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Remedies A. EXPECTATION INTEREST (Putting the aggrieved party where they expected to be as a result of performance.) 1. DISCUSS UCC, WHEN APPLICABLE, LEASES, ETC.)& BONEBRAKE TEST?? 2. Protecting the Expectation Interest 3. Substitute Contract (Preferred) (p.49): encourages the aggrieved party to enter a substitute contract and then award damages to make up any remaining losses. Seller’s Damages (Mitigation of Losses): a. b. 2-703, In General 2-704, Identify Goods to the Contract Notwithstanding Breach or to Salvage Unfinished Goods??
c. 2-706: , Resale Including Contract for Resale: [(contract price – resale price) + incidental damages allowed - expenses saved from buyer’s breach] d. 2-708, For Non-Acceptance or Repudiation (Non-Resale) 1) 2-708(1): [(unpaid contract price – market price) + incidental damages allowed - expenses saved from buyer’s breach]. IF INADEQUATE TO PUT SELLER IN AS GOOD A POSITION AS PERFORMANCE, THEN…2-708(2) 2) 2-709, Action for the Price: when buyer fails to pay the price as it becomes due, seller can recover: [the contract price of the goods buyer accepted or the conforming goods lost or damaged + incidental damages] OR [the contract price of goods if the seller cannot resell after reasonable price and effort + incidental damages] 4. Inferior Substitute Contracts (p.50) a. b. 2-708(2): [expected profit + incidental damages allowed + due allowance + due credit] 2-710: the seller can always recover incidental damages incurred as a result of the breach Parker v. 20th Century Fox o Issue: Can [P]’s refusal of [D]’s substitute offer be used in mitigating damages? Rule: The measure of recovery by a wrongfully discharged employee is the amount of salary agreed upon for the period of service, less the amount the employer affirmatively proves the employee has earned or with reasonable effort might have earned from other employment. (IOW, [agreed salary – proved mitigated earnings]. This rule is similar to 2706 and 2-708(1).) However, the employer must show that the other employment was comparable or substantially similar.
2-718. and therefore it is an issue of triable fact. Buyer’s Restitution (Limits on Seller’s Damages) c. the difference b/n the majority and dissenting opinions is one of procedure vs. [D] didn’t present evidence to prove that the substitute was “comparable or substantially similar”). o Dissent: The issue is. we don’t know if Parker ever sought substitute employment) Take away: RULE EXCEPTION: The duty to mitigate at least limits.” Also. Hence. 2-708(1) and (2). no factual dispute was presented on the issue (IOW. the strength of the duty is determined by the employment alternatives available. Retail Marine Corporation o o Issue: What are the proper measure of damages? Rules: 2-718(2). and 2-710: 2-718(2) entitles the BB to restitution. the expectation interest. Answering both questions.g. Did [P] act reasonably in refusing it? The dissent holding is. however. Liquidation or Limitation of Damages. Deposits: (p.66) The buyer despite her breach may have restitution subject to offset to the extent that the seller establishes a right to recover damages under the provisions (subsections 2-4??) other than subsection (1) 1) 2-718(1): Either party may liquidate damages but only to a reasonable amount in light of anticipated or actual damages resulting from the breach 2) 2-718(2): where seller justifiably withholds delivery of goods b/c of breach buyer is entitled to restitution Neri v. respectively. required answering the same question that is subordinate within the rule: Was the offer substantially similar to the original offer? This is where the two opinions diverge in their answers. The court concerned with control and same political views Also consider which facts are missing (e. however 2-718(3) limits such restitution by offsetting .o Holding: [P]’s refusal to accept can’t be used to mitigate [D]’s damages b/c the offer was of employment “both different and inferior. substance. summary judgment not appropriate b/c “reasonable minds could differ” as to the similarity of the work. at most negates. 2-718(3). Majority opinion also raised the issue but did not discuss it b/c it was not raised at trial. There is a duty to mitigate but not a very strong duty.
