General Damages for Breach of Contract→ Expectancy Measure Flashcards Preview

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Flashcards in General Damages for Breach of Contract→ Expectancy Measure Deck (17):
1

 

Expectancy Measure

Purpose

Purpose is to put the non-breaching party in the position they would have been in had the contract been performed.

  • This is the preferred method because it generally yields the most money for the non-breaching party. (What was promised-What was received).
  • Rule: If you breach the contract, you cannot use the Expectancy Measure to recover damages. 

2

 

Expectancy Measure

Formula

 

Formula -->  LOV + OL – CA – LA

  • Loss of Value (VE – VR) + Consequential damages – Cost avoided – Loss avoided

Common Law Formula FOR SERVICES.  Goods controlled by UCC

 

3

 

Expectancy Measure

LOV

Loss of Value: Value Expected – Value Received

Value Expected

  • Evaluation of returned performance
  • Includes expected profit and costs
  • Find in contract

Value Received

  • Amount of value actually received at the time of breach

4

Expectancy Measure: 

Other Losses

Other Losses:

  • Loss caused by breach, beyond the loss of performance value
  • Losses in addition to the costs from the contract that occur as a result of the breach;
  • Loss caused by the breach beyond the loss of performance value

NOTES:

  • Only recover for damages that the breaching party had reason to foresee as a probable cause of the breaching of the contract.
  • This does not include pre-contract expenses…any expenses made in anticipation of a contract are not compensable

Use Value: Determined by the rental value

5

Expectancy Measure:

Other Losses

Requirements

 

  1. Foreseeability: Damages from other losses are not recoverable for loss the party did not have reason to foresee as a probable result of the breach. 
    • Causation: Must be caused by the breach.
    • But for the ∆’s failure?​
    • Presumed – naturally follow a breach of that kind of k
      Notice - special damages

  2. Certainty: Damages are not recoverable for loss beyond an amount that the evidence permits to be established with reasonable certainty
  3. AvoidabilityOnce contract is breached, non-breaching party has duty to not make damages worse

     

 

6

Expectancy Measure

2 Categories of Foreseeable Damages

  1. General Damages: those that “arise naturally” from the breach

  2. Special Damages: Damages that are beyond the ordinary course of events

     

7

Expectancy Measure

2 Kinds of Other Losses

 

  1. Consequential: any loss caused by breach
  2. Incidental: expenses incurred because of breach

 

8

Expectancy Measure:

Forseeability

Does it matter whether the breach was foreseeable?

 

No.  The Expectancy Measure deals with the foreseeability of the harm; not foreseeability of the cause of breach

  •  So as long as the harm was foreseeable, it doesn’t matter how it happened

9

Expectancy Measure

Forseeability

General Damages

  • General Damages: Naturally arising damages that are likely to flow from the ordinary course of the breach. These must be reasonably foreseeable at the time of the breach. 

  • Reasonable test: must have been reasonably foreseeable

  • Use Value: Capital goods/machinery have value alone, which may be equal to the rental valueà deprivation of a machine’s use due to delay of delivery is foreseeable

  • Hadley: Lost profits from delay in shipping part to factory do not arise naturally…Within the contemplation of the parties. Knowledge of the circumstances.

10

Expectancy Measure:  Other Losses

Forseeability: General Damages

Tacit Agreement:

Tacit Agreement: [Minority Rule --> Only in Arkansas]:

The plaintiff must prove more than mere knowledge that a breach of contract will result in damages. They must also show that the defendant at least tacitly agreed to assume responsibility. 

11

Expectancy Measure

Forseeability

Special Damages

Special Damages: Damages that are beyond the ordinary course of events.

  • Rule: Party in breach must have had actual notice of the possibility of damage, such that they would be in the contemplation of a reasonable person.
  • Most times, lost profits are going to go in this category
  • But sometimes lost profits will arise naturally from the breach --> if we have a contract where I promise to give you rights to sell t-shirts and I breach, you have lost the profits you would get from selling the shirts…that arises naturally
  • Have to look at the nature of the contract

12

Expectancy Measure

Costs Avoided

Costs Avoided: Costs that non-breaching party avoided because of the breach

Rule: When a contract is breached, then the non-breaching party has a duty to not make damages worse by continuing performance. 


If non-breaching party was going to have $100K worth of expenses, and he had only spent $30K when breach occurred, CA= $70K

13

Expectancy Measure

Other Losses

Certainty

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

  • Lost profits that are purely speculative are not awardable
  • Doesn’t need to be exact
    • in case of boxing match, with no prior history, anticipated profit would be entirely speculative
    • If anticipated profit is based on figures from similar situations, that can be certain enough for the court to award

NOTE: often times when profits are uncertain so as to not allow use of expectancy damages, injured party will use reliance measure

14

Expectancy Measure

Other Losses

Avoidability

Avoidability

  • Rule: Once contract is breached, non-breaching party has duty to not make damages worse
  • Duty exists as long as loss could have been avoided without undue:
    • Risk
    • Burden
    • Humiliation
  • Injured party is not precluded from damages in the event he has made reasonable but unsuccessful efforts to avoid loss

15

Expectancy Measure

Other Losses

Avoidability

Exployment Contracts

 

Employment Contracts

Formula for calculating damages in employment contract: Contract compensation - Actual Earnings – What Employee might have earned from reasonable effort to get another job

  • Exception: Rejection/failure to seek employment of different or inferior kind may not be used to mitigate damages. Employment must be comparable or substantially similar
  • Defendant has burden to prove availability of substantially similar employment

16

Expectancy Measure

Losses Avoided

Losses Avoided: Value retained by the plaintiff as a result of not having to complete performance.

  • Any loss the plaintiff incurred because of the breach that can be redeemed
  • EX: leftover cabinets can be resold for $X, thus reducing the damages from the breach

17

 

Expectancy Measure

Remedies at Law

Remedies at Law (money damages):

  • Ordinarily in contracts cases the remedy will not be equitable.
  • The remedy will consist of money damages.
  • There are three main measures of money damages in contracts cases: Expectancy damages, reliance damages and restitution.