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Corollary/competing policy Do not award damages for injuries that the aggrieved party could have avoided/prevented/mitigated (because they were not caused by the breaching party) Avoid under-compensation, forfeitures and penalties Avoid letting the breaching party profit from the uncertainty caused by the breach, even if the measure of damages is somewhat uncertain, and resolve uncertainties in favor of the aggrieved party to ensure adequate compensation
Award those damages and only those damages caused by the breach
Avoid over-compensation, windfalls and double recovery Avoid speculative damages (too uncertain in amount) because there is insufficient basis for believing such damages are compensatory Award consequential damages ONLY if it was FORESEEABLE to the breaching party, at the time of contract formation, that the other party would suffer a loss from that kind of breach
Avoid burdening the breaching party with damages the risk of which was not reasonably contemplated when deciding whether to enter into the agreement
(I) Three kinds of damages (A) Expectation Damages (1)Designed to put the aggrieved party into the position that it would have been if it had received the full performance promised (2)Make the plaintiff whole by paying the amount necessary to approximate the value of full performance (B) Reliance Damages (1)Designed to put the aggrieved party back into the position that it would have been in today if the parties had not entered the contract (2)Compensate out-of-pocket expenses incurred by the aggrieved party in reliance on the existence of the contract as well as opportunities the aggrieved party let pass in reliance on the contract (lost opportunity costs) (C) Restitution Damages (1)Designed to avoid unjust enrichment of the breaching party by forcing that party to restore to the aggrieved party any benefits conferred for which the aggrieved party was not already compensated (II) Expectation Damages (A) Direct vs. Indirect (incidental and consequential) (III) Direct Damages (A) Amounts awarded for injury to or loss of the value of what was promised as consideration in the contract
Also argues about liability assumed b. By the end of the court's discussion you find a fairly wide open field c. the market price is at the place where the seller was supposed to have tendered the goods (ii) If the seller has tendered defective goods or otherwise breached. Handling a defective delivery or arranging for purchase of substitute goods (3)Might include costs incurred in storing or reshipping or reselling goods. (IV) Indirect Damages (A) Amounts awarded for other.goes from daily to weekly. lost customers.(1)Ex. Buyer argues that the valuation of the paper at the time of breach should be used rather than the resale price i. Newspaper sale case b. secondary losses resulting from the breach (1)Classified as (B) Incidental Damages (1)Extra costs incurred by the aggrieved party in dealing with the breach (2)Ex. To determine the materiality of a failure to fully perform a promise. paying a broker to find a substitute buyer. paying extra insurance.04 Determining Whether Writing is a Complete or Partial Integration . D does several acts of mitigation . property not delivered. gets personal mortgage. etc. (C) Consequential Damages (1)Other losses arising as a consequence of the breach and are often where the "real money" is in the dispute (2)May include such items as lost profits. lost business volume and downstream breaches caused by the original breach (V) Direct Damages: Amount for damages (A) Typical damages (B) Need to know time and place at which market should be measured and which market provides an appropriate measure (1)UCC §2-708(1) specifies using the market price at the time and place at which the seller was to tender the goods to the buyer under the contract (i) Common law has similar rules (2)UCC §2-713(1) specifies using the market price at the time when the buyer learned of the breach (i) If the seller has repudiated or failed to perform. the market price is at the place where the goods arrive (iii) Common law has similar rules (C) Damages when there is no market (1)Sackett v. Spindler (i) Facts a. the following factors are considered: (use R2nd§241) § 7. Whether a breach of contract is total or partial depends upon its materiality. sells half his stock (ii) Damages determined based on resale price a. D seller c. P buyer. Compensate for loss because of services not performed. etc.
in which case the writing is a partial integration. If the cost to complete or correct is out of proportion = the measure for damages is the difference in value d. Rule. the measure is the difference in value." When that is true. UNLESS the cost is “grossly and unfairly out of proportion to the good to be attained.” c. Bell (i) Facts: Dentist case (ii) Damages a. Measure is not the cost of replacement but the difference in value (iii) ROL . Where substantial performance has been rendered= the remedy is the cost of completion or correction b. BUT where the defect in performance is substantial. When this is true. There is increasing acceptance of this approach. (2)Difference in Value Rule: (Diminution) a. the cost of completion or correction will be awarded. Kent (i) Facts a. including evidence of prior negotiations. (3)Khiterer v. the measure is the difference in value . the remedy is the cost of completion or correction unless that cost "is grossly and unfairly out of proportion to the good to be attained. as it has been incorporated into the UCC and the Restatement Second. the writing is conclusively presumed to be a complete integration. DIMINUTION IN VALUE (1)Jacobs & Youngs v. This is the majority approach.In most cases the cost of replacement is the measure … unless the cost of completion is grossly and unfairly out of proportion to the good to be attained. UCC § 2202] (VI) COST OF COMPLETION/REPAIR VS. 3) Reasonable person" approach (from Williston's rules) – If a writing appears to be a complete expression of the parties' agreement. Plumbing Pipe case (ii) Damages a. [See Restatement § 210. 4) Intention of the parties" approach (Corbin) – This approach allows all relevant evidence on the issue of intent. it is a complete integration unless the additional terms are such that it would be natural to enter a separate agreement as to such terms. comment b. 2) Collateral contract" concept – All final writings are deemed to be partial integrations.Where substantial performance has been rendered.1) Four corners" or "plain meaning" rule – If the writing appears complete and final on its face.