So must apply 2-708(2). Impossible for a LVS with an “inexhaustible supply” (e. 2708(1) is inadequate to put seller in as good a position as performance. Worldcom o Issues: Should either motions made by both parties for summary judgment be granted? Rules: Federal Rule of Civil Procedure 56(c) allows summary judgment only when “there is no genuine issue of material fact. in General: the buyer may cancel and in addition to recovering damages. Take away: RULE EXCEPTION: Lost Volume Seller (LVS) negates the mitigation principle. NBS has initial burden of establishing that BB breached K. Jordan v. Then burden shifts to BB to prove [P] had duty to mitigate. AND 2-710 establishes NBS’s right to incidental damages.g. 2-716. also cover.89) Buyer’s Remedies a. o 5. Courts award reasonable incidental damages. Performance Rather Than Damages (p. Buyer’s Right to Specific Performance or Replevin 1) 2-716(1): where goods are unique or in other proper circumstances 2) Official Comment #2: Specific performance is no longer limited to goods which are . Trial court erred in not applying the recent statute change.” Holding: As a matter of law. Take away: Mostly a lesson in civil procedure. and 1) 2-711(2)(b): obtain specific performance b.it against the seller’s right to damages provided by 2-708(1) and (2). 2-711. offset by (less) [D]’s right to lost profit and incidental damages. Retail Marine) to mitigate damages. so apply 2-708(2). Jordan has not mitigated damages and there must be an evidentiary hearing on how much his claim should be reduced consistent with his duty to mitigate. not 2708(1). o Holding: Trial court correct to deny attorney’s fees incurred b/c not an expense intended by the UCC . recover. [P]’s are entitled to restitution of their deposit. Then burden shifts back to NBS to prove it had no duty to mitigate b/c it is a LVS.
Memorex Corp. 2) “…Under Illinois law a liquidation of damages must be a reasonable estimate at the time of contracting of the likely damages from breach. Carborundum Company o Issues: 1) Does Lake River’s entitlement to damages also entitle it to assert a lien against Carborundum’s property? 2) If not valid. Copylease can recover only damages. However. 2) concluded that the clause was actually a penalty b/c it always assured o o . under 2-716(1). Liquidated Damages (p.) establishes that (1) a remedy is not necessarily inadequate merely b/c calculating damages may be difficult and (2) courts are adverse to ordering specific performance. Take away: RULE EXCEPTION: 2-716(1) courts will grant specific performance for damages in addition to damages if the NBB can prove uniqueness OR “other proper circumstances. and the need for estimation at that time must be shown by reference to the likely difficulty of measuring the actual damages from a breach after the breach occurs. United Drug Co. Copylease may be entitled to specific performance if it can prove that Memorex’s toner is unique OR that Copylease’s “inability to cover is strong evidence of “’other proper circumstances. v. then is the liquidated damages clause in the contract valid? 3) If not valid. California’s common law (Long Beach Drug Co v.’” If Copylease can prove 2-716(1). v. then damages would require measuring the uniqueness or degree of difficulty in covering against the difficulties in enforcement which have caused courts to refrain from granting specific performance.Copylease Corp.” AND 3) Lake River is entitled to its Illinois common law damages [unpaid contract price – expenses saved b/c of breach] Holding: 1) The court rejected Lake River’s lien claim as invalid. what are the proper damages to be assessed? Rules: 1) The court could find no rule on facts similar to the case to establish the validity of Lake River’s lien.” Become sensitive to exclusivity in contracts Specific performance creates institutional problems: 1) courts don’t have the means to enforce judgments and 2) courts don’t want to force parties into arrangements and continuing relationships they don’t want o o 6. Breach Deterrence vs. Holding: Absent an exception to the general rule.100) Lake River Corp. o Issue: Is a NBB (Copylease) entitled to specific performance of K as well as damages? Rule: Contrary to Copylease’s argument.
