Expectation Damages: give injured party benefit of the bargain, put in position as if contract had been performed. Entitled to:
a)value lost because of other party’s default
b)the expenditures made carrying out own obligations under contract
Restatement § 347- injured party has a right to damages based on expectation damages as measured by a)loss in the value to him of the other party’s performance caused by its failure or deficiency, plus b)any other loss, including incidental or consequential loss, caused by the breach, minus c)any cost or other loss that he avoided by not having to perform.
UCC §2-712-buyer may cover by making a purchase of substitute goods and have damages from Seller equal to the difference between the cost of cover and the contract price. Buyer may recover from Seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages.
Hawkins v. Mcgee (63)- hairy-hand case, promised 100% perfect hand
?-Can oral guarantee of 100% success hold a Dr. liable if not satisfied? New Contract?
A-Yes, words had intention of securing consent for operation, Dr. went beyond supplying
his medical opinion.
(Value of perfect hand) minus (value of current hand)
Sullivan v. O’Connor (74)-Professional entertainer-nose job-not limited to out of pocket expenses, but also for pain and suffering from 3rd operation. Compensable in reliance or expectation.
Reliance Damages: Damages that put injured party in position as if the contract was not formed. (Expenditures made in preparation of performance) minus (expenses saved in breach)
Restatement §349-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 party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed.
Nurse v. Barns (71)
Reliance when: 1)profits too uncertain to determine but party can show their expenses, 2)in the case of a losing contract, or not enforceable contract but party entitled to some damages under promissory estoppel.
Calculating Expectation Interest:
Looking at what’s best for market efficiency: encourage performance and not breach.
Fixed Cost Problem: When some item of cost doesn’t change because of a breach, person who breaches is not responsible.
Anything that’s the same regardless of whether contract happens or not drops out.
J.O. Hooker & Sons v. Roberts Cabinet Co (78).: Removal of cabinets; UCC or CL?
Does UCC or general K law apply? transaction did involve sale of goods, but dispute was over a service (removing cabinets)
Delegation of responsibility is contract land (I’ll do this and you do that).
Since Δ couldn’t refute π profit claims (custom not enough), they were allowed.
Tongish v. Thomas (86): Sunflower seeds; which statute to use?
Conflict between general statute and specific statute, specific statute controls unless there is a reason (legislative history) to use the other one.
Market price instead of lost profit: if they give him market price, K breach would actually be profitable: could breach when price was high, pay buyer low resale price.
Example of efficient breach. (Court doesn’t want to encourage breach.)
Limitations on Damages:
Remoteness or unforeseeability of harm:
Restatement §351: Unforeseeability and other limitations on damages
not foreseeable by party in breach no damages
Common Knowledge: loss follows in ordinary cause of events (consider separation in time and space between breach and consequences, customs of the trade, etc)
Notice: party in breach knows of special circumstances
Exceptions to foreseeability:
excluding loss of profits, paying only reliance damages
if giving damages results in overcompensation
Damages can be curtailed by excluding recovery for lost profits, by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in the circumstances justice so requires in order to avoid disproportionate compensation
Creates an implicit duty to pre-mitigate.
Test of foreseeability is to determine whether D would have agreed to the contract price had he known of the extent of his liability.
UCC §2-715: (1) incidental damages include all reasonable expenses in connecting to the cover and any other reasonable expense incident to the delay or other breach (2) consequential damages resulting from sellers breach include (a) any loss of which seller at time of contract had reason to know and which could not be reasonably prevented by cover and (b) injury to person or property proximately resulting from any breach or warranty.
Hadley v. Baxendale(93): Shaft delayed b/c of negligence
Promisor responsible for foreseeable damages (expect to happen or have notice of). For special situations, damages can be awarded only if π informs Δ of the special situation or if the damages were reasonable foreseeable. Note that this encourages information sharing when deviating from a default rule
If parties silent, liability limited to foreseeability. (Common knowledge/notice)
Reasonable person in transportation co. would not have foreseen these damages.
Reasonable person won’t think this is the ONLY shaft.
When damages foreseeable: (1) included in K (2) arises naturally from breach (3) reasonably in contemplation of parties when K made.
Martinez v. Southern Pacific Transport(104): Drag Line broken
Party does not have to show that
t to mitigate, and if it’s too burdensome then it can be contracted out of
Mistletoe Express Service v. Locke(128): Breach of a losing K; can you get damages?
π can recover under reliance theory when in a losing contract and the Δ breached. If no evidence of profit, can collect reliance UNLESS Δ has evidence that π would have lost profits on deal. (then that would be subtracted from the damages)
Ignore element of profit and recover based on expenditures.
Expenses must be reasonable made in performance of the K.
Rockingham County v. Luten Bridge(131): Breach; Δ doesn’t stop performance.
π duty to do nothing to increase the damages flowing from breach
Recovered for dmgs. before breach, but not after
Party can only stop performance through explicit direction.
Damages = expenses incurred prior to breach + expectancy interest (profit expected).
Victim of a breach has a duty to avoid actions that increase the other party’s damages.
Shirley MacLaine Parker v. 20th Century Fox(142): Movie Star gets movie changed; cover?
The measure of recovery for a wrongfully discharged employee is the salary agreed upon less the amount the employee earned or with reasonable effort could have earned.
The employment must be comparable and not of a different or inferior kind.
Employer must show this before projected earnings of new job.
Buyer’s Breach and Seller’s Remedies:
UCC§2-706: where a buyer of goods repudiates or wrongfully refuses to accept delivery the seller’s damages are measured by the difference between the contract price and the price at which the same goods can be resold in the market.
Damages resale price – contract price + incidental damages – expenses saved in breach
Lost Volume Seller Exception:
UCC §2-708: if above damage measures are inadequate to put the seller in as good a position as if performance would have been done because buyer’s breach results in loss of a sale, then seller’s damages should be the profit and reasonable overhead which seller would have made by full performance.
Neri v. Retail Marine Corp(154):
Assumed that breach by buyer prevented the sale of two boats instead of one, therefore seller can recover restitution damages. [Assuming he could keep