Remedies Flashcards
CL Damages
Include:
- Expectation Damages
- Reliance Damages
- Restitution
- Liquidated Damages
Expectation Damages
-Attempt to put the non-breaching party in the position they would have been in if performance had occurred.
Formula for Expectation Damages
Loss of value of the breaching party’s performance + any foreseeable incidental and consequential costs generated by breach – any payments received from the breaching party – any costs saved as a result of the breach
Limitations on Expectation Damages
Include:
- where expectation damages cannot be calculated with reasonable certainty (e.g. new company with no profit history)
- where damages are unforeseeable (e.g. when buyer makes deal not known by seller); and
- where damages can be mitigated
Hadley Rule
Claims that a breaching party is liable for general damages (those that naturally flow from breach) but not for special or consequential damages unless breaching party knew or had reason to know that consequential damages would result from breach.
Reliance Damages
Damages that will restore the aggrieved party to the position they were in prior to the K. Are only available when expectation damages are not available (when they are uncertain or speculative).
Measure of Reliance Damages
Expenditures made in preparation for performance or in actually performing – loss which the breaching party can prove the aggrieved party would have suffered even if the K had been fully performed.
Restitution
- When a party chooses to recover the value of the benefits conferred on the breaching party by the aggrieved party during the course of the K (alt. to expectation damages)
- Available to both breaching and aggrieved parties.
Ways of Measuring Restitution
Include:
- the reasonable value of the benefit conferred upon the breaching party (measured by the market value of the services rendered ,not the K price); or
- the extent to which the breaching party’s property has increased in value based upon the aggrieved party’s performance
Restitution v. Completion
If the aggrieved party has fully performed under the K, then the aggrieved party is limited to expectation damages
Liquidated Damages
Parties are free to include among the terms of their K a liquidated damages clause (freedom of K)
Enforceability of Liquidated Damages Clauses
A clause is valid and enforceable unless it is a penalty.
Test for Determining if the Liquidated Damages Clause Is a Penalty (3-Prongs)
- 1) Did the parties intend for the clause to operate as a liquidated damages clause or as a penalty?
- 2) Was the clause reasonable at the time of K in relation to the anticipated harm?
- 3) Was the clause reasonable in relation to the harm and losses that actually occurred due to the breach?
- some courts will not require both 2) and 3) if one of them is present
What Happens When a Court Finds that a Liquidated Damages is a Penalty?
A court will strike it from the K. Damages will be enforced in accordance with default rules.
Monetary Damages Under the UCC: Seller’s Remedies
The seller can cancel the K and withhold delivery & recover $ damages.
UCC: Seller’s Remedies for Delivered Goods: Action for the Price
If some or all of the goods have been delivered and accepted, the seller is entitled to collect the K price for those goods.
UCC: Seller’s Remedies for Undelivered Goods
- If seller resales –> K price – resale price
- If seller does not resell –> K price – market price
- Incidental damages (costs associated with getting stuck with goods the seller thought he had sold as well as the costs of resale)
Damages for Lost Volume Sellers
Are entitled to the profit they would have made on the lost sale rather than relegating them to to contract - market or contract - resale.