DAMAGES WEEK 9 VIDEO NOTES

 Three general categories of contract damages

o Expectation
 Purpose: put the non-breacher in the position he/she would have been in if
the K was performed (give benefit of the bargain)
 It is forward-looking
 Typically, lost profits or lost value
 If we don’t have lost profits, we turn to reliance
o Reliance
 Out-of-pocket expenses
o Restitution
 Unjust enrichment
 General premise is that if a party has expectation damages, that is where they should
begin. Typically, expectation is lost profits or lost value. If you cannot prove them or
have them, then you look at reliance, which looks at breaching parties’ out-of-pocket
expenses. The third is restitution. Here, the focus is on the breaching party. What did they
get? If they got anything, we would want to take that away. The first two we look at the
non-breaching party
 CALCULATE EXPECTATION INTEREST
o First calculate the expectation  lost profits/lost value
o You may add in SOME out-of-pocket expenses
o you can also look toward restitution. If the breaching party benefitted in any way,
you can take that money away
o always start with expectation
o Goal: put the p in as good as position as he would have been in had the defendant
performed his promise
o If suing “on the contract”, this is the general goal of an award of damages
 RELIANCE INTEREST
o You will sue in reliance if you do not have expectation or cannot prove
expectation
o the purpose here is to put the non-breacher back in the position he or she would
have been BEFORE the K was created (aka this restores the status quo)
o it is backward-looking in time
o Can recover (calculate)
 (1) you will get ALL out-of-pocket expenses [Reliance]
 (2) Restitution (breacher’s profits)
o Goal: put the p in as good a position as he was in before the promise was made
 RESTITUTION INTEREST
o Purpose: put the breacher back into the position he or she was in before the
contract was created
o Avoid breacher’s unjust enrichment
o Breacher should not be able to benefit from breaching a contract
o Can recover
 Restitution (breacher’s profits)
 o Goal: allow one party to recover the value of a benefit conferred upon the other
party (prevent unjust enrichment)
 Two more choices for expectancy
o Cost of performance
 How much money would it cost the non-breacher to be put in the position
he or she should have been in had the K been performed as promised?
o Diminution in value
 If the cost of performance would result in unreasonable economic waste,
AND the breach is insignificant (incidental to main purpose of the K),
only award the diminution in value caused by the breach
o Based on the facts, you’ll then determine which test to choose

WEEK 9 IN CLASS NOTES

 Contract damages big picture

o General damages
 Direct damages that come from the breach of contract
 i.e., Fulana is selling house to X. what if she breaches contract and
doesn’t sell anymore. The damage is whatever money figure was
put on the house.
o Special damages
 Indirect losses from the breach of the contract (will review week 10)
o Limits on damages
o Liquated damages clauses
 i.e., paying three months’ worth of rent if tenant decides to break contract
and leave early
 Not all provisions will be enforced by the court
o U.C.C. Damages
 Specific formulas under article 2 with calculations for damages (different
than CL calculations)
o Restitution
 Non-breacher vs. Breacher
 The breaching party was unjustly enriched by the non-breaching party. In
this case, we will be able to yank their profits back.
o Equitable Remedies
 Dealing with non-breaching party wanting something else
 Lucy v. Zehmer
 At the end of the day, did lucy and his brother want the $50,000?
They actually wanted the farm.
 You can’t always get the item. Something other than money.
 Three Interests of Contract Damages (These may or may not be present on a fact
pattern)
o Suing for expectation
 ***we form a valid K. uh oh one of the parties breaches. At this point, we
put breacher in position had the K been carried out before.
  Expectation +
 Generally looking at lost profit
 Some reliance * +
 Restitution*
o Suing for reliance
 I am going to sue for reliance if there was never a profit expected. If I
have no out-of-pocket expenses in conjunction that a profit was never
going to be made, look for restitution.
 Reliance +
 Restitution *
o Suing for restitution
 Restitution
 Suing in expectation
o We’re always gonna get out lost profit
o How do we determine whether or not we get to recover the out-of-pocket
expenses?
 Non-recoverable reliance if suing in expectation
 Expenses that would have been incurred…
 Reliance
o We are only going to sue if we don’t have any lost profit
o Goal: put the plaintiff in as good a position as he was in before the promise was
made
 CL Governed Calculations
o Real estate contracts
 Expectation when seller breaches
 Reliance when seller breaches
o Construction Contracts
 Expectation when owner breaches (during construction)
 Reliance when owner breacher (during construction)
 ***Expectation when seller breaches (failure to perform)
 Idea of Peevyhouse
o Medical Procedure Contracts
 Expectation when doctor breaches
 Reliance when doctor breaches
o Losing Contracts
 Owner breaches construction contract
 Seller breaches real estate contract
 Client breaches service contract
 **For medical contracts
o Lost value
 So, another way to calculate profits…
 Peevyhouse vs. Coal Company
o ***When we have a seller that fails to perform a construction contract, we look
first to the cost of performance (award non-breachers had the contract been
performed) or the difference in value
  Cost of performance: how much money would it cost the non-breacher to
be put in the position he or she should have been in had the contract been
performed as promised?
 Difference in value: if the cost of performance would result in
unreasonable economic waste, AND the breach is insignificant, only
award the diminution in value caused by the breach
 In this case, it was $300 (what the land was worth now vs. how
much pre-mine stripping)
 Economic waste
o i.e., expense of tearing down and rebuilding a completed
structure
 Insignificant
o Incidental to main purpose of the contract
o Is this not really important to why the parties contracted?
 **Minority view
o Reliance
 Entitled to money expanded in preparation….