Remedies -- Damages

Question 1

Contracts remedies order

Answer 1

(same as torts):

i. legal remedies: damages
ii. restitutionary remedies
iii. equitable remedies: specific performance, rescission, reformation

Question 2

Compensatory Damages - four requirements

Answer 2

1. four requirements: same as torts, based on injury to π
   i. actual causation (but-for cause of injury)

ii. proximate causation (foreseeable injury)

iii. certainty (damages cannot be too speculative)
a. past losses have to be established w more certainty than future losses
b. historical records help to provide certainty (ex. history of profits)
c. all or nothing rule for future damages: π must show the injury is more likely to happen than not (> 50% chance the injury will occur)

iv. unavoidability (damages were unavoidable)
a. π must take reasonable steps to mitigate damages

Question 3

Consequential Damages

Answer 3

4. indirect damages that flow from the harm
5. special harms that would not have been suffered by another similarly situated buyers
6. available for related damages that are foreseeable at the time of formation
   i. foreseeable if the seller knew about the possible harm. If the π communicated this to the ∆ at the time of formation.
   a. Crankshaw case: must have communicated lost profit possibility at time of k formation.
7. bar often tests lost reputation or profits: foreseeable that business or reputation would go down due to contract breach
   i. For example: direct damages: have less fancy stuff so can sell for less, but consequential damages: loss to reputation. Must show foreseeability.

Question 4

Nominal Damages

Answer 4

1. nominal damages on contracts are allowed

Question 5

Punitive Damages

Answer 5

1. punitive damages are not allowed on contracts
2. if ∆’s conduct is willful, then it may be characterized as a tort (fraud case), in which case punitive damages could be available

Question 6

Liquidated damages

Answer 6

i. a k provision that fixes amount of damages. Issue will be validity: concern is whether the provision is too high and masking as a penalty

2. requirements on validity of liquidated damages clause
   i. damages are difficult to ascertain at the time of contract formation
   ii. reasonable forecast of what damages would be (if excessive, then it’s a penalty, which isn’t allowed for ks)
3. if valid: only the liquidated amount is available
4. if invalid: only the actual damages is available (don’t say no damages available)
   i. a clause that says the non-breaching π can elect either actual compensatory damages or the liquidated damages is not effective; makes the liquidated damages provision invalid (π only gets compensatory damages)

a. if the damages is a fixed number, this triggers reasonable forecast concern. must be a range or a formula to not be suspect.

Question 7

Damages overview

Answer 7

i. Policy: compensate the π, NOT punish the ∆
iii. Damages Generally= expected profit + costs spent

Steps

1. Expectation: Breaching party must put the non-breaching party in the same position as if there hadn’t been a breach
2. PLUS Incidental: costs incurred in dealing with the breach, always recoverable
3. PLUS Consequential: EITHER the kind of loss anyone would sustain OR those that aires from π’s special circumstances, ( if the breaching party would have known the special position)
4. MINUS Avoidable : subtract losses π could have avoided without undue burden (shouldn’t continue performance, shouldn’t turn down comparable opportunities)
5. MINUS Certainty : no recovery for damages that are not reasonably certain (new business for ex.) If too uncertain–> give out-of-pocket expenses
6. Reliance: if expectation damages are too uncertain, use reliance damages. allows recovery of out of pocket expenses for uncertain expectation damages and promissory estoppel
7. Liquidated: k provisions fixing amount of damages, must be reasonable forecast and not a penalty.
8. BREACHING PARTY DOESN’T GET ANYTHING, EVEN IF THE NON-BREACHING PARTY WAS UNJUSTLY ENRICHED

Question 8

Seller’s right of reclamation from an insolvent buyer

Answer 8

Unpaid seller may get its goods back if:

1) buyer was insolvent when it RECEIVED the goods
2) buyer, before delivery, told seller he was solvent
3) seller demands return of goods within 10 days of receipt/ within reasnable time
4) buyer still has goods at time of demand

Question 9

Entrustment remedies

Answer 9

1. this is under the UCC
   i. Owner leaves goods for repair/cleaning/storage with a merchant. Later a BFP buys the goods.

Owner’s remedy –> conversion against the merchant.

Question 10

Rule for monetary damages for sale of goods

Answer 10

1. Damages for seller’s breach:
   a. Seller breaches, buyer keeps the goods –
   i. FMV if perfect- FMV as delivered
   ii. OR
   iii. Cost of repair

b. Seller breaches, seller has the goods
i. Market price at time of discovery of the breach – k price
ii. OR

iii. reasonable replacement price – k price
iv. Whichever is greater.

2. Damages for buyer’s breaches

a. Buyer breaches, buyer keeps the goods
i. K price

b. Buyer breaches, seller has the goods
i. (contract price – resale price) + provable loss profits
ii. if seller cannot resell, recovery is the k price

c. If seller loses volume: provable loss profits for volume sellers are also iven
i. Seller must have access to unlimited supply of the goods

Question 11

SOL under UCC

Answer 11

i. for sales k—UCC gives 4 year SOL. can shorten by agreement to no less than 1 year, maynot lengthen period.
ii. begins to run when a breach occurs. Doesn’t matter if the aggrieved knew about the breach.

iii. For breach of warranty—SOL starts running upon delivery.
iv. IF the warranty covers future performance, SOL doesn’t run until buyer should have discovered breach
.
v. Implied warranties (merchantability and fitness for particular purpose) don’t extend to future performance, so they are breached upon delivery.