(Efficient breach makes most sense when BS has a special deal that beats the market price. It is more reasonable to have liquidated damages clause if it is difficult to estimate damages. Judges want to retain determination of punitive (penalty) issues b/c it will keep contracts free from emotions Carborundum never gives up ownership of the goods. 7. AND 2) the profits (CLARIFICATION: the profits to be made in operating a business using the goods the BS was supposed to sell NOT the profits the BS was going to make from the sale) (is this always the NBB?? Can it be a BB??) the NBB/non-breaching party can prove it lost as a consequence of the breach b/c the beach and the profits are closely related. b. AND 3) Even though the clause was an invalid penalty.) It is possible for both parties to renegotiate more favorable terms in a rising market that is wealth-maximizing for both. so the UCC does not apply Take away: Contrary to Judge Posner’s opinion. c. 2-713. o o .Lake River more than its actual damages. Baxendale (THE FORESEEABILITY TEST) o Issue: Can [P] recover the lost profits it would have otherwise earned from performance? The Hadley Rule: The non-breaching party (usually the NBB) is entitled to: 1) damages that arise “naturally” from the breach OR “special terms” damages both parties agreed to when they reasonably anticipated (foresaw) and communicated to each other the consequential damages arising from “special circumstances” at the time of making the contract. otherwise any gain from the breach is eaten up in the damages analysis.113) Buyer’s Damages a. Buyer’s Damages for Non-delivery or Repudiation: [(contract price – market price@breach) + incidental damages – expenses saved from seller’s breach] 2-715: Buyer’s Incidental (subsection 1) and Consequential (subsection 2) Damages 2-715(2): grants the buyer consequential damages as defined by (a) and (b) Hadley v. Lost Anticipated Profits & Consequential Damages (p. Lake River is still entitled to damages and the case was returned to the lower court to re-determine both parties’ damages. it is unlikely that it could have been an efficient breach b/c there was not a substitute deal.
loss of profits for a non-established business cannot be recovered b/c they are only speculative and cannot be determined with the requisite degree of certainty. must prove that profits are closely related to the breach and were lost b/c of the breach. In the Hadley Rule. 331: Damages are recoverable for lost profits only if the evidence showing the loss provides a sufficient basis for estimating their monetary amount with reasonable certainty.”affirms the party asking for the order. The loss of profits cannot reasonably be considered as resulting from the delay (breach). Evergreen Amusement Corporation v. 2-715(2) offers more protection than the Hadley Rule to the NBB b/c omitting makes it easier to hold the BS liable. Official Comment of 2-715: the buyer (NBB) has the burden of proving consequential damages (loss of profit) and the liberal administration of remedies will allow the NBB to calculate damages in any way that is reasonable under the circumstances. However. there might be other reasons for the loss of profits besides the delay. the NBB can recover lost profits. This forces the buyer to be more specific about the terms needed for the seller to perform the contract. the causation element of the Hadley Rule is omitted. Milstead (PROOF OF DAMAGES WITH REASONABLE CERTAINTY) o Issue: Can a new. this is difficult to prove. Rule absolute is a court order “to show cause. a buyer must foresee “special circumstances” and communicate these to a seller so that in the case of a breach. Holding: A new business’ claim for loss of profits is too speculative b/c it does not have an established operating history to provide a sufficient o o . to recover lost profits. Per both rules. In 2-715(2). Omitting the causation element takes the discretion away from juries in deciding the strength in relationship b/n lost profits and the breach. unestablished business submit evidence to prove loss of profits? Rules: Restatement.o Holding: No. Consequently. RULE NISI?? Why important to this case? Take away: Rule absolute is important to this case b/c the courts want to protect the breaching seller from damages that they could not foresee. Contracts. d. Otherwise damages may be measured by the rental value of the property.
