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only if the K involves unique or extraordinary o but K for personal services will not be affirmatively or public interest in involved (462) the transfer of land Avoided, esp if: o court would have to keep supervising o K is indefinite and uncertain o Damages are adequate The Cost/Benefit analysis of specific performance (parties will just negotiate a price to breach) o Shifts burden of determining costs from the court o Probably a more accurate cost (market system) o Could have 3rd party costs o Might require court supervision
Loss in value = difference between the value that party would have received from performance and what was actually received Other loss = additional loss because performance was not given Cost avoided = the beneficial savings the injured party got that would have been cost incurred if performance continued Loss avoided = any further beneficial effect (salvaging or reallocating resources that would have been devoted to performance) Formula A: Damages = Loss in value + other loss – cost avoided – loss avoided Formula B: Damages = cost of reliance + profit – loss avoided + other loss (loss in value – cost of complete performance = profit) Overhead is not part of damages, because it would be incurred whether or not there is a K/performance BUYER UCC 2-712 (for cover) Buyer does not have to prove market price when they cover Measure of damage = cover price – K price (because UCCC encourages cover) - only has to prove that action to cover was o in good faith o without unreasonable delay o was reasonable substitute for good that were due from other K
so if you resell but want to claim you are a volume seller. seller may recover difference in price.problem: o placement of privision for last profit in 2-708(2) o most common scenario where seller wants to claim lost profit is where breach buyer claims seller resold and should be restricted to K price – selling price o 2-706 deals with resell. not cover depends on whether both Ks could have been done together • if so they could have been done together.if it is something that would have been purchased anyway. you want to then use 2-708(2) To recover lost profits you have to use 2-708(2) But the resale is under 2-706 Court in Diasonics allows volume seller that resold under 2-706 to recover under 2708(2) . those purchases from other sellers is lost volume.it should not be the case that a seller who resold goods in commercially reasonably manner is limited to 2-706 damages o (most courts have this interpretation – it is consistent with UCC’s preference for cover) o Most courts say the seller’s burden (to get those lost profits) is to show that the seller could have sold another unit.seller’s version of cover Seller may resell the goods When the resell is made in good faith and commercially reasonable manner.lost volume o if buyer has many sources that it is buying from. that it could have handled both deals (lost volume) .this is the provision relied on by volume seller (2-708(2)) o question of whether seller was volume seller or was covering comes up more than same question with buyer .Cover versus lost volume . it is lost volume SELLER Look to UCC 2-706 and 2-708 2-706 . along with incidental damages but less savings 2-708 (1) measure of damages is difference in market price and the unpaid K price (assuming no cover) (2) where measure of damages in 2-708(1) is inadequate to put sell in good as position as he would be if it K had gone through Profit which seller would have made from full performance from buy together with incidenals from cost and loss avoided . it is not cover .
not merely possible) WHAT HAPPENS WHERE THE K IS A LOOSING DEAL (what happens in expection damages) . what does the party get for damages? o It would not be expectation to get any money – restitution would get him money on the loosing K (designed to avoid unjust enrichment of owner) Measure of restitution: Reasonable value of the benefit conferred on owner (see Algernon Blair pg 488 – a pretty typical case) General rule: where the victim of breach is in loosing deal.because breaching party would be unjustly enriched .“duty to mitigate” . and the contractor can’t recover more than the K price o courts are divided (note 2 pg 290) o there aren’t a lot of cases (because party on winning end of deal rarely breaches) LIMITATIONS ON EXPECTATION DAMAGES (491) AVOIDABILITY (limitation on “loss value”) Avoidability (applies no matter what the K is – but we will look at specific examples of ucc and employment) . but contractor has already spend more than the K price? . courts uniformly give only the amount that they would have gotten under the K – don’t go over the K price .but if party has partially performed. the party may obtain restitution (sue in quasi-K) instead of expectation . the party would have lost money Where party has fully performed.But take the words with grain of salt – it isn’t a “duty” because a breach of it does not provide a cause of action .Measure of reasonable value: use the reliance price – the amount spend thus far (but it is labeled “restitution”) What if party has Partially Performed. 7th circuit (in Diasonics) asks if they “would” have sold another unit (if it would have been profitable.Means: party may not recover damages that could have reasonably been avoided o Formula A = Loss value+ other loss – cost AVOIDABLE – loss AVOIDABLE (instead of just cost and loss avoided) .because expectation damages try to put the party in the position it would have been in if the K had been performed o But in the loosing K.should the K price be a ceiling.
where K price – market price/resale price would undercompensate (by not compensating for loss in volume) .What happens where K price – market price/resale price would overcompensate? Majority rule: market damages remedy (may not reflect the actual loss to buyer.There are still problems with these basic UCC formulas o Volume seller (dyasonics pg 480) .2-706 : give seller remedy for resell price (which alleviates seller from having to prove market price) .UCC 1-106: UCC generally should be liberally administered to the end that the aggrieved party should be put in as good a position as if the other party had fully perfomed o This comes together with the rational of courts like Dyasonics. seller (who then completes work and resells) is protected as long as it was a commercially reasonable judgment (protected even if the cost of completing and selling got it less than K price) Avoidability under UCC .Preference for substitute transaction implements principle of avoidability o which differs from common law view (measure of damages and K price at place and time for tender) .Buyer’s damages are difference between cover price and K price (no need to prove market price) as long as it was commercially reasonable cover .- - o Formula B = lost profit + JUSTIFIED cost of reliance + other loss – loss AVOIDABLE (avoided) Reason behind the avoidability rule: o (see Rockingham pg 492) – by not avoiding costs. but encourage a more efficient market and discourages breach) . the party runs up damages for other party. but does not have a net gain for himself We want party to buy its way out of the K.Seller’s damages (2-708 (1)): difference between K price and market price at time and place for tender o Just like common law . not to give the other party to increase those damages even when it doesn’t help that party Therefore victim of repudiation may not proceed and perform anyway (unless repudiating party retracts repudiate) Recall Cosden v Helm: (trying to determine at what point in rising market did we figure the market price at which the seller has repudiated) o In light of UCC’s preference for cover and UCC’s allowing party to suspend performance and await retraction of repudiation… buyer may wait a commercially reasonable time o But what if buyer repudiates when seller is in the middle of performance (opposite cosden v helm) 2-704(2) where buyer repudiates.Favors cover .
