Remedies : Professor Powers- Fall 2014
-Compensatory remedies- provide P with $ that will make up for consequences of the wrong
-Restitution remedies- disgorge the benefit conferred on D obtained at P’s expense.
-Injunctions- prevent a wrong from occurring or limit consequences of a wrong that has occurred
– Remedy decisions are made to affect behavior of people in the future who may breach
-Specific relief- transfers something to the P, or brings about particular thing. Makes breach do something.
-Substitutional relief- $ substitute for P’s right.
– Specific and Subs relief associated with equity and law. Chancellors would give relief in extraordinary cases where no remedy was available in courts of law. Usually in personam decrees by ordering D to act/ refrain from acting in some way (injunction). Legal remedy was subsitutional relief, $$.
EX: ejectment, replevin
Ex: Some $ restitution, tracing
EX: injunction (specific perf)
GENERAL PRINCIPLES GOVERNING DAMAGES:
A. Compensatory Damages
a. Compensatory das are awarded to a person as compensation, indemnity or restitution for a wrong or injury sustained by him. Make injured party whole and restore him to position he was in before the loss, no profit to him.
b. When persons prop destroyed/ made useless, das measure is the fair market value of item before it was destroyed. NO profit for P.
B. Direct and Consequential DAS (General moves you forward, consequential is just the effects outside the K).
a. Expectation interest: Loss in value of performance + Any other loss (incidential/ consequential loss caused by breach – Cost/ loss avoided = benefit of the bargain as if the contract had been perf. You should be able to rely on the K. K DAS are supposed to help you move forward. Gives you what you were supposed to get from the bargain. EXPECTANCY PROTECTED that when u enter K, u get what you wanted. EX: How much the K was worth
b. Breach of K- breach must be prox cause of injury to P
c. Direct DAS- “general DAS” are measured by loss of the value of the performance promised by the breaching party. It is based on the value of the very thing which the P was entitled to from the K. Include paper losses, unrealized losses. They are determined @ date of loss market measure.
1. Arise naturally from breach under ordinary circumstances
a. Market value
b. Substitute transaction
d. Cost to complete/ repair, dimunation in value
d. Consequential DAS- “special DAS”- DAS that result as a secondary consequence of the D’s non-performance. Arise from another variable of an additional cause, without which the act done would have made no harmful result. NOR based on VALUE of the performance promised but the VALUE of the consequence that that performance may produce.
1. Arise as a consequence of the breach due to circumstances of the particular case
a. Collateral losses
b. Lost profits
e. How DAS are categorized are important.
LIMITATIONS of DAS
a. If there is a breach, when may P recover lost profits?
i. Must be certainty that such damages have been caused by the breach
ii. AND alleged loss must be reasonably certain and directly traceable to the breach, not remote or the result of other intervening causes.
iii. AND must be showing that the particular DAS was in contemplation of the parties at the time K was made.
1. Absolute certainty of amount not required where loss is est.
2. New business has stricter standards cus cant estimate lost profits with reasonable certainty.
iv. Kenford v. County of Erie- Projections for the next 20 years of profits NOT sufficient proof for reasonable certainty. The economic model the P used assumed the stadium was completed, available for use, and was successful. They made too many assumptions about the projections of profitability.
1. Ps consequential loss is too remote from the main injury to be compensable and too speculative to be ascertainable.
b. Certainty for overhead/ home office expenses- operating expenses, salaries of staff, accounting, dues and subscriptions, equip costs, and utility svcs.
i. The Authority hires contractor to build project. Authority set start date but kept getting pushed back. Contractor just sat idly waiting to start, costed them $$. Never gave contractor definite dates to start, they were on standby.
ii. Overhead are general DAS cus you were expecting to get $ to pay your employees. You included overheard cost in K price. But can become consequential if allocated overhead is exceeded cus of D’s delay.
c. Unabsorbed home office expenses- overhead cost needlessly consumed by a partially or totally idle contractor. Periods of reduced activity or delay.
i. When party imposes delay on other party to perform obligations, DAS are measured by direct cost of all labor and material PLUS fair and reasonable overhead expenses during the reasonable time required to complete perf.
ii. Where P incurrs indirect DAS as a result of delay like addl cost and labor, just need to show that P could not otherwise reasonably recoup its pro rate home expenses incurred while it was idled by the delay. (includes if if revented them from seeking other contracts during the delay period.
iii. Eichleay formula- method of prorating a contractor’s total overhead expenses for a particular K. ONLY USED IF THERE IS ADEQAUTE EVIDENCE the contractor suffered actual DAS as a result of unreasonable owner-caused delay.