not cost of completion c.proper measure of damages in cases involving the breach of a construction contract is the "difference between the amount due on the contract and the amount necessary to properly complete the job or to replace the defective construction. (i) Facts a. D .Garland Coal .Peevyhouse . RULE .for construction of a custom home .Belosky . however. Court found cost of completion . Belosky Construction.home was built but the roof was centered over the library not the living room as represented in the drawings as well as other problems (ii) Procedure a. Inc.own a farm with coal deposits and leased premises to D b. P . D appealed (iii)Holding a.awarded P $73K d. "the contractor's breach was unintentional and constituted substantial performance in good faith" and remedying the defective performance would result in unreasonable economic waste. D didn't do the remedial work so P sued d. RULE: Where. Policy . Garland Coal & Mining Co.the difference in value rule is applied to avoid economic waste (4)Lyon v. P . damages should be based upon i. D introduced testimony that the difference between the present value (ii) Procedure . "the difference between the value of the property as constructed and the value if performance had been properly completed" (5)Peevyhouse v.entered into contract with D . (i) Facts a.b.specifically agreed to perform certain restorative and remedial work at the end of the lease c. Finds that D acted negligently and it was a substantial defect b/c it was a custom home (iv) Damages ROL a. whichever is appropriate" b.Lyon . D argued diminished value should be used. P sued for breach of contract b.
Undue Expense RULE i. Boat had already been ordered and in D's possession b. (1) Measure of damages for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for offer and the unpaid contract price together with any . (i) Facts: P contracted to buy a boat and requested immediate delivery but P's lawyer sent D a letter rescinding the sales contract because P was about to undergo hospitalization and it would be impossible to make payments a. but where the defect in material or construction is one that cannot be remedied without an expenditure for reconstruction disproportionate to the end to be attained. P awarded $5K and had sought $25K (iii)Holding a. D CAN RECOVER LOSS OF PROFITS AND INCIDENTAL EXPENSES i. D declined to refund deposit c. D argued it would have sold two boats and had to pay incidental expenses for upkeep. Where the defect is one that can be repaired or cured without undue expense. storage. (ii) Holding a. D later sold the boat four months later for the same price i. etc. P argued D made up loss ii. UCC §2-708 i. Measurement is period between date performance was due and time of resale (iii) RULE.a. Retail Marine Corp. the cost of performance is the proper measure of damages. Reduced judgment to $300 for P (iv) Damages ROL a. P sued D for breach of contract and was awarded considerably less than was sued for so both P and D appealing i.Damages a. the value rule should be followed (B) Seller's lost profits and lost volume (1)Neri v.
Corp. A right to recover damages under the provisions of this article other than subsection (1) (C) Vitex Mfg. Caribtex.affirmed . despite his breach. expenses or commissions incurred in stopping delivery. in . v. in the transportation. care and custody of goods after the buyer's breach.Vitex (ii) D .district court not compelled to consider P's overhead costs (3)Damages (D) Overhead RULE (1)Include broadly the continuous expenses of the business. Corp. due allowance for costs reasonably incurred and due credit for payments or proceeds of resale b. Buyer's right to restitution under (2) is subject to offset to the extent that the seller establishes: ii. Buyer.incidental damages provided in 2-710. may have reimbursement of the amount by which his payment exceeds: ii. 20% of the value of the buyer's total performance. UCC §2-718 i. overhead should be treated as a part of gross profits and recoverable as damages and should not be considered part of seller's costs (VII) Indirect Damages (A) Incidental Damages--> extra costs incurred by the aggrieved party in dealing with the breach (1)Usually administrative and mitigative costs (2)UCC §2-710 Sellers Incidental Damages (i) Incidental damages to an aggrieved seller include any commercially reasonable charges. but excluding expenses saved in consequence of the buyer's breach ii.appealing judgment for P for loss of profits (iii) Service contract for administering chemicals (2)Holding . (2) If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer. Reasonable liquidated damages stipulated by the contract. together with any incidental damages provided in Section 2-710. Absent such stipulation. or iii. regardless of the outlay on a particular project (E) Lost Profits RULE (1)In a claim for lost profits. (1)Facts (i) P . or $500.Caribtex . UCC §2-718 i. whichever is smaller c.
