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July Exam - Contracts > Monetary Remedy - Damages > Flashcards

Monetary Remedy - Damages Flashcards

1
Q

Damages - Basics

A
  • recovered only to extent they can be proved w/ reasonable certainty + couldn’t be avoided w/ reasonable effort
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2
Q

Compensatory Damages

A
  • 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
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3
Q

Standard Measure of Damages

A
  • 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
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4
Q

Reliance Damage Measure

A
  • 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
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5
Q

Incidental Damages

A
  • 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
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6
Q

Consequential Damages - General Concept

A
  • special damages
  • reflect losses over + above standard expectation damages
  • arise b/c of nonbreaching party’s particular circs
  • most often consist of lost profits
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7
Q

Consequential Damages - When Available

A
  • 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
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8
Q

Certainty Rule

A
  • pl must prove that the losses suffered were certain in their nature + not speculative
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9
Q

Certainty Rule - New Businesses

A
  • 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
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10
Q

Punitive Damages

A
  • generally NOT awarded in K cases
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11
Q

Nominal Damages

A
  • may be awarded when a breach is shown but no actual loss is proven
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12
Q

Liquidated Damages

A
  • 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
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13
Q

Liquidated Damages Clauses - Requirements for Enforcement

A

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
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14
Q

Liquidated Damages - What happens if no actual damages met?

A
  • 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
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15
Q

UCC - Buyer’s Damages Where Seller Doesn’t Deliver or Buyer Rejects/Revokes

A

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

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16
Q

UCC - Cover

A
  • 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
17
Q

UCC - Difference Between K Price + Market Price

A
  • if buyer measures damages in this manner, market price usually is determined as of time buyer learns of breach + at the place of tender
18
Q

UCC - Buyer Remedy if Seller Delivers Nonconforming Goods That Buyer Accepts - Warranty Damages

A
  • 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
19
Q

UCC - Buyer Remedy if Seller Delivers Nonconforming Goods That Buyer Accepts - Notice Req

A
  • 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
20
Q

UCC Buyer Remedy - Seller Anticipatorily Breaches

A
  • measure of damages = difference between market price at t buyer learned of breach + K price
21
Q

Consequential Damages

A
  • 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
22
Q

Consequential Damages - Goods for Resale

A
  • if buyer in business of reselling goods, seller is deemed to have knowledge of the resale
23
Q

Consequential Damages - Goods Necessary for Manufacturing

A
  • 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
24
Q

Seller’s Damages - Where Buyer Repudiates or Refuses to Accept Conforming Goods

A

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

25
Q

Lost Volume Seller

A
  • 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)
26
Q

Seller’s Damages - Where Buyer Accepted Goods - Action for Price

A
  • 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
27
Q

Contracts for Sale of Land

A
  • standard measure of damages for breach of land sale Ks = difference between K price + fair market value of land
28
Q

Employment Ks - Breach by Employer

A
  • 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
29
Q

Employment Ks - Breach by Employee

A
  • 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
30
Q

Employment at Will

A
  • 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
31
Q

Construction Ks - Breach by Owner

A
  • 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
32
Q

Construction Ks - Breach by Builder

A
  • 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
33
Q

Construction - Restoration and Economic Waste

A
  • 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
34
Q

Contracts Calling for Installments Payments

A
  • 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
35
Q

Mitigation

A
  • 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
36
Q

Mitigation - Employment Ks

A
  • 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
37
Q

Mitigation - Manufacturing Ks

A
  • 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
38
Q

Mitigation - Construction Contracts

A
  • 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
39
Q

Mitigation - Contracts for Sale of Goods

A
  • 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

July Exam - Contracts (14 decks)

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