Remedies

Question 1

Restatement § 344 Purposes of Remedies

Answer 1

Judicial remedies under the rules stated in this Restatement serve to protect one or more of the following interests of a promisee:

(a) his “expectation interest,” - as good as if the contract was completed
(b) his “reliance interest,” - as good a position as contract had not been made, or
(c) his “restitution interest,” getting back any benefit that he has conferred on the other party.

Question 2

Restatement § 344 Purposes of Remedies Three Interests

A contracts to build a building for B on B’s land for $100,000. B repudiates the contract before either party has done anything in reliance on it. It would have cost A $90,000 to build the building.

Answer 2

A has an expectation interest of $10,000, the difference between the $100,000 price and his savings of $90,000 in not having to do the work. Since A has done nothing in reliance, A’s reliance interest is zero. Since A has conferred no benefit on B, A’s restitution interest is zero.

Question 3

Restatement § 344 Purposes of Remedies Three Interests

A contracts to build a building for B on B’s land for $100,000. It would have cost A $90,000 to build the building. B repudiates after A has spent $60,000 of the $90,000. A has been paid nothing and can salvage nothing from the $60,000 that he has spent.

Answer 3

A now has an expectation interest of $70,000, the difference between the $100,000 price and his saving of $30,000 in not having to do the work. A also has a reliance interest of $60,000, the amount that he has spent. If the benefit to B of the partly finished building is $40,000, A has a restitution interest of $40,000.

Question 4

Restatement § 347 Measure of Damages in General

How to

Answer 4

Subject to the limitations stated in §§ 350- 53, the injured party has a right to damages based on his expectation interest as measured by

(a) the loss in the value to him of the other party’s performance caused by its failure or deficiency, plus
(b) any other loss, including incidental or consequential loss, caused by the breach, less
(c) any cost or other loss that he has avoided by not having to perform.

Question 5

Restatement § 347 Measure of Damages in General Loss in Value

A contracts to publish a novel that B has written. A repudiates the contract and B is unable to get his novel published elsewhere.

Answer 5

B’s damages include the loss of royalties that he would have received had the novel been published together with the value to him of the resulting enhancement of his reputation.

Question 6

Restatement § 347 Measure of Damages in General Loss in Value

A, a manufacturer, contracts to sell B, a dealer in used machinery, a used machine that B plans to resell. A repudiates and B is unable to obtain a similar machine elsewhere.

Answer 6

B’s damages include the net profit that he would have made on resale of the machine.

Question 7

Restatement § 347 Measure of Damages in General Other Loss

A contracts to employ B for $10,000 to supervise the production of A’s crop, but breaks his contract by firing B at the beginning of the season. B reasonably spends $200 in fees attempting to find other suitable employment through appropriate agencies.

Answer 7

B can recover the $200 incidental loss in addition to any other loss suffered, whether or not he succeeds in finding other employment.

Question 8

Restatement § 347 Measure of Damages in General Other Loss

A leases a machine to B for a year, warranting its suitability for B’s purpose. The machine is not suitable for B’s purpose and causes $10,000 in damage to B’s property and $15,000 in personal injuries.

Answer 8

B can recover the $25,000 consequential loss in addition to any other loss suffered.

Question 9

Restatement § 347 Measure of Damages in General Cost or Other Loss Avoided

A contracts to build a hotel for B for $500,000 and to have it ready for occupancy by May 1. B’s occupancy of the hotel is delayed for a month because of a breach by A.

Answer 9

The cost avoided by B as a result of not having to operate the hotel during May is subtracted from the May rent lost in determining B’s damages.

Question 10

Restatement § 347 Measure of Damages in General Cost or Other Loss Avoided

A contracts to build a house for B for $100,000. When it is partly built, B repudiates the contract and A stops work. A would have to spend $60,000 more to finish the house.

Answer 10

The $60,000 cost avoided by A as a result of not having to finish the house is subtracted from the $100,000 price lost in determining A’s damages. A has a right to $40,000 in damages from B, less any progress payments that he has already received.

Question 11

Restatement § 347 Measure of Damages in General Cost or Other Loss Avoided

A contracts to build a house for B for $100,000. When it is partly built, B repudiates the contract and A stops work. A has bought materials that are left over and that he can use for other purposes, saving him $5,000.

Answer 11

The $5,000 cost avoided is subtracted in determining A’s damages, resulting in damages of only $35,000 rather than $40,000.

Question 12

Restatement § 347 Measure of Damages in General Cost or Other Loss Avoided

A contracts to convey land to B in return for B’s working for a year. B repudiates the contract before A has conveyed the land.

Answer 12

The value to A of the land is subtracted from the value to A of B’s services in determining A’s damages.