BSO . Awards her $12K not the original $100K (iii) ROL and Reasoning a.millers who had equipment problems so D . downstream breaches caused by the original breach and other losses (ii) Aggrieved party must prove the injury was caused by the breach a. An injured party may recover those damages reasonably considered to arise naturally from a breach of contract. First question is about the recoverability of loss of professional opportunities i. P . D argues it is damage to reputation ii. Lost profits.after they cancel her contract to narrate Oedipus Rex after she supported PLO i. Real argument is about the indirect damages . expenses or commissions in connection with effecting cover and any other reasonable expenses incident to the delay or other breach (B) Consequential Damages --> losses triggered by the breach itself (not costs associated with the aggrieved party's efforts to mitigate further losses) (i) Likely include a. (i) Facts a. lost customers.Hadley . Second category . Boston Symphony Orchestra. any commercially reasonable charges. or those damages within the reasonable contemplation of the parties at the time of contracting. receipt.sues D . not seller/supplier (iv) Must be foreseeable at the time of contract formation (2) Hadley v. First category .the consequential damages b. P argues it is loss of future jobs . P . b. Baxendale (i) Facts a. She wins a $100K verdict at trial for loss to career (ii) Holding a.Baxendaletook shaft for repair but was delayed in return to P and P lost profits i.Redgrave . Inc. Orders new trial with rule on how to determine damages (iii) ROL a.Special Consequential Damages i. lost business volume. transportation and care and custody of goods rightfully rejected. Information made known to the other party (by the time of contract formation) regarding type of breach and resulting damages (3) Vanessa Redgrave v.connection with return or resale of the goods or otherwise resulting from the breach (3)UCC §2-715 Buyer's Incidental Damages (i) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection. Causation alone is not enough (iii) Almost always awarded only to buyer/recipient. The delay resulted in consequential damages (ii) Holding a.General Consequential Damages i.
She also can't seem to prove the nature of her jobs changed substantially enough after the cancellation vii.movies not obtaining financing v.proper jury instructions . a person who has suffered an injury or loss should take reasonable action. BSO cancelation led to damages iv. ROL . iii. Second issue . BSO statements . (3)Aggrieved party cannot exact revenge by "running up the ante" (B) Sackett v. The mitigation of damages doctrine is sometimes called minimization of damages or the doctrine of Avoidable Consequences. 50 2. Any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise b. to avoid additional injury or loss.perceived reaction iii. They discuss other reasons .to recover for consequential damages. (2)Under the mitigation of damages doctrine. The failure of a plaintiff to take protective steps after suffering an injury or loss can reduce the amount of the plaintiff's recovery. established experience or direct inference from known circumstances (4)UCC §2-715. Nexus between breach and so called result wasn't proven up by P and it was P's burden vi. where possible. P must establish a "basis for an inference of fact" that P has actually been damaged and the fact finder must be able to compute the compensation by rational methods upon a firm basis of facts f. Could the computation calculation by rational means ii.court holds yes d.1. ROL . Spindler (1)Facts . Buyer's Consequential Damages (i) Consequential damages resulting from the seller's breach include: a. There are ways to put holes in her causation arguments e.Damages must be capable of ascertainment by reference to some definite standard.2 factors on p. McCone ROL --> claims for damages to reputation and other emotional injury could not be sustained in the suit because "these additional damages are not contract damages. either market value. Next issue is whether there is sufficient causation of the damages by the breach i. Injury to person or property proximately resulting from any breach of warranty (VIII) Mitigation of Damages Doctrine (avoidable damages) (1)The use of reasonable care and diligence in an effort to minimize or avoid injury. Massachusetts says damage to reputation is unduly speculative and cannot be presumed to have been within the contemplation of the parties when they entered into the contract . Court distinguishes her claim from what D is arguing to what she is arguing that it is a loss of future jobs so the court holds yes it is recoverable in her kinds of damages that she wants to recover c.
