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Contracts
University of Mississippi School of Law
Gross, Oren

Prof. Gross Contracts Fall 2014 UCC Outline

REMEDIES

Damages: The Basics

Restatement § 347 Measure of Damages in General

The injured party has a right to damages based on his expectation interest as measured by:

(a) The loss in value to him of the other party’s performance cause by its failure or deficiency, plus

(b) Any other loss, including incidental or consequential loss, caused by the breach, less

(c) Any cost or other loss that he has avoided by not having to perform

Restatement § 348 Alternatives to Loss in Value of Performance

(1) If a breach delays the use of property and the loss in value to the injured party is not proved with reasonable certainty, he may recover damages based on the rental value of the property or on interest in the on the value of the property

(2) If a breach results in defective or unfinished construction and the loss in value to the injured party is not proved with sufficient certainty, he may recover the damages based on

(a) The diminution in the market price of the property caused by the breach

Or

(b) The reasonable cost of completing performance or of remedying the defects if that cost is not clearly disproportionate to the probably loss in value to him.

(3) If a breach is of a promise conditioned on a fortuitous event and it is uncertain whether the event would have occurred had there been no breach, the injured party may recover damages based on the value of the conditional right at the time of breach.

Restatement § 349 Damages Based on Reliance Interest

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 contract been performed.

UCC § 2-610 Anticipatory Repudiation

When either party repudiates the contract with respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other, the aggrieved party may

(a) For a commercially reasonable time await performance by the repudiating party; or

(b) Resort to any remedy for breach (2-703 or 2-710), even though he has notified the repudiating party that he would await the latter’s performance and has urged retraction; and

(c) In either case suspend his own performance or proceed in accordance with the provisions of this Article on the seller’s right to identify goods to the contract notwithstanding breach or to salvage unfinished goods

UCC § 2-703 Seller’s Remedies in General

Where the buyer wrongfully rejects or revokes acceptance of goods or fails to make a payment due on or before delivery or repudiates with respect to a part or the whole, then with respect to any goods directly affected and, if the breach is of the whole contract, then also with respect to the whole undelivered balance, the aggrieved seller may

(a) Withhold delivery of such goods;

(b) Stop delivery by any bailee as hereafter provided (UCC 2-705)

(c) Proceed under the next section respecting goods still unidentified to the contract;

(d) Resell and recover damages as hereafter provided (UCC 2-706)

(e) Recover damages for non-acceptance (UCC 2-708)

(f) Cancel.

UCC §2-708 Seller’s Damages for Non-Acceptance or Repudiation

(1) The measure of damages for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages

(2) If subsection 1 is inadequate then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in the article (2-710) due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.

UCC §2-709 Action for the Price

(1) When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under the next section, the price

(a) Of goods accepted or of conforming goods lost or damaged within a commercially reasonable time after risk of their loss has passed to the buyer;

(b) Of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing

(2) Where the seller sues for the price he must hold for the buyer any goods which have been identified to the contract and are still in his control except that if resale becomes possible he may resell them at any time prior to the collection of the judgment. The net proceeds of any such resale must be credited to the buyer and payment of the judgment entitles him to any goods not resold.

(3) After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated, a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for non-acceptance under the preceding section.

UCC §2-710 Seller’s Incidental Damages

Incidental damages to an aggrieved seller include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer’s breach, in connection with return or resale of the goods or otherwise resulting from the breach.

UCC §2-712 “Cover”; Buyer’s Procurement of Substitute Goods

(1) After a breach within the preceding section the buyer may “cover” by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.

(2) The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (2-715), but less expenses saved in consequences of the seller’s breach.

(3) Failure of the buyer to

sonable time before or after the time described or at any other place which in commercial judgment or under usage of trade would serve as a reasonable substitute for the one described may be used, making any proper allowance for the cost of transporting the goods to or from such other place.

(3) Evidence of a relevant price prevailing at a time or place other than the one described in this Article offered by one party is not admissible unless and until he has given the other party such notice as the court finds sufficient to prevent unfair surprise.

There are 3 types of damages:

· Expectation

· Reliance

· Restitution

Expectation

Difference between what you were promised and what you have

Reliance

What it requires to get you back to where you were when promise was made

Restitution

Prevention of unjust enrichment

Limitations on the Compensation Principle

Restatement § 351 Unforeseeability and Related Limitations on Damages

(1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probably result of the breach when the contract was made.

(2) Loss may be foreseeable as a probably result of a breach because it follows from the breach

(a) In the ordinary course of events, or

(b) As a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know.

(3) A court may limit damages for foreseeable loss by excluding recovery for loss of 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.

Restatement § 352 Uncertainty as a Limitation on Damages

Damages are not recoverable for loss beyond an amount that the evidence permits to be established with reasonable certainty.

Restatement § 353 Loss due to Emotional Disturbance

Recovery for emotional disturbance will be excluded unless the breach also caused bodily harm or the contract or the breach is of such a kind that serious emotional disturbance was a particularly likely result.

Restitution

Restatement § 370 Requirement that Benefit be Conferred

A party is entitled to restitution under the rules stated in this restatement only to the extent that he has conferred a benefit on the other party by way of part performance or reliance.