) 1. The trial court was right to base damages on fair rental value and actual monetary losses incurred.139): a. 1) Buyer makes expenditures to unlock the value of Seller’s performance. Kaonohi o Issues: 1) Can damages for emotional distress resulting from a breach be awarded in a commercial contract? 2) Can an unestablished business be awarded damages for loss of anticipated profits? Rules: 1) Dold v. 2) Buyer discontinues seeking contracts from other sellers (reliance of lost opportunities—no recovery for damages) 2-715(2): grants the buyer consequential damages as defined by (a) and (b) o o b. Outrigger Hotel: “Where a contract is breached in a wanton or reckless manner as to result in a tortuous injury. It is uncertain if Evergreen’s “proffered” witness was an expert witness. Chung offered Voronaeff as an expert witness. the analysis was reasonably certain enough. If damages are too speculative : use reliance . Holding: 1) Yes??. the “dispositive factor” is not “the nature of the contract. 2. reckless nature of the breach.” 2) The Court of Appeals rejected the harsh “per se” rule and instead adopted a rule allowing the awarding of damages for a new or unestablished business where a [P] can prove lost future profits with reasonable certainty. witnesses must be qualified. no operating track record. RELIANCE INTEREST (Compensating the non-breacher for out-of-pocket expenses made. and held with prior precedent.” but “the wanton.” 2) There was sufficient evidence presented to base an awarding of loss of profits. Take away: B. Take away: The best argument that the Court of Appeals got it right was that loss of profits was too speculative. the aggrieved person is entitled to recover in tort. Chunng v. Furthermore. Two types of reliance loss (p. Although Voronaeff’s income stream analysis figures for estimating the loss of profits were not based on a history of profit. Evergreen “proffered a witness” as evidence for loss of profits but the court dismissed it.basis for estimating damages. the [D] failed in their crossexamination to prove that it was merely speculative.
Holding: The damages [P] suffered were a consequence of the breach b/c in order for the [P] to benefit from the contract. Therefore… … RULE EXCEPTION: Reliance is an exception to the expectation interest. 2) and 3) “Where there is a breach…the party suffering the loss can recover only that which he would have had had the contract not been broken…But…In some instances. the injured party may recover expenses incurred in relying upon the contract. but for the breach. This rule is similar to 2-715(2). there would be no damages). both cannot be used at the same time. Even though Security Stove was in a better position b/c of the breach. THIS IS THE DIFFERENCE B/N TORTS & CONTRACTS: in torts. not reliance. These reliance damages are consequential not incidental b/c they are a consequence of (closely caused by) the breach not a consequence of performing the contract. b/c it would involve the loss of profits. damages are explicitly b/c of the breach.e. ??? Take away: Reliance doesn’t penalize b/c unlike in Lake River where Judge Posner said there was not a strong enough connection b/n the breach and loss of profits. in reliance. notice. the shipment had to be delivered on time and [D] was advised of the importance of the shipment. Out-of-pocket expenses are not speculative b/c can be proven with reasonable certainty.[If damages are inadequate to put in as good a position : use 2-708(2)] Security Stove v. If he was going to sell the stove. the court still awarded damages b/c it was concerned about negligence and “but for” causation (i. Reliance damages are o o . May have mistakenly been a torts case b/c it dealt with duty. Reliance damages are never greater than expectation damages b/c if they are then the difference must be deducted (aka the Hand Limitation). and negligence. American Railway o Issues: 1) Can [P] sue for an unenforceable breach of promise to deliver shipment on time? 2) Can [P] recover expenses as damages or 3) is [P] limited to recovering only loss of profits? Rules: 1) Delivery within a reasonable time was necessary to comply with the agreement. the proper damages would have been expectation.
The burden of proof applied in reliance damages is a control measure and makes reliance damages approximate that of the expectation interest. the promisor may deduct whatever he can prove the promise would have lost.built into subsection 2.” Therefore. 2) A promisee’s damages for breach of contract are [the value of the promised performance – outlay. Co. if the contract had been fully performed. Albert & Son v. and Healy v. RESTITUTION (Giving back to the non-breacher who has not yet fully performed that portion which they [unjustly] enriched the breacher . Armstrong Rubber o Issues: 1) Did the judge incorrectly deny the breaching seller interest for the value of the motor? 2) Were NBB’s out-of-pocket reliance expenses closely caused by the BS’s delay (breach) such that the buyer is entitled to reliance damages? Rules Considered: 1) Reagan v.) 1. the buyer is entitled to $3K (an offset against the seller’s recovery of interest) less whatever the seller can prove the buyer would have lost had the Refiners been delivered. not built into incidental damages (subsection 1). 2) There is insufficient proof of the causation to award reliance damages. There must be a breach . which includes the payment to the promisor and any expenses needed to prepare for the performance] Rules Adopted: Restatement of Contracts 333(d): The promise can recover its outlay…for the performance subject to limitations such as. Armstrong’s damages would have been difficult to calculate b/c they were unforeseeable.” interest should be covered. Take away: RULE LIMITATION: the breaching party has the right to limit the non-breacher’s damages by meeting its burden of proof to deduct the amount that the non-breacher would have lost had the contract been performed. Holding: 1) The seller should have been awarded interest. Fallon: When the value of goods can be “ascertained with reasonable certainty as of a definite time. New York & New England Ry. o o o C. “We will not…put the [P] in a better position than…had the contract been fully performed. Reliance (and restitution) acts as though the contract was never formed. Three requirements of restitution: a.
