REMEDIES UNDERWOOD SPRING 2015
COMPENSATORY DAMAGES
INTRO TO RIGHTFUL POSITION
1. RP: the position P would have been in the wrong never occurred (Hathalay)
a. Not better positon
2. K: put P in RP
3. Tort: restore P to RP
MEASURING THE RIGHTFUL POSITION—DON’T FORGET TO OFFSET BENEFITS
1. What measure of damages used?
a. Generally: objective measure (FMV, replacement cost)
i. Ease of administration
ii. Reduce risk of exaggerated subjective value
b. Subjective measure is last resort
2. When is amount of damages measured?
a. Property: time damaged or destroyed
i. Stocks: JX split—some take highest value up until trial
ii. Volatile mkt: ct’s might be willing to take highest FMV until trial
b. Contract: time of breach
3. Which objective measure of damages will be used? (FMV or replacement)
a. Is there a well-functioning market? (many buyers and sellers)
i. Yes: FMV will usually be the measure
1. Lost or destroyed: the FMV of property
2. Not totally destroyed: FMV before – FMV after (decline in FMV)
ii. No: Replacement
1. Cost must be reasonable and reasonably necessary
2. Special use property always receives replacement
a. Charity, religious, nonprofit—lacks active market
b. Lesser of two rule: P is entitled to the lesser of FMV or replacement (usually FMV)
i. Except special use property
4. How is the fair market value measured?
a. Can look to recent sales of similar property
5. When are repairs to property allowed?
a. Must be reasonably necessary in light of damage done
6. What other awards are necessary to restore to RP
a. Prejudgment interest: restores time value of thing lost up until judgment
i. Always required on liquidated—easily measured—damages
ii. Never appropriate for future awards
iii. Measuring the prejudgment interest: loss of use, lost rental value
b. Postjudgment interest: interest on amt P owes after judgment
EXPECTATION DAMAGES AND THE RIGHTFUL POSITION
1. What is the P rightful position in event of breach of contract?
a. Expectation damages: gives P benefit of the bargain—puts P in position would have been in if the contract were carried out
2. What is the formula for expectation damages? UCC provides
a. When the seller breaches
i. FMV OR GF cover contract price (duty to mitigate) – original contract price
ii. Fantastic expectancy: value as warranted (even for fantastic expect) – value as accepted (must give notice of non-conformity)
iii. Special damages/incidental damages also possible if meet reqs
b. When buyer breaches
i. Unpaid K price – FMV + special/incidentals – savings
ii. If seller not adequately compensated:
iii. Lost profits + incidentals – resale proceeds
1. If seller is lost volume seller, don’t subtract resale (Neri)
3. Are there expectation damages in tort?
a. No—there is no promised position
b. If there was
n use similarly situation, established business
2. Who carries the risk of uncertainty?
a. If uncertainty of damages was caused by D, ct’s will lower burden
b. Rationale: jury can make reasonable estimation
3. How do lawyers prove the amount of damages necessary to put in RP?
a. Expert models
i. Replacement cost model: cost of replacing what was lost or damages
ii. Discounted cash-flow model: measured by the time value of what was lost
iii. Cost acquisition model
iv. Going-concern model: conceives all the damage occurring at once
1. Then asks what FMV was before the damage and then after the dmg
TYPES OF COMPENSATORY DAMAGES (AND PUNITIVES)
1. What types of compensatory damages are available?
a. General damages: flow (1) necessarily and (2) inherently from the wrong
i. Presumed damages—certainty of their occurrence need not be proven
ii. Lost at moment of initial harm or breach
iii. Contracts: the expectation damages (more definite)
iv. Torts: pain and suffering, loss of consortium (more abstract)
b. Special damages: secondary damages that flow from the injury or breach
i. Not presumed—certainty of occurrence must be proven