Co.Rather than permitting employee to remain idle …. Financial condition of paper immediately after breach was worse than one year later (C) Parker v.says it was comparable (ii) ROL . American Ry. the employee's rejection of or failure to seek other available employment of a different or inferior kind may not be resorted to in order to mitigate damages (4)Dissent (i) Says the movie wasn't different enough . less the amount.(i) Newspaper shares case . Law requires him to make a reasonable effort to secure other employment. v.Shirley Maclaine Parker . has earned or with reasonable effort might have earned from employment. (1)Facts (i) P . However. Twentieth Century Fox Film Corp. Express Co.measure of recovery by a wrongfully discharged employee is the amount of salary agreed upon for the period of service.sues 20th Century after they dropped the movie Bloomer Girl and offered her Big Country Western movie which she declined (ii) Contract contains liquidated damages clause (iii)D argues P refused to mitigate by not accepting other role (2)Holding (i) Affirmed summary judgment for P a. a. which the employer affirmatively proves the employee. Other movie was different and inferior (3)RULE (i) General ROL . before projected earnings from other employment opportunities not sought or accepted by the discharged employee can be applied in mitigation.seller mitigates (2)RULE: (i) Mitigation RULE . And Restatement (Second) §90 (B) Available only for REASONABLE expense incurred IN RELIANCE on the existence of the promise (1)The aggrieved party may not recover for expenses that could have been avoided through reasonable actions to mitigate or avoid losses (C) Security Stove & Mfg. (iii) Kunz doesn't like dissent because it would be cramming down a modified contract on the party and that isn't right (IX) Reliance Damages (A) Designed to put the aggrieved party in the position that it would have been in TODAY if the parties had not entered the contract (i) Compensate out-of-pocket expenses incurred by the aggrieved party in reliance on the existence of the contract as well as lost opportunity costs (ii) May also be awarded when a promise is enforced under promissory estoppel a. (1)Facts .A party injured by a breach of contract is required to do everything reasonably possible to minimize his own loss and thus reduce the damages for which the other party has become liable (ii) Question of fact a. the employer must show that the other employment was comparable or substantially similar to that of which the employee has been deprived.
Liquidation or Limitation of Damages. which is reasonable in light of the anticipated OR actual harm. A term fixing large liquidated damages is VOID as a penalty.when aware. P has 21 packages .shipper (iii)P wants to exhibit stove and needs D to transport it to show for them.(i) P . .page 76 .but that profit is often not included in measuring the value obtained by the aggrieved party (F) Liquidated/agreed/stipulated Damages (1)UCC §2-718. Thomas (1)Facts (i) P .Lancellotti . Five-year lease with condition about construction (iii)Contract is broke so P sues seeking $25K back (iv) D seeks $52K in damages including $6. Deposits (i) Damages for breach by either party may be liquidated in the agreement BUT ONLY at an amount.all numbered .Thomas (ii) P agreed to purchase D's luncheonette business and rent premises from D.manufacturer (ii) D . then responsible for loss (D) Lancellotti v. goodwill and equipment for $25K and a promise that only he would operate the business and promise to build an addition to the existing building a.665 for unpaid rent of property and missing equipment (2)Holding (i) Adopts Restatement (Second) §374 (ii) Remands to apply reasoning and new rule (3)RULE: (i) Court goes through problems with old rule (ii) Majority adopts new Restatement and remands it for them to apply it a. D was well aware of purpose and may have been negligent (3)ROL (i) Good example of what to do with uncertainty about expectation damages then drop down to reliance damages (ii) Peculiar circumstances ROL . the difficulties of proof of loss and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. Also agreed to buy name.and all but one arrive (the most essential one is missing) a. Couldn't replace it so couldn't mitigate (iv) P sues seeking reliance damages for expenses and interest (2)Holding (i) Court holds that it was proper to allow recovery a.sues D . How would you measure those damages (E) Measuring Restitution Damages (1)Multiple ways to measure this (i) Net enrichment (ii) Cost of services provided (iii) Pro rata portion of the contract price (2)Net enrichment often furnishes a lesser amount than cost of services or pro rata . So no real action on how much they get to keep (iii)See that trial court is really pissed off about the fact that these guys seem to have had this hoagie business and they really just wanted to buy in and find out secrets of trade and then get out a. caused by the breach.
