Oregon Contracts Bjerre First Semester
Know the rules, apply the rules and then consider if the result of the rules seem morally right and analyze whether the rule is morally correct (invent an exception)
What does the rule tell you about the result and then what does the result tell you about the rule?
Remedies for a Breach of Contract Chapter 1
A. Four ways in which a breach can effect the injured party
a. Actual damages- Profits lost, difference between what should have been received and what was
i. Expectation (Loss of benefits to the (P))
1. The goal of contract remedies is to award the amount in damages that will put the injured party in the position it would have been in had the contract been preformed. (Benefit of the bargain)
ii. Reliance (Promissory Estoppel) (Cost to the (P)) (§90 Restatement)
1. Puts the aggrieved party in the position it would have been had the promise never been made (not were the party had been if the contract was fulfilled)
2. Refunds costs incurred- recovery of the cost of non essential reliance on promise
3. Use of expectation to measure reliance- Ability to recover expectation damages for forgoing another opportunity due to reliance on a broken promise
4. Use of reliance to measure expectation- When fact of damages is certain but amount of damages is unknown (Computer- trade show case)
5. Essential Reliance
a. Consideration for the K
b. Actions done that were necessary to complete the deal
c. Not recoverable (Part of Expectation damages)
6. Nonessential Reliance
a. Consideration done based on reliance that the K would be fulfilled
b. Recoverable if foreseeable
i. Security Stove and Man. Co. v. American Railways Express Co.
1. (P) contracted with (D) to have novel stove brought to trade show
2. (D) breached, (P) sued for renting the space at the show and hotel costs
3. Court held that the (D) was liable for the reasonable nonessential reliance damages the (P) incurred
b. Costs avoided- any cost the non-breaching party was allowed to avoid because of the breach (relocation of assets)
c. Consequential damages- damages that are not part of the contract but occur due to the breach (§2-715(2))
i. Lost income due to breach
ii. Party must be informed of consequential damages, OR
iii. They are of the type that arise naturally from the situation
iv. Foreseeability- Consequential damages are only recoverable if the breaching party was informed or had reason to foresee the damages as a consequence of the breach
1. Hadley v. Baxendale (Mill shaft case)
a. K was just for transportation, the Consequential damages were found to be unforeseeable
2. Should always include a disclaimer about liability for consequential damages (fed ex)
v. New Business Rule
1. New Businesses cannot show loss of profit because of lack of history
a. Evergreen Amusement Corporation v. Milstead
i. Court found for (P) that evidence could not be shown on potential earnings
b. Rule is dying
d. Incidental damages- Costs the non-breaching party incurs while attempting to mitigate the damages (transaction costs) (§2-710)
i. Anthony Neri v. Retail Marine Corporation
1. (P) K with (D) to buy boat
2. (D) breached
3. (P) attempted to recover the costs of insurance and upkeep on the boat while attempting to resell
4. Court held that the incidental damages were recoverable
B. Limitations on damages
a. Certainty- Damages but be certain and not speculative
b. Mitigation- After the breach the non-breaching party has the obligation to mitigate the damages (reasonably)
i. UCC 2-704
ii. UCC 2-706
1. If a seller does not resell he can recover the difference between the market price at the time performance was supposed to happen and the contract price
iii. UCC 2-708
1. If the seller does resell he can recover the difference between the price received and the contract price
2. Only if resell was reasonable
iv. Stop the loss
1. Rockingham County v. Luten Bridge
a. Cannot
for the damages was too great
d. (D) was ordered to pay for the land (Social benefit of not wasting money)
b. Subjective
i. Cost of Repair
1. Freedom of K
a. Allows parties to make the deal they desire
i. Even if it doesn’t make economic sense
b. Allows compensation for sentimental value
F. Restitution (Quasi-contract) (Benefit to the (D))
a. Can sue for a breach of K or Restitution
b. Restores the benefit that has been conferred on the (D)
i. What the (D) is obligated to pay, not what (D) promised to do
c. (D) has received some benefit (if a car is being built but has not been delivered Restitution is not applicable)
d. And retaining said benefit is inequitable
e. If there is no contract or the consideration has failed but something of value has been exchanged the person receiving the value is viewed as rescinding the contract (liable)
f. To prevent unjust enrichment the (P) may recover the
i. Increase in value to (D)’s property or
ii. Reasonable value of performance at open market
g. If (P) preformed fully the contract price is the “reasonable market value” even though the contract is no longer enforceable.
h. Britton v. Turner- Breachor and sue Breachee for amount of work done.
i. Employer must pay for the work received.
i. Oliver v. Campell
i. (D) hired lawyer at way below market value
ii. (D) breached K
iii. (P) sued under restitution for full market value of services (way higher than K price)
iv. (P) lost because the court found that the K was (almost) fully completed
v. So the (P) could only recover agreed upon price
