Remedies: Monetary

Question 1

What is the general rule re: recovery of money damages ?

Answer 1

Damages can be recovered ONLY to the extent that:

1. they can be proved with REASONABLE CERTAINTY; and
2. could not be avoided with reasonable effort

Question 2

What are the different types of compensatory damages?

Answer 2

1. Expectation Damages
2. Reliance Damages
3. Consequential Damages
4. Incidental Damages

Question 3

What is the standard measure of damages in most cases?

Answer 3

“expectation damages” - damages reflecting the expectancy of the K

Question 4

What are “reliance damages”? When will they be recovered?

Answer 4

“reliance damages” - designed to put P in the position she would have been in had the K never been formed

If P can’t prove expectation damages w certainty, then she may elect to recover those damages based on her reasonable reliance on the K

Question 5

What are “consequential damages”?

Answer 5

“consequential damages” - special damages that reflect losses above and beyond standard expectation damages

• arise bc of non-breaching party’s unique circumstances, and most often consist of lost profits

Question 6

When may “consequential damages” be recovered?

Answer 6

Consequential damages may be recovered ONLY IF:
1. at time K was made, reasonable person would have FORESEEN the damages as a probable result of the breach

NOTE: in K for SOG, only BUYER may recover consequential damages

Question 7

What are “incidental damages”?

Answer 7

“incidental damages” - typically include expenses reasonably incurred in connection with K as a result of breach

• typically seen in SOG

Question 8

What is the rule re: “punitive damages” and contracts cases?

Answer 8

Punitive damages are generally not recoverable in contract

Question 9

What is the rule re: “nominal damages” and contract cases?

Answer 9

Nominal (token) damages may be awarded when breach is shown but actual loss is not proven (example –> award of $1)

Question 10

What are “liquidated damages”?

Answer 10

• Parties to K may stipulate what damages are to paid in event of breach.

(see - limitations on enforcement)

Question 11

When are “liquidated damages” enforceable?

Answer 11

1. damages for breach must be DIFFICULT TO ESTIMATE or ASCERTAIN at the time K is formed; AND
2. Amount agreed must be a REASONABLE FORECAST of compensatory damages in event of breach

If liquidated damages clause is UNREASONABLE –> court will view it as a penalty and will not enforce it

NOTE: most courts say that P may recover liquidated damages even if there are no actual damages

Question 12

Under UCC, what are buyer’s damages if:

• Seller does not deliver; OR
• Buyer rejects good; OR
• Buyer revokes acceptance

Answer 12

Buyer can choose:

[difference between contract price & market price at time buyer learned of breach] + [incidental and consequential damages] less expenses saved by breach; OR

[difference between contract price & cover price] + [incidental and consequential damages] less expenses saved by breach; OR

IF buyer chooses COVER price –> Buyer must make a reasonable K for substitute goods in good faith and without unreasonable delay

“cover price” = cost of replacement goods

Question 13

Under UCC, what are Buyer’s damages if Buyer accepts Seller’s non-conforming goods?

Answer 13

Difference between:

[value as delivered] AND [value as should be] + [incidental and consequential damages]

NOTICE REQUIREMENT –> Buyer must give notice within reasonable time after she discovers or should have discovered defect

Question 14

Under UCC, what are Buyer’s damages if Seller anticipatorily breaches K?

Answer 14

difference between:

[market price at time Buyer learned of breach] AND [contract price]

Question 15

Under UCC, when is Seller liable for consequential damages?

Answer 15

Seller is liable for consequential damages IF:

1. he had reason to know of buyer’s general or particular requirements; AND
2. the subsequent loss could not reasonably be prevented by cover

If buyer is in business of reselling goods –> Seller is deemed to have knowledge of resale

If seller KNOW goods are to be used in manufacturing –> deemed to know breach would cause disruption in production leading to loss of profits

Question 16

Under UCC, when is Buyer liable for consequential damages?

Answer 16

Never

Question 17

Under UCC, what are Seller’s damages if:

Buyer repudiates; OR
Refuses to accept conforming goods

Answer 17

Three options:

1. recover difference between [market price as of delivery date] and [contract price] + [incidental damages] less [expenses saved]
2. resell goods, and recover difference between [contract price] and [resale price] + [incidental damages] less [expenses saved]
3. IF “lost volume seller” (ie unlimited volume) —> recover difference between [contract price] and [cost to seller] + [incidental damages] less [expenses saved]

Question 18

Under UCC, what are Seller’s damages if:

• Buyer has accepted goods and not paid; OR
• Buyer has NOT accepted, and Seller is unable to resell them at any reasonable price; OR
• goods are lost/damaged while risk of loss is on buyer

Answer 18

In this case, Seller may bring an action “for price”:

[Action for full contract price] + [incidental damages] less [expenses paid]

Question 19

What are the damages for breach of land sales K?

Answer 19

difference between

[contract price] and [fmv of land]

Question 20

With regards to employment K’s, what are damages for breach by employer?

Answer 20

full contract price (regardless of when breach occurred)

NOTE: may be reduced if EE fails to mitigate if ER can prove another position is available

Question 21

With regards to employment K’s, what are damages for breach by employee?

Answer 21

employer = entitled to cost of replacing EE

[replacement EE’s wages less breaching parties wages]

Question 22

With regards to a construction contract, what are the damages if there is a breach by owner?

Answer 22

If before completion –> [expected profit] + [costs expended]

If after completion –> [contract price] + [interest]

Question 23

With regards to a construction contract, what are the damages if there is a breach by builder?

Answer 23

[costs of completion] + [damages from delay] - [quasi-contract recovery for benefit conferred by builder]

If breach is ONLY late performance –> owner is entitled to damages incurred bc of late performance

Question 24

What is the rule when a construction task is not properly performed?

(Example –> wrong type of pipe used)

Answer 24

• owner is entitled to cost of fixing defect

HOWEVER –> unless there is special significance and it is communicated to builder, court will not make order that results in undue economic waste.

Question 25

What is the rule if contract calls for payments in installments, and payment is not made ?

Answer 25

• there is only a PARTIAL breach
• aggrieved party is limited to recovering ONLY the missed payment, NOT the entire contract price

HOWEVER –> K may include an acceleration clause making the entire amount due on late payment, in which case aggrieved party may recover full amount

Question 26

What is the general rule re: mitigation of damages?

Answer 26

At common law –> non-breaching party generally has duty to mitigate damages. Mitigation REDUCES recovery, but does NOT prohibit recovery.

Under UCC –> Rule of mitigation does NOT apply.

• Seller is not required to re-sell
• Buyer is not required to cover

Market damages are always available if Seller does not re-sell, or Buyer does not cover.

HOWEVER –> Seller cannot bring action against buyer for FULL contract price UNLESS:

• goods cannot be resold at reasonable price; OR
• goods were destroyed while buyer bore ROL