and build it again) .Lost profits approach encourages seller to breach when the market is rising • A fixed price K (like there was in this case) allocates the risk of a rising market to seller and declining market to buyer – that allocation defines the expectations made at the time they made the K o But what about idea of efficient breach? o Seller would be overcompensated (see p 499) Avoidability in employment Ks Parker v Twentieth Century-Fox Film Corp (500) .to some courts.how close does the substitute employment have to be? Of the same kind? Of the same quality? Avoidability and cost to remedy defect (Jacobs and Youns v kent – p 507) . the willfulness of the breach is a factor to consider when deciding how to analyze the case .Also. change pipe.Merely mitigating loss doesn’t mean that she has given up her claim for breach Question of reasonable measures that would avoid loss DISTINCT from measure that would make her give up the first K (and therefore the cause of action) .even thought there was substantial performance.Issue: how to measure the “loss in value” o Either what it would cost to bring job in conformance with specs o Diff between value of building as it was build and as it was promised Use diff between value as built/as promised Diff was 0 Rational: desire to avoid econ waste (it would be wasteful to tear out building. but Kent still had a claim for damages .does duty to mitigate include dealing with party that has just breached the K? o seems like a way to modify K without getting agreement .Desire to avoid economic waste – similar to avoidability Diminution of value v cost of completion (see Goves v John Wunder – 513) . there would not have been econ waste concern (nothing has to be undone) o But breach could have been an efficient breach – to avoid econ waste (a 60. we might not allow efficient breach (the purpose of the K) • .000 job that makes the land worth 12.000 instead of 0) see (Peevyhouse – 518) o But if it is a matter of eccentric taste. there was still breach .willful breach (as opposed to Jacobs and kent) .So Kent still had to pay for performance.
five key points o generally we determine foreseeability at time K was made. p 541): the extreme traditional view • Denies lost profits to any new business (as opposed to ongoing business) • Requires a track record to measure lost profits against (which new business doesn’t have) .Doesn’t have to be just lost profits o Lost appreciation of land in Kenford .this is a policy judgment o courts are divided about how lost profits can be established Fera v Village: liberal view of certainty • Even though the store never opened. the store could recover lost profits by est by expert testimony what projected lost profit was Evergreen Amusement Corp (note 1. the damages must have reasonably been in the contemplation of both parties when they made the K .most commonly an issue when: there is a claim for lost profits on a new venture that does not come about because of breach . not at time of breach o what must be foreseeable: the loss would result if the breach occurred (the breach itself must not be foreseeable – the breach could come about in a way that no one contemplated) o loss must be contemplated by both parties (as a practical matter.Issue: does expert testimony est the loss with sufficient certainty (depends on what court) .courts don’t let ∏ speculate on what damages will be o must be proven with reasonable amount of certainty . we only care if it was foreseeable to the party in breach) o were the consequences foreseeable (not were they actually forseen) – this is an objective standard o The loss must be foreseeable as a probable consequence of the breach (not as a certain consequence of the breach) CERTAINTY .Courts split nearly 50% on efficient breach v willful breach/econ waste/how important the term of K was to someone/how disproportionate cost of completion was compared to diminushan of value FORESEEABILITY Limitation on “other loss” For lost expectation to be recoverable.
possible advantage taking (most concerned in adhesion Ks) o if liquidated damages clauses are liberally enforced. both sides might want the liquidated damages to minimize their respective risks by specifying payment for breach in advance . esp in adhesion Ks .avoids safeguards of court litigation .Potential to reduce litigation.to make it clear who is assuming liability for the breach (risk that party A will come away with nothing) . avoid delays and expense of litigation Disadvantages of the clause (as a matter of policy): .It can enhance the credibility of a party (a construction K that takes on liquidation damages if contractors doesn’t finish on time lends them credibility) . it could impede that companies ability to pay other creditors o it increases the risk for other creditors .doesn’t allow efficient breach .it also limits the liability (if the damages are potentially astronomical and B could get stuck with runaway damages) o thus. they will show up in more places.It also allows parties to fashion remedy that corrects what parties perceive to be inadequate judicial remedies (foreseeability and certainty problems) .LIQUIDATED DAMAGES: What situations would parties want liquidated damages in K? .if stipulated damages provision deters company from breaching K (and increase price of breach).
presumption against specific performance o consider the extent to which damages can be reasonably calculated.merely incidental to main purpose of K .UCC 2-716 . and to which goods or services are unique or cannot be obtained elsewhere (Oprah situation) .Expectation (Baseline remedy) o K for sale of goods: breach by buyer o K for sale of goods: breach by seller o K for services: breach by seller o K for services: breach by buyer K for sale of goods: breach by buyer K price – cover price (see UCC 2-706 K for sale of goods: breach by seller Cover price (or market price) – K price K for services: breach by seller (see pb house) Cost of completion Exception: diminution in value .unintentional breach .economic waste K for services: breach by buyer Costs incurred prior to breach + profit excepted – payments received Magic: K price = cost incurred + costs saved + profit expected K price – cost saved = Costs incurred + profit expected Thus 1st equation becomes: K price – costs saved – payments received .Remedies (overview) .