Select Page

Contracts II
Faulkner Law - Thomas Goode Jones School of Law
See, Brenda

 Remedies for Breach
Expectation Damages
§ 344(a) Parties interest in having the benefit of the bargain by being put in as good a position as he would have been in had the K been performed.
§ 347 – Formula
                                                              i.            The loss in value to him of the other party’s performance caused by its failure or deficiency, PLUS
                                                            ii.            Any other loss, including incidental or consequential loss, caused by the breach, MINUS
                                                          iii.            Any cost or other loss that he has avoided by not having to perform
Reliance Damages
§ 344(b) Parties interest in being reimbursed for loss caused by reliance on the K by being put in as good a position as he would have been in had the K not been made.
§349 – Damages Based on Reliance Interest
                                                              i.            The injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, LESS any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the K been performed.
Restitution
§ 344(c) Parties interest in having restored to him any benefit that he has conferred on the other party
“Quantum Meruit”
§ 373 – Restitution when other party is in breach
                                                              i.            The injured party is entitled to restitution for any benefit that he has conferred on the other party by way of part performance or reliance.
§ 374 – Restitution for the party who is in breach
                                                              i.            If a party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by the other party’s breach, the party in breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he has caused by his own breach.
Specific Relief
Specific Performance
                                                              i.            § 359 (a) – Specific Performance or an injunction will not be ordered if damages would be adequate to protect the expectation interest of the injured party.
1.      § 360 – Factors for Adequate Damages
a.      The difficulty of proving damages with reasonable certainty
b.      The difficulty of procuring a suitable substitute performance by means of money awarded as damages, AND
c.       The likelihood that an award of damages could not be collected
                                                            ii.            UCC 2-716 – Specific performance may be decreed where the goods are unique or in other proper circumstances.
1.      In a consumer K, the parties can agree to specific performance
                                                          iii.            Price Increase alone is not sufficient to order specific performance
                                                          iv.            Specific Performance can be decreed if there is a public interest involved.
                                                            v.            Personal Service Rule – The court is not going to make someone work against their will.
1.      No SP in a personal service K
Injunctions
                                                              i.            § 359(a) – allows for injunctions
                                                            ii.            Injunctions differ from specific performance b/c the court is going to prevent you from doing something instead of making you do something.
Measuring Expectation
Overhead
                                                              i.            Non-breaching parties are allowed to recover overhead expenses as part of lost profit damages b/c they do not have to include overhead in expenses saved, i.e., costs avoided.
                                                            ii.            UCC 2-708(2)—allows the seller to recover reasonable overhead in calculating lost profits when 2-708(1), which measures damages as the difference b/w the K price and mkt. price, is inadequate to give the seller the benefit of the bargain
Cover
                                                              i.            2-712: Buyer may have damages by making in good faith and w/o unreasonable delay any reasonable purchase of or K to purchase substitute goods and may recover from seller the difference b/w the cover and the K price PLUS incidental/consequential damages
                                                            ii.            Elements of Cover under 2-712:
1.    

of Goods
1.      Majority: Mkt. price theory (diff. b/w mkt. price & K price) under 2-713 should be used to calculate damages for the breach of an executory K for the sale of goods
2.      Minority: Only in limited circumstances, e.g., when a seller’s breach is not in bad faith and is the result of conditions not contemplated by either party to the K (such as weather destroying a crop) or when the K is complete (i.e., no longer executory), should the lost profits theory (i.e., limit damages to actual loss sustained) be used to calculate damages (involves impossibility of performance)
3.      What is the reason for application of 2-713?
a.       It discourages both parties from breaching the k
b.      Interpretation of the UCC is if there is a more specific section regarding buyer/seller’s remedies then it should be used over a more general section, i.e., §1-106
                                                          iii.            Avoidability in Employment Contracts
1.      An employee has a duty to mitigate damages when the employer breaches—however, the employee is not required to take a job that is substantially different or inferior to the job given by the breaching employer. 
2.      The breaching employer bears the b.o.p. that the substitute employment was comparable or similar and not inferior or different, and that the opportunity was offered to employee
                                                          iv.            Avoidability and Cost to Remedy Defect
1.      Diminished Value Rule
a.      Generally, damages for owner against a breaching builder would be the cost of completion.
b.      Exception: (DVR) – If the cost of completion is grossly disproportionate to the value then the court will give diminution of value.
2.      Cost to Remedy Defect
One who willfully breaches a construction K to improve another’s land is liable for the reasonable cost of completing the required work, not the value