Select Page

Contracts II
Southern Illinois University School of Law
Robertson, RJ

Contracts II Outline

Chapter 5: Remedies for Breach—
*2 Questions: Do I have a claim? If I do, what will I get if I prevail?

Types of Damages
-specific performance
-expectation (restitution/reliance)
-remedies for sale of goods

I. Specific Relief
*Theories of Contract Law
-substitutional: most damages are monetary damages in substitute for specific
Performance
-compensatory: purpose of contract law is to compensate the injured party, not
punish the breaching party (don’t consider good-faith or bad-faith motive
because the damages remains the same)
-expectation: generally want to put the plaintiff in the position he would have
been in had the contract been fulfilled
*Specific Performance (aka equitable relief)
-available only if there is no adequate remedy at law (ie: previous state laws)
-historically: equity courts were seeing more cases than the law courts, and
making more money (want to evenly distribute load and wealth)
-today: most equity and law courts have merged
-2-712
1) after a breach, buyer may cover by making a good faith and without
unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from seller
2) original seller must pay the difference between the cost of cover and the
contract price (along with incidental costs)
-ex: A agrees to sell B car for $1000, then breaches. B buys car from C
for $1200. A then owes B $200 in order to make B whole (the
substitute must reasonable)
-2-713:
-the measure of damages for non-delivery or repudiation of the seller is the
difference between the market price at the time that the buyer
learned of the breach ad the contract price (with incidentals), but
less expenses saved in consequence of seller’s breach
-2-716:
-specific performance may be decreed when goods are unique or in other
proper circumstances
1) unique: custom-made goods, artwork, heirlooms, etc
2) other proper circumstances: how easy would it be for the
aggrieved to cover? Is there a great deal of inconvenience, delay, costs? Can’t just look at the number of comparable items that exist.
-additional expense usually does not factor into “other proper
circumstances” unless it is difficult to determine how much cover should be because of changing markets or lack of clear contract end date, as buyer must prove expenses “reliably”
-Specific performance is generally used for
1. unique goods
2. output of requirements contracts: because of the flexible nature of the
contract itself
3. land (each parcel is unique)
-specific performance is generally NOT used for
1. most goods: not unique items, can buy anywhere else
2. personal service: don’t want to force 2 opponents to work
together (becomes involuntary servitude), difficult to determine if there is compliance (doing a good job)
3. ongoing supervision by the courts: can cause the court
headaches they want to avoid

II. Measuring Expectation
1. Loss in value: the difference in value between what the promisor promised to
do and what the promisor actually did (present in every breach)
2. Other Loss: loss caused by the breach other than loss in value (such as
personal injuries and property damage)
3. Cost avoided: where the promisor’s breach is material and excuses the
promisee (aggrieved party) from performing whatever the promisee
promised to do under the contract
4. Loss avoided: Expenses avoided by the seller of goods when the buyer
breaches (ex: resale proceeds)
*Formula A
damages = loss of value – cost avoided + other loss – loss avoided
*but when aggrieved party has begun to perform:
-cost avoided = cost of complete performance – cost of reliance
-damages = LV – CCP + CR + OL – LA
*Formula B:
D = Profit(net) + CR + OL – LA
*Both formulas must yield the same result!!!!
*Example 1: Roofer charges $1000. $850 in supplies, and $150 labor. You
breach before he starts and hire another roofer. What are the damages?
A) LV (1000) – CA (850) – LA (0) = $150
B) CR (0) + profit (150) – LA (0) = $150

*Example 2: Roofer has already begun performance, expending $350
A) LV (1000) – CA (500) – LA (0) = $500
B) CR (350) + profit (150) – LA (0) = $500
*UCC remedies for the buyer
1. Cover (2-712)—buyer may “cover” for breach by making a good faith and
without reasonable delay any reasonable purchase of or contract to purchase goods in substitution (damages measured by difference in contract price and cover price).
-a buyer who “covers” does not have to prove market price
2. Market Price – K price (2-713)—buyer is entitled to the difference between the
market value at the time of tender and the contract price
3. Specific Performance (2

er what…inconsistent with Compensation
ideology
-2-718 (3): if seller can establish loss, the seller doesn’t have to give back
downpayment, then sue for damages. Instead, the seller can offset
damages with the downpayment, and then return the money.
*When a plaintiff can give up his right to sue for expectation damages, but can instead be
allowed to recover under restitution or reliance measures.
-sometimes wants to be in the position it would have been in had the contract
never been formed.
-restitution: look at defendant’s gain as the result of the contract (require the
defendant to give back the value of what was taken from the aggrieved
party)
-“stand-alone restitution” – the concept of restitution defines a basis for
recovery, even though no promise was made
-quantum meruit: look at the actual value of the service performed
(another word for restitution)
-§371: restitution may be measured by the extent to which the other party’s
property has been increased in value or his other interests advanced.
-Or by the reasonable value to the other party of what he received in terms
of what it would have cost him t obtain it from a person in the
claimant’s position.
-some courts seem to measure restitution based on reliance
-a person who recovers on restitution or reliance might be making a profit
(contrary to compensation ideology), when their expectation interest
would have led to a loss
-however, restitution is designed to prevent unjust enrichment
-have to choose between the policies of compensation and unjust enrichment
-reliance looks at out-of-pocket expenditures of the plaintiff
*When does the aggrieved party have the right to choose restitution as a measure of
damages?
-a person will want restitution or reliance when the aggrieved party would have
lost money by measuring by expectation