class 14 & 15 Flashcards
(51 cards)
goal of contract damages
place the P in the same position as if the K had been fully formed or as if the K never existed
damages cannot exceed what would have been provided if the k was fully performed by both parties
damages limitation is to encourage k formation.
damages foundation
for damages to be awarded they must be: caused y D conduct (breach), certain in fact and amount, foreseeable and not subject to mitigation
measuring k damages
expectation damages, reliance damages, restitution
expectation damages
what you would have expected if the K wasn’t breached- benefit of the bargain damages
damages are calculated based on what the P (non-breaching party) expected to get
reliance damages
calculated based on your conduct done in reliance on a particular promise or belief that the contract was going to be performed.
a P may elect to measure damages by reliance or expectation damages
selling a parcel of land for 100k and spends 500k on equipment
can get either expectation of purchase 100k or expectation 500k
promissory estoppel
engage in some type of promise between the parties, maybe no official contract has been written but promise has binding effect and is breached, get reliance damages.
promissory estoppel
P must prove
1 clear and definite promise,
2, made **
statute of frauds
certain contracts need to be written to prevent fraud
land sales, K that can’t be completed within 1 year,
Karen believes a parcel of land for sale in west Texas has oil under the surface that will be worth several millions. she enters into a K to purchase the land for 200k with escrow scheduled to close in a month. she then spends 500k on equipment that she need to drill for oil. the seller breaches the K and sells the land to someone else. as it turns out, there is no oil on the property
if she paid the 200k purchase price, she can get it back under expectation damages
spending the 500k on equipment was not caused by the breach of contract and was not a reasonable reliance on the oil on the property. will not get the 500k back because if the K had gone through, she would be eating this cost anyway
restitution
prevents a D from unjustly benefit where the harm inflicted creates an economic benefit for the D. will remove the benefit and maybe able reliance damages but NOT expectation damages
compensatory damages generally
substitutionary damages, give money as a substitute for the thing they contracted to receive
1. caused/certain
2. foreseeable/within the contemplation of the parties
3. unavoidable
caused/certain
fact of damages= caused (usually proved by the breach)
amount of damages = reasonable certainty (the quantity)
new business rule
non-breaching party to a contract is trying to show consequential damages- like lost profits (helps fill the hole with certainty of profits for a new business)
if the non-breaching party is a new business, then they will not be able to prove the amount of lost profits with certainty
Modern rule is expert testimony along with profits of similar business
foreseeable or contemplated
non-breaching party must have know or should have known that the damages could result from a breach.
the damages must be within the contemplation of the parties
if they knew or should have known, would they have entered into this contract?
ASK: what liability have the parties assumed consciously, or reasonably should have known, when the contract was made? what could the parties at the time of the K anticipate as damages in the case of a breach?
unavoidable
mitigation/cover: the buyer buys a substitute product/ obtain a substitute service or the seller tries to sell it to someone else
must be done: in good faith, with no unreasonable delay, as a reasonable purchase
non-breaching party should do this is they have the ability to do so
general damages
benefit of the bargain damages or damages that are a natural result of the breach
base damages = damages that are a direct result of the breach
incidental damages = cost of dealing with things after the breach
general damages are within the contemplation of the parties because they are a natural consequence of a breach = the damages that are sufficiently predictable
these are measured objectively, not subjectively
these are expectation and reliance damages.
special damages
damages which are caused by the breach but not objectively the natural and probable consequences of it.
they are secondary or derivative to general damages
certainty and foreseeable
a woman contracts a charter jet company to fly her to an interview for a job. she tells the company that its imperative that I arrive on time. a mechanical problem that grounds the jet forcing the woman to find a commercial flight that arrives 3 hours late and she does not get the job. she sues for breach of contract and seeks damages for the salary she would have received
what was in the contemplation of the parties? is her salary within the contemplation of the parties? no- just saying its important to arrive on time is not enough
problem with certainty and problem with foreseeability
Peter is in the ice cream business. he produces it and delivers it to local grocery stores. he contracts with a freezer manufacturer to install a new freezer on one of his trucks. the manufacturer to install a new freezer incorrectly, causing it to abruptly shut off during a delivery run. the ice cream melts, and Peter is unable to fill that months orders. 2 of his biggest customers are upset and refuse to do business with Peter any longer. as a result, Peter loses 100k in profits that year. can P recover his lost profits
general damages: a new freezer, product that was spoiled as a result- is it standard to store a months worth of ice cream, did he cover?
special damages: was it within the contemplation of the parties? probably not losing customers completely is probably too far. maybe different if the mobile freezer industry is privy to this
lewis Jorge construction management v. pomona unified school district
company 4 months delayed building something for school district. school district fired company. insurance company dropped building company and can no longer get contracts with public entities. business went under. company sued school district
not within the contemplation of the parties that the company would lose their ability to get bonds and cause their business to go under
liquidated damages
parties to the K predetermined the damages that can be recovered if a breach occurs
question only if it goes too far and is unfair- unenforceable penalty. consider: amount of damage is uncertain/difficult to anticipate at the time of the contract formulation plus amount of liquidated damages to be paid are reasonable compared to the harm incurred because of the breach.
modern: are they reasonable?
factors to consider: relationship to the amount anticipated to the actual harm
difficulties in proving loss because of the breach
inconveniences or non feasibility of other remedies
is this unreasonable; “late fee: rent is due on the first day of every month during the lease term. if the full amount of rent is not received by the first day of the month, liquidated damages of 25% of the monthly rent shall be added to the payment owed”
unreasonable without more information
maybe if the bank penalized the leasing company
damages not available
generally no emotional or punitive damages
