Remedies Flashcards
Expectation Damages
Rule: Expectation damages are the standard measure of damages and will be measured by the parties expectation of the contract, i.e., suffecient damages to buy a substitute peformance. (a.k.a. - Benefit of Bargain).
Formula:
Damages = loss in value + other loss – cost avoided – loss avoided
- Loss in value: Determined by deducting the contractual value of what the plaintiff received from what she promised.
- Other Losses: Includes any consequential or incidental damages.
- Cost avoided, loss avoided: Any cost or loss the plaintiff avoided by not having to perform.
Reliance Damages
Defined: Damages that put the plaintiff in the posisition she would have been in had the contract never been formed.
Rule: Reliance damgages are given when expectation damages are too speculative to measure.
Consequential Damages
Defined: Consists of losses resulting from the breach that any reasonable person would have foreseen would occur from the breach at the time of entry into the contract.
Rule: For sale of goods, only a buyer may recover consequential dmages.
Incidental Damages (Sale of Goods)
Defined: In contracts for sale of goods, compensatory damages may also include incidental damages. Incidental dmages include expenses reasonably incurred by the buyer in inspection, reciept, transportation, care, and custody of the goods rightfully rejceted and other other expesnes reasonably incident to the seller’s breach, and by seller in storing, shipping returning, and reselling the goods as a result of the buyer’s breach.
Certainty Rule
Rule: The plaintiff must show that the losses suffered were certain in their nature and not too speculative.
Liquidated Damages
Rule: Liquidated damages clauses will be enforceable if the following two requirements are met:
- Damages must have been difficult to estimate or ascertain at the time the contract was formed; and
- The amount agreed on must have been a reasonable forecast of compensatory damages in the case of breach.
- If unreasonable then court will construe this as a penalty.
NOTE: Recoverable even if there are no actual damages.
Buyer’s Damages in Sale of Goods when Seller does not deliver or buyer rejects goods or revokes acceptance
Rule: Damages consist of the difference between the contract price and either: (i) the market price or (ii) the cost of buying replacement goods, plus incidental and consequential damages.
- Market price is determined at the time of the breach and at the place of tender (as opposed to seller’s damages which is measured at the time of delivery).
- For “Cover” Damges (replacement goods) the buyer must make a reasonable contract for substitute goods in good faith and without unreasonable delay.
Buyer’s Damages when Seller Delivers non-conforming Goods
Warranty Damages: The basic measure of damages is the difference between the value of the goods as delivered and the value they would have been if they had been according to contract, plus incidental and consequential.
Notice Requirement: To recover goods for any defect as to accepted goods, the buyer must, within a reasonable time after she discovers or should have discovered the defect, notify the seller of the defect.
Buyer’s Damages for Anticipatory Breach by Seller
Rule: The measure of damages when the seller anticipatorily breaches the contract is the difference between the market price at the time the buyer learned of the breach and the contract price.
Buyer’s Damages: Consequential Damages
Rule: Seller is liable for consequential damages if: (i) seller had reason to know of the buyer’s general or particular requirements, and (ii) the subsequent loss resulting form those needs could not reasonably be prevented by cover.
- Particular needs must be made known to the seller, but general requirements usually need not be.
- Goods for Resale: If buyer is in the business of selling goods, the seller is deemed to have knowledge of the resale.
- Goods Necessary For Manufacturing: If a seller knows that the goods he provides are to be used in the manufacturing process, he should know that his breach would cause a disruption in production leading to loss of profits.
Seller’s Damage when Buyer repudiates or refuses to accept conforming goods
Rule: The seller can:
- Recover the difference bettwen the market price (measured as of the time and the place of delivery) and the contract price;
- Resell the goods and recover the difference between the contract price and the resale price; or
- Recover lost profits (difference between contract price and cost to seller).
- Only when seller has lost sales volume as a result of the breach.
Seller’s Damages when Buyer Accpeted Goods
Rule: If buyer has accepted the goods and not paid, or has not accepted the goods but seller cannot resell the goods at a reasonable price, or goods have been lost, damaged, or destroyed after ROL passed to buyer, Seller can maintain an action for the full contract price.
Quasi-Contract Recovery
Rule: Resititution is available in quasi-contract when there is no contractual relationship between the parties if:
- Plaintiff conffered a benefit to D;
- with a reasonable expectation of being compensated for its value;
- D knew or had reason to know of plaintiff’s expectation; and
- D would be unjustly enriched if he were allowed to retain the benefit without compensating P.
Common Law Nonmonetary Damages
Specific Perfomance: If the legal remedy is inadequate the nonbreaching party may seek specific performance. Available for land and unique goods, but never availiable for services.
Covenant Not to Compete: Enforceable if services are unique; and covenant is reasonable. Reasonable means: (i) it is necessary to protect a legitimate interest of the person benefited by the covenant; (ii) reasonable time and geographic scope; and (iii) not harm public.
Equitable Defenses To Specific Performance:
- Unclean Hands: Party will not get injunction or specific performance if they did some wrongdoing.
- Laches: Plaintiff delayed bringing action, and delay prejudiced defendant.
- Sale to Bona Fide Purchase
Buyer: Nonmonetary Remedy, Article 2
Cancellation: Buyer can cancel contract after rightfully rejecting goods.
Right to Replevy Identified Goods
1. Buyer’s Part Payment:
- If buyer has made part payment and seller has not delivered the buyer can replevy if: (i) Seller becomes insolvent within 10 days after recievign buyer’s first payment; or (ii) goods were purchased family, personal or household purposes.
- In either case they must tender any unpaid portion of the purchase price to the seller.
2. Buyer’s Inability to Cover:
- Buyer can replevy undelivered, identified goods from the seller if the buyer, after reasonable efforts, is unable to secure adequate subsituted goods.
Specific Performance:
Rule: Even when goods are not identified, the court may require specific perfomance if they are unique.