[P] can recover only the full sum ($850) specified in the contract b/c he had completely performed.b. Campbell o o Issue: Is [P] entitled to “the reasonable value of his services?” Rules: 1) Restatement of Contracts 350: Restitution is not available for an employee who has fully performed if they have been paid in full for their services except for a liquidated debt in the contract (e. then the rescinder may or may be found to be in breach) The non-breacher must elect restitution as an alternative Oliver v.g.186) AND 2) There must be a benefit conferred. So he claimed “the reasonable value of services.” Holding: No. a bonus). “The Full Performance Rule” was interpreted differently by the trial court (midstream) and Supreme Court (fully performed = can’t rescind = no restitution). o . c. The courts are wary of saving the sophisticated from their own bad contracts. (The Supreme Court reversed the trial court’s decision. may sue upon a quantum meruit…and may recover the reasonable value of the services performed. This rule is aka “The Full Performance Rule???” and is similar to UCC ???.” not breach of contract. Gibbons: “One who is wrongfully discharged and “prevented from further performance” …may elect…to treat the contract as rescinded. therefore discouraging efficient breaches. 2) Lessing v. Restitution can put the aggrieved party in a better position than had the contract been performed. which led to differently results. The non-breacher must rescind the contract (RISK: if the person did not in fact breach.) There were two versions of this contract: 1) what the lawyer claimed and 2) what the administratrix as [D] claimed. Take away: RULE LIMITATIONS: 1) The [P] cannot elect restitution if [P] has fully or substantially performed and is entitled to the contract sum (p. This case was not about a breach of contract. Oliver had a duty to advise Campbell during their disagreement that he was committing a breach and would need a new lawyer. But restitution may be available to an employee who has fully performed if the outstanding payment owed to them is something other than a liquidated debt. he would only be entitled to the contract price of $850. if [P] had sued for breach.
e.This advice would have created a conflict of interest for Oliver and the courts may have been concerned about Oliver’s failure to advise. unjust enrichment). The defaulting buyer was also awarded reliance-related architect’s fees because the NBS never contested it. restitution fails to limit/control the breached party’s damages so that they are not in a better position than if the contract had been performed. (understand principal-agency. From the buyer’s perspective.177) o Dissent: “This court misapplies the very rules it cites…This court errs when it says ‘there being no dispute as to the amount…the services having been in effect fully performed. looking at it from the other side) De Leon v. Therefore. Fuqua: If it would be inequitable for there not to be restitution. Holding: The [P] (defaulting buyer) was awarded restitution for payments plus interest. At times.000). MEASURING DAMAGES FOR SUBJECTIVE LOSSES . Aldrete o o Issue: Does the defaulting buyer forfeit his payments or have a right to? Rule: The Majority/Forfeiture Rule: A defaulting buyer cannot recover any money she pays even though the seller has abandoned performance and keeps the money. the majority rule would have been unfair b/c it penalizes the buyer for trying to perform AND overcompensates the non-breacher beyond its expectation damages. It is possible to get restitution that exceeds the NBS’s expectation interest. Restitution for the Plantiff in Default (p. Rule Exception: Lipscombv.188.” 2.’ The foregoing statement is neither supported factually by the record nor legally by the authorities cited…The discharge amounts to a clear repudiation…in which case [P] is entitled to recover the reasonable value of the service performed ($5. then there must be restitution. Take away: LIMITATION: Restitution is not neat or mathematically precise b/c it is an equitable remedy and concerned with fairness (i. p. the defaulting buyer ended up in a better position than had the contract been performed. o o D.