1. (Total amount billed on the K by contractor/
Contractors total billings during the K period)
Contractors home office expenses attributable to the K period
AMOUNT OF HOME OFFICE EXPENSES ALLOCABLE TO THE K
(AMOUNT OF HOME OFFICE EXPENSES ALLOCABLE TO THE K/
Total # of days of the contractors perf under the K)
Daily contract home office expense rate.
3. Daily contract home office expense rate
# Days of delays = TOTAL DAS AMOUNT
d. Bigelow principle- in cases where D’s wrongdoing prevented P from demonstrating the exact measure of DAS suffered, factfinder may make a just and reasonable estimate of DAS. Principle: How can D insist on proof of DAS if D destroyed the proof?
D. Avoidable Consequences/ mitigating. Avoid loos when you can or you wont get compensation.
a. Generally, when owner tells builder that he repudiates or renounces the contract and EXPLICITLY tells contractor not to do anything further under it, the contractor cannot go on and complete the work and sue for the full K price.
i. Exception-where work has progressed to extent that stopping would be impracticable to try to estimate the contractor’s DAS, where to complete the work will diminish the DAS to the owner, or at least not enhance his DAS, the contractor may complete the work.
1. Ie having a complete house limits DAS to owners then a half built crappy house. House is worth more and can sell to limit DAS to owner.
2. UCC- Burden is on buyer to show sellers action of completing manufacture was commercially unreasonable. Seller may exercise reasonable commercial judgment for purposes of avoiding loss, either resell for scrap or salvage.
b. When D damages P’s car, P entitled to the difference in FMV before and after the damage.
c. D hits P’s truck which hauled gravel. P hauled 1/3 less and lost profits because the truck was wrecked. P did not make good efforts to find a substitute truck to rent. P wanted lost profits and repair costs to truck. P is only entitled to repair cost, not lost profits.
i. To recover lost profits, he must show he made reasonable efforts to obtain another for the time required to repair/replace the damaged one and
ii. He was unable to obtain one in the area reasonably related to his business. No duty TO MITIGATE DAS
or loss that the party in breach did not have a reason to foresee as a probable result of the breach when the K was made. TORT- recovery only if D owed a duty to P , regardless of foreseeability, caused by D’s negligent act.
b. Economic Loss- A plaintiff can recover in tort only those economic losses resulting from injury to his person or damage to his property. P cannot recover economic losses associated with injury to the person or damage to the property of another.
1. Limit reach or tort liability
2. Protect line between tort and contract
3. Prevent domino effect, he sues x, x sues z, z sues y.
ii. One who suffers only pecuniary loss through negligence of other has no tort cause of action against that person. It’s a contract case, not a tort case. prohibits the extension of tort recovery for cases in which a product has damaged only itself and there is no personal injury or damage to other property and the losses or damages are economic in nature. It preserves the distinction between contract and tort law and prevent parties to a contract from avoiding agreed-upon contract remedies and seeking broader remedies under tort theory than the contract would have permitted
c. Recovery for Emotional Distress- No recovery for emotional distress UNLESS
i. Breach also caused bodily harm
ii. Contract or breach is one where serious emotional distress is an especially likely result. The CONTRACT is emotional confort or something. Look at primary purpose of K. Some K’s are highly personal and laden with emotion.
1. Carriers and innkeepers
2. Disposition and carriage of dead bodies
3. Delivery of death messages
iii. There is no be a measurable market std for emotional DAS .
iv. Must be that Monetary damages are not calculable.
H. Contractual Limitations on Damages
a. Liquidated damages and Penalties- to prevent breach
i. Damages for breach by either party can be liquidated in the K, but only at an amount reasonable in light of the anticipated or actual loss caused by the breach and the difficulty of proof of loss.
ii. Unreasonably large liquidated damages are UNENFORCEABLE. It is to compensate for loss, NOT PUNISH. Penalty clause not enforceable? If there is no DAS, there is no harm caused. No LDAS
iii. Reasonable if:
1. Amount approximates actual loss or loss anticipated at time K made. and
2. The greater the difficulty of either proving that the loss occurred or of establishing its amount with the requisite certainty. If its easy to calculate, don’t need LD provision. Means youre tyring to get more than you should.
b. Limits on remedies
i. Undercompensatory Damages provisions
1. Ie clause says DAS up to $500. actual $20K in DAS. Exculpatory clauses insulating a party from its own negligence (tho disfavored) are permitted if one party is not at a significant disadvantage in bargainging.
a. Against Public Policy if it enforces a release from Wilfull and wanton conduct