Liability and damages
Goals of damages – Enforce the promise, make the plaintiff whole, put the plaintiff in the position he/she was in before the breach
I. Strict liability
Does not take into account good faith, bad faith, willful disregard of a promise
Either he/she fulfilled the promise or he/she didn’t
NO FAULT STANDARD
– Expectation damages: Put the plaintiff in the position he/she was before the breach, in light of what he/she would have received if the contract hadn’t been breached – default type of damages
o Market value vs. cost of compliance
Grove: Cost of compliance even though possibly wasteful
Peevyhouse: Market value since cost of compliance was
o Total cost of compliance (including what has been paid into the contract– Unpaid portion of the contract = Compliance damages
o Market value of item if contract had been fulfilled – market value before the breach = market value damages
– Reliance damages: Put plaintiff in position before the contract; make plaintiff whole – used when expectancy isn’t practical, actual money spent on the contract
Sullivan, Hawkins – What is the expectancy value of a perfect hand/nose? Reliance damages awarded in Sullivan. Expectancy awarded in Hawkins.
– No damages – when the plaintiff suffers no actual loss, he/she cannot be awarded damages for a breach
Acme Mills suffered no loss due to Johnson’s breach; in fact, both parties benefited from the breach. No damages could be awarded. Wheat.
II. Limits on expectation damages
A. Laurin: Gravel was removed from property. D sold gravel for more than it improved the value of the property. In this special case, expectancy was calculated at the profit D made from selling the gravel, not diminution of market value of property because Market Value < Profit from sale
B. Louise Caroline Nursing Home: D breached and did not complete building on time. P wanted damages based on the difference between market value of the construction when D breached and market value should the contract had been completed. P was awarded no damages because P entered into a new contract with someone else that was within the contract price of D, less anything paid on the contract to D. The market value of the completed project was preserved when the new contractors completed construction. RULE: The goal of expectation damages is to make the plaintiff whole; it should not benefit from the breach.
C. Duty to mitigate
Rockingham County v. Luten Bridge: Not allowed to compensate for construction of the bridge that was done after the breach of contract. P has a duty to mitigate damages incurred subsequent to a breach. RULE: You can’t pile on damages after a contract has been repudiated.
pudiation: Reliance Cooperage: Trial court ruled that P would receive expectancy damages in the amount of the contract price minus the market value of the contract at the time of the breach. Appellate court reversed, awarding the difference between the contract price and the market price at the time of the contract’s delivery date. This wouldn’t happen in modern court rulings because the sale of goods are covered in Article 2 of the UCC.
1. §2-712, §2-113: Anticipatory repudiation, buyer must replace the repudiated contract within a reasonable amount of time. Market price is set at the time of repudiation; not at the time of fulfillment, i.e. Reliance Cooperage.
1. Hadley v. Baxendale: Mill contracted out for a new crank shaft. P ordered expedited delivery because entire mill had stopped. D breached. RULE: Breaching party must be able to reasonably foresee liability, or non-breaching party must communicate special circumstances.
Valentine v. General American Credit, Inc. P sued for exemplary damages for emotional distress after D breached employment. RULE: Emotional