Would the dollar amount .Restatement Second rule too . Courts have to make sure private remedy doesn't stray too far from compensatory principles b. (iii)There was a liquidated damages clause (2)Holding (i) Court upholds clause (3)RULE (i) Validity of liquidated damages is a question of law (ii) Policies that support and disfavor liquidated damages a.5 months. Panos (1)Facts (i) P . Idea of what it takes to amount to an efficient breach b. P was unemployed for 2. Parties toward and against enforceability (4) 3-Factor Wisconsin test: Whether the clause is reasonable under the totality of the circumstances: (i) Did the parties intend to provide for damages or for a penalty? (ii) Is the injury caused by the breach one that is difficult or incapable of accurate estimation at the time of the contract (iii) Are the stipulated damages a reasonable forecast of the harm caused by the breach a. Prospective and retrospective approach discussed in third factor (5)The Theory of Efficient Breach (i) Judge Posner is a proponent a.employer (ii) P was hired as a general manager for D for 3-year period but was fired 21 months before end. Huge windfall problem generated here 1. If enforce a lot of penalty clauses. Kunz likes his arguments ii.hotel . Good points about honoring the intent of the parties i.is that punitive damages may be awarded when the breach of contract is also an independent tort . end up giving the lucky aggrieved party piles of damages 2. Sees point about sophisticated parties but says it is really hard to draw that line iii.Panos .the disproportion of the liquidated damages compare to the actual damages matter at all if you were to go with Posner's test a. (G) Wassenaar v. Liquidated Damages and Penalties (i) Damages for breach by either party may be liquidated in the agreement BUT only at an amount that is reasonable in the light of the anticipated OR actual loss caused by the breach and the difficulties of proof of loss. (ii) A term fixing unreasonably large liquidated damages is UNENFORCEABLE on grounds of public policy as a penalty.(2)Restatement (Second) §356. Details to be worked out still (H)Punitive Damages (1)RARE (2)At court's discretion (i) Usually as deterrence (3)Majority Rule .Wassenaar – employee D . Damages clause held in check i.
and (ii) Claimant would suffer irreparable harm if no relief (2)Specific Performance (i) Specific Performance --> remedy by which the court orders a party to perform the unfulfilled promises in the contract rather than ordering payment of the value of those performances a. Wanton Definition --> wrongfulness. P was shopping with daughters and got trampled. or iv.(4)Romero v. Malicious ii. P and D contracted to build P's store. allowing the remedy in "other proper circumstances" especially when the aggrieved buyer is unable to locate substitute goods (cover) for those involved in the breach or knows that a substitute is unlikely to be available (3)Ammerman v. when the evidence demonstrates conduct committed without concern for the consequences. (i) Facts a. Committed recklessly with wanton disregard for P's rights b. Malice Definition --> intentional doing of a wrongful act without just cause or excuse.General Punitive Damages ROL --> punitive damages may be recovered when D's conduct was i. Fraudulent iii. Oppressive. D manager said D would pay and then didn't pay P's medical bills (ii) Holding a. Affirmed (iii) ROL a. which are unique and irreplaceable (v) UCC §2-716(1) expanded the class of goods for which specific performance may be ordered. The other party receives actual performances rather than the damages representing the value of performance (ii) Difficulty of supervision issue often comes up a. D applied to rezone property and then passed on P as a tenant . rather than intentionally and connotes an utter indifference to or conscious disregard for the rights of others (X) EQUITABLE REMEDIES (1)Equitable relief available if: (i) No adequate remedy at law. but knew it was wrong when he did it c. City Stores Co. Mervyn's (i) Facts a. Some courts use that as the sole basis for being able to say specific performance just isn't justified (iii) Most common in real estate cases (iv) May be ordered for the purchase of rare or sentimental items. D not only intended to do the act which is ascertained to be wrongful.
(ii) Holding a. Remedy at law available is adequate . Contract is indefinite and uncertain iii. Repudiation here not "termination" d. General ROL . Restatement §370 i.unpredictable market b. Court ordered specific performance . D sent letter repudiating contract (ii) Holding a.To defeat specific performance. definite in material respects. prompt. contains some terms which are subject to further negotiation between P and D will not bar a decree for specific performance (4)Laclede Gas Co. Specific performance ordered (iii) ROL a. D contracted to provide gas to MO residents area would apply to P who would ask D to supply it. Remedy of specific performance would be difficult for court to administer without constant and long-continued supervision ii. Four factors for specific performance (3 mentioned) i. Gas shortage occurred and D couldn't meet supply. (i) Facts a. General ROL . remedy at law must be as certain. Specific enforcement will not be decreed unless the terms of the contract are so expressed that the court can determine with reasonable certainty what is the duty of each party and the conditions under which performance is due b. Arab Oil Embargo . Amoco Oil Co. v. complete and efficient to attain the end of justice as a specific performance decree c.holding damages would be inadequate (iii) ROL a.the mere fact that a contract.