Remedies Flashcards
3 types of remedies (interests):
(1) Expectation Interest (our focus) – Income you would have received if the contract had been performed GOAL = make you as good as you would have been
(2) Reliance Interest – Money you spent not in fulfillment but in reliance on contract GOAL = make you as good as you were prior
(2) Restitution Interest – Money you spent/services performed in fulfillment of your end of contract GOAL = make you as good as you were prior
The one case we need to know
Hadley vs Baxendale – Baxendale negligently delivered crank, resulting in a one week delay; Hadley sued for the lost profits for the week the crank was down analysis: was it foreseeable? So when doing a foreseeability analysis for damages, mention Hadley v Baxendale where there are “special damages” or “consequential damages” – this was a case where only consequential damages were awarded. If Baxendale had reason to foresee these damages, then maybe “special damages” awarded
The Expectation Interest Analysis
(1) But-for cause
(2) Foreseeability -.
Foreseeability Analysis:
§351 Was this the foreseeable “probable result” of the breach when the contract was made: Two ways to analyze under §351(2)(a)-(b)
(a) ordinary course of events
(b) reason to know of special circumstance
Limitations on foreseeability under the common law
Limitation - Line drawing – for example if you breach contract #1 with me and you make a new one and #2 breaches as well.. you are not liable for a person breaching the subsequent contract. Even though it is “but-for” cause it is not foreseeable
§351(3) – Court may limit damages “as justice requires” to avoid “disproportionate compensation”
CISG Foreseeability Analysis
CISG see foreseeability as an analysis of a possible result (not probable result as UCC) – thus this means “special damages” are more likely
Buyers remedy under UCC
Incidental vs Consequential Damages
Incidental Damages
UCC concept - These are goods; thus, reasonable damages from reshipping/transport etc of a second batch from another seller (AKA your cost to cover)
Consequential Damages
UCC concept - Loss resulting from requirements that (1) seller knew about (maybe you knew without this I would be out money) and (2) could not be reasonably avoided with cover
Types of cover under the UCC
Cover vs Hypothetical Cover
Cover under the UCC
Buying a replacement when you fail to send goods (in order to mitigate damages) - must be commercially reasonable
Hypothetical cover under the UCC
you do nothing and you get market value of goods
Damages for non-conforming goods
§2-714 If you have sent me 10 gizmos but 2 are defective, the damages are (1) any loss from a normal course of events (2) may also get consequential or incidental damages (aka reasonable cover costs AND if foreseeable and unable to be covered, other consequential damages)
Seller’s Remedies under UCC
Seller can withhold goods, stop delivery many things (w/in UCC 2-703 but what about resale? If the buyer refuses to accept goods (that are perfectly fine) then you can sue for sales price.
Seller’s remedies - consequential damages
consequential damages do not exist under UCC, they only bargained for the sales price
The “Lost Volume” seller problem
Typically you only get the sale price, this is an issue for middlemen (as an example) Ford Car Dealer. Every car is the same price. The profit is the same price. The incidental damages after cover would always be $0. So cannot compute easily. You use §2-708(2) Here the damages would just be the anticipated profit.
Limitations to Damages
“Reasonable Certainty” limitation of expectation damages– if you cannot compute damages with reasonable certainty (AKA too speculative) , a court will not enforce them
Emotional Distress – VERY difficult to get emotional damages from breach of contract claim – typically would be public shaming or something (example 1 – public shaming like the hotel example 2 - improper storage of the deceased)
Mitigation in UCC and Restatement
In Restatement §350 If you could avoid the loss without undue risk, burden, or humiliation then you have a “duty” to mitigate – where if you fail to it will ONLY impact your damages.
In UCC – Already seen under cover, you cannot (as buyer) sue if you did not cover. Otherwise damages are limited (for hypothetical cover)
Liquidating Damages
AKA putting a clause in that avoids court by saying: “if breach, XYZ are damages.” Courts are fine but must be reasonable under §356 and §2-2-708(1) – if too low or just right, they will allow; if over the compensatory damages, watch out
Calculating Damages - 2 types
Default: Cost to complete – Ex) 100k K to build house – should take 90k to build, 10k profit. When 50k of work done owner wrongly fires. Cost of completion is 50k of expenses + 10k of profit. What if builder breaches after 50k work is done and pays another company 60k to finish? Whatever it takes to get them to 100k. So 50 to original company 60 to new company, original company owes the difference of 10k
Less used: Diminution of Value (Think Reading pipe ex) the calculation is the amount the price decreased because of the breach. In Reading pipe example is was essentially $0.
When is Diminution of Value Test used? When the cost to complete is very high OR the breach is not material
Calculations for three types of interests
Restitution calculation – Under Restatement, restitution for any benefit conferred (note no subtraction based on bad contract)
Expectation calculation – Under Restatement, damages include the loss in value caused, incidental or consequential loss, less less any loss that would have occurred
Reliance interest – Expenditures less any losses