Hawkins v. the parties would likely renegotiate more favorable terms. The court’s decision upholds the expectation interest. what are the proper damages? . o o o Dissent: [D]’s breach was willful and not in good faith. [P] would not have agreed to the contract without the included clause. therefore [D] knew the cost of performance would be disproportionate when it agreed to the contract. Garland would have to restore the coal to the land. are the damages arising from the breach of the incidental portion of the contract also incidental? Even if the court had issued specific performance.Peevyhouse v.S. Take away: PROBLEM: The Supreme Court’s use of the “main purpose” analysis to come to its decision overlooks the fact that there would not have been a contract without the remedial work clause.” only reasonable damages may be recovered. the cost of performance could be reasonably approximated when the contract was negotiated and there is nothing existing that could not have been reasonably anticipated. the lessor may recover the diminution in value resulting from the non-performance. Garland Coal & Mining o Issue: Is the proper measure of damages what it will cost to obtain performance of the work that [D] defaulted on or is it the expectation interest of the difference b/n the market value before and after the work was performed? Rules: 1) O. If the remedial work is incidental. if the value of performance should be considered in determining the measure of damages . If restitution was granted. Judgment of $300 for [P]. and where the economic benefit of full performance is grossly disproportionate to the cost of performance. McGee o Issue: Is a warranty a contract? If so. the value of the benefits the breaching party received should also be considered. 1961. The court’s interpretation had the effect of “rewriting” the contract by seeing the remedial work as incidental. Subsection 96: one cannot recover a greater amount in damages for breach than one would have gained by full performance and 2) Subsection 97: where there may be an obligation creating “unconscionable and grossly oppressive damages. where the portion of the contract that was breached was only incidental to the main purpose of the contract. Holding: In a coal mining lease.
for the expectation or reliance interest for the worsening of her condition. A warranty is a special promise about the quality of the service or good. Take away: If Hawkins had had additional surgeries to fix Dr. McGee’s mistake.e. Hawkins would not be awarded pain and suffering. Connor o Issue: Is the [P] limited to recovering out-of-pocket expenses or can she also recover for pain and suffering for and/or disfigurement and associated mental distress? Rule: There is no general rule barring such items [pain and suffering. pain and suffering). including any incidental damages contemplated by the parties (i. An offer and an acceptance makes a special contract via assent. and for the pain and suffering and mental distress incurred from the third operation. he would be able to recover incidental damages for those surgeries. Holding: Reliance Interest: [expenditures made b/c of contract + other foreseeable damages closely caused by the breach].e. mental distress. pain and suffering)]. Holding: The true measure of damages is the difference b/n the value to him of a perfect/good hand and the value of his hand in its present condition. psychological and physical injury may be expected… Suffering or distress resulting from the breach going beyond what was anticipated by the agreed treatment should be compensable. [P] waived her right to an expectation claim and by default was awarded by applying the reliance interest. o o . Also b/c of her withdrawal.o Rule: Expectation Interest: [(the value of the goods as they would have been if the warranty as to the quality had been true . and disfigurement] of damage…When the contract calls for an operation. the opinion was relegated to dicta and therefore not binding. By withdrawing her appeal. The [P] is entitled to recover out-of-pocket expenses. o Sullivan v. Take away: Judge Caplan says that reliance may be the most appropriate remedy and pain and suffering incurred in a failed operation may be awarded b/c it is analogous to “wasted” out-of-pocket expenses due to the breach.the value of the goods at the time of sale) + gains prevented and losses sustained + other damages reasonably anticipated by the parties (i. McGee. But under the current contract with Dr.
The expectation measure may not be the most appropriate damages to award in a non-commercial contract but reliance may be an appropriate alternative. .