential Damages - When Available
- can be recovered only if, at t K made, reasonable person would’ve foreseen the damages as a probable result of the breach
- key issue = foreseeability -> breaching party must’ve known or had reason to know of special circs giving rise to damages
- in Ks for sale of goods, only a buyer may recover consequential damages
Certainty Rule
- pl must prove that the losses suffered were certain in their nature + not speculative
Certainty Rule - New Businesses
- traditionally, if breaching party prevented nonbreaching party from setting up new business, courts wouldn’t award lost profits from prospective business as damages b/c too speculative
- modern cts may allow lost profits as damages if can be made more certain by observing similar businesses in the area or other businesses previously owned by the same party
Punitive Damages
- generally NOT awarded in K cases
Nominal Damages
- may be awarded when a breach is shown but no actual loss is proven
Liquidated Damages
- parties to K can stipulate what damages are to be paid in event of breach
- must be in an amount that is reasonable in view of the actual or anticipated harm caused by the breach
Liquidated Damages Clauses - Requirements for Enforcement
Enforceable if:
- damages for contractual breach are difficult to estimate or ascertain at t K is formed AND
- amount agreed on is a reasonable forecast of compensatory damages in case of breach
-> test for reasonableness = comparison between amount of damages prospectively probable at t of K formation and the liquidated damages figure
- if liquidated damages unreasonable, court construes as penalty + won’t enforce
Liquidated Damages - What happens if no actual damages met?
- clause is enforceable even if no actual money or pecuniary damages have been suffered, just needs to be that the requirements for enforcement are met
UCC - Buyer’s Damages Where Seller Doesn’t Deliver or Buyer Rejects/Revokes
Buyer’s basic damages in this case consist of difference between K price + either:
1) market price OR
2) cost of buying replacement goods, plus incidental and consequential damages, if any, less expenses saved as result of seller’s breach
UCC - Cover
- when buyer covers, damages = difference between K price + cost of replacement goods
-> if buyer chooses cover measure, buyer must make reasonable K for substitute goods in good faith + w/o unreasonable delay
UCC - Difference Between K Price + Market Price
- if buyer measures damages in this manner, market price usually is determined as of time buyer learns of breach + at the place of tender
UCC - Buyer Remedy if Seller Delivers Nonconforming Goods That Buyer Accepts - Warranty Damages
- if buyer accepts goods that breach one of seller’s warranties, buyer may recover as damages loss resulting in normal course of events from the breach
-> basic measure of damages in such case = difference between value of goods as delivered + value they would’ve had if they’d been according to K, plus incidental + consequential damages
UCC - Buyer Remedy if Seller Delivers Nonconforming Goods That Buyer Accepts - Notice Req
- to recover damages for any defect as to accepted goods, buyer must, w/in reasonable time after discover or should’ve discovered defect, notify seller of defect
- if buyer doesn’t notify seller w/in reasonable time, lose their right to sue
UCC Buyer Remedy - Seller Anticipatorily Breaches
- measure of damages = difference between market price at t buyer learned of breach + K price
Consequential Damages
- seller liable for consequential damages if:
1) had reason to know of buyer’s general or particular reqs AND
2) subsequent loss resulting from those needs couldn’t reasonably be prevented by cover - particular needs must be made known to seller, but general reqs usually need not be
Consequential Damages - Goods for Resale
- if buyer in business of reselling goods, seller is deemed to have knowledge of the resale
Consequential Damages - Goods Necessary for Manufacturing
- if seller knows that the goods they provide are to be used in the manufacturing process, they should know that their breach would cause a disruption in production leading to a loss of profits
Seller’s Damages - Where Buyer Repudiates or Refuses to Accept Conforming Goods
3 measures -> seller can:
i) resell goods + recover difference between K price + resale price
ii) recover difference between market price (measured as of t + at place of delivery) and the K price OR
iii) if above measures are inadequate b/c seller could’ve made additional sale, recover under a “lost profits” measure the difference between the K price + cost to seller
Lost Volume Seller
- other damages never adequate if seller = lost volume seller -> need to do lost profits measure (difference between k price + cost to seller)
-> happens if seller supply of goods = unlimited - not the case where seller can’t obtain all the goods they can sale (ex: unique item)
Seller’s Damages - Where Buyer Accepted Goods - Action for Price
- if buyer accepted goods + hasn’t paid, or hasn’t accepted the goods + seller unable to resell at any reasonable price, or if goods lost/damaged while risk on buyer, seller can maintain action against buyer for full K price
Contracts for Sale of Land
- standard measure of damages for breach of land sale Ks = difference between K price + fair market value of land
Employment Ks - Breach by Employer
- regardless of when breach occurs (before perf, after part perf, or after full perf) standard measure of damages for employee = full K price
-> damages could be reduced though if employee fails to mitigate
Employment Ks - Breach by Employee
- if employee materially breaches, employer is entitled to recover cost of replacing employee
-> wages emp must pay to replacement minus breaching employee’s wages - breaching employee may offset $ owed for work done to date
Employment at Will
- can be terminated at any time for any reason
-> means termination doesn’t result in breach - position characterized as “permanent” creates emp-at-will relationship
Construction Ks - Breach by Owner
- if breached by owner, builder entitled to profits that would’ve resulted from K plus any costs expended
-> if K breached after construction completed, damages = full K price plus interest
Construction Ks - Breach by Builder
- owner entitled to cost of completion plus reasonable comp for delay
- most cts allows builder to offset or recover for work performed to avoid unjust enrichment
- if breach only late performance, owner entitled to damages incurred b/c of late performance
Construction - Restoration and Economic Waste
- usually, when K not properly performed, owner entitled to cost of fixing defect
- unless special significance attached to use of particular item + that significance is communicated to the builder, ct won’t order remedy that results in undue econ waste
- split on result when party contracts to restore property + willfully refuses to do so b/c much more costly than any diminution in value of property
Contracts Calling for Installments Payments
- if K calls for payments in installments + payment not made, only partial breach
- aggrieved party is limited to recovering only the missed payment, not the entire K price
- BUT K may include acceleration clause making entire amount due on late payment -> aggrieved party can recover entire amount
Mitigation
- under common law, nonbreaching party can’t recover damages that could’ve been avoided w/ reasonable effort
- must refrain from piling up losses after receiving notice of the breach
- must not incur further expenditures or costs + must make reasonable efforts to cut losses
- generally, a party can recover the expenses of mitigation
Mitigation - Employment Ks
- if breaching employer can prove comparable job in same locale was available, contract damages for lost wages will be reduced by wages that pl would’ve received from that comparable job
Mitigation - Manufacturing Ks
- if person for whom goods are being manufactured breaches, manufacturer is under a duty to mitigate by not continuing work after the breach
- BUT if facts are such that completion of manufacturing project will decrease rather than increase damages, manufacturer has right to continue
Mitigation - Construction Contracts
- builder doesn’t owe duty to avoid consequences of owner’s breach by securing other work, but does have duty to mitigate by not continuing work after breach
- if completion will decrease damages though, may be allowed
Mitigation - Contracts for Sale of Goods
- Under Article 2, rule of mitigation generally doesn’t apply
-> injured buyer not required to cover
-> injured seller not required to sell - market damages always available if buyer doesn’t cover or seller doesn’t resell
- BUT seller generally can’t bring action against buyer for full K prices unless goods can’t be resold at a reasonable price or were damaged or lost when risk of loss was on buyer