Question 13

Restatement § 347 Measure of Damages in General Cost or Other Loss Avoided

A contracts to employ B for $10,000 to supervise the production of A’s crop, but breaks his contract by firing B at the beginning of the season. B instead takes another job as a supervisor at $9,500

Answer 13

The $9,500 is subtracted from the $10,000 loss of earnings in determining B’s damages.

Question 14

Restatement § 347 Measure of Damages in General Cost or Other Loss Avoided

A contracts to build a machine for B and deliver it to be installed in his factory by June 30. A breaks the contract and does not deliver the machine.

Answer 14

B’s factory is destroyed by fire on December 31 and the machine, if it had been installed there, would also have been destroyed. The fact that the factory was burned is not considered in determining B’s damages.

Question 15

Restatement § 347 Measure of Damages in General

A contracts to send his daughter to B’s school for $5,000 tuition. After the academic year has begun, A withdraws her and refuses to pay anything. A’s breach does not reduce B’s instructional or other costs and B is unable to find another student to take the place of A’s daughter.

Answer 15

B has a right to damages equal to the full $5,000.

Question 16

Restatement § 347 Measure of Damages in General Actual Loss Caused by Breach

A contracts to build a house for B for $100,000, but repudiates the contract after doing part of the work and having been paid $40,000. Other builders would charge B $80,000 to finish the house, but B finds a builder in need of work who does it for $70,000.

Answer 16

B’s damages are limited to the $70,000 that he actually had to pay to finish the work less the $60,000 cost avoided or $10,000, together with damages for any loss caused by the delay.

Question 17

Restatement § 347 Measure of Damages in General Actual Loss Caused by Breach

A contracts to employ B for $10,000 to supervise the production of A’s crop. A breaks the contract by firing B at the beginning of the season, and B, unable to find another job, instead takes a job as a farm laborer for the entire season at $6,000.

Answer 17

The $6,000 that he made as a farm laborer is subtracted from the $10,000 loss of earnings in determining B’s damages. See Illustration 8 to § 350.

Question 18

Restatement § 347 Measure of Damages in General Actual Loss Caused by Breach

A contracts to employ B for $10,000 to supervise the production of A’s crop, but breaks his contract by firing B at the beginning of the season. B is unable to find another similar job but receives $3,000 in state unemployment benefits.

Answer 18

Whether the $3,000 will be subtracted from the $10,000 loss of earnings depends on the state legislation under which it was paid and the policy behind it.

Question 19

Restatement § 347 Measure of Damages in General

On April 1, A and B make a personal service contract under which A is to employ B for six months beginning July 1 and B is to work for A during that period. On May 1, B repudiates the contract. On August 1, B falls ill and is unable to perform the contract for the remainder of the period.

Answer 19

A can only recover damages based on his loss during the month of July since his loss during subsequent months was not caused by B’s breach.

Question 20

Restatement § 347 Measure of Damages in General Lost Volume

A contracts to pave B’s parking lot for $10,000. B repudiates the contract and A subsequently makes a contract to pave a similar parking lot for $10,000. A’s business could have been expanded to do both jobs.

Answer 20

Unless it is proved that he would not have undertaken both, A’s damages are based on the net profit he would have made on the contract with B, without regard to the subsequent transaction.

Question 21

UCC § 2-712. “Cover”; Buyer’s Procurement of Substitute Goods

Answer 21

(1) After a breach within the preceding section the buyer may “cover” by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.
(2) The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (Section 2-715), but less expenses saved in consequence of the seller’s breach.
(3) Failure of the buyer to effect cover within this section does not bar him from any other remedy.

Question 22

Restatement § 237 Effect on Other Party’s Duties of a Failure to Render Performance

Answer 22

Except as stated in § 240, it is a condition of each party’s remaining duties to render performances to be exchanged under an exchange of promises that there be no uncured material failure by the other party to render any such performance due at an earlier time.

Question 23

Restatement § 237 Effect on Other Party’s Duties of a Failure to Render Performance Substantial Performance

A contracts to build a house for B, for which B promises to pay $50,000 in monthly progress payments equal to 85% of the value of the work with the balance to be paid on completion. When A completes construction, B refuses to pay the $7,500 balance claiming that there are defects that amount to an uncured material breach.

Answer 23

If the breach is material, A’s performance is not substantial and he has no claim under the contract against B, although he may have a claim in restitution. If the breach is not material, A’s performance is said to be substantial, he has a claim under the contract against B for $7,500, and B has a claim against A for damages because of the defects.

Question 24

Restatement § 349 Damages Based on Reliance Interest

Answer 24

As an alternative to the measure of damages stated in § 347, the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed.

Question 25

Restatement § 349 Damages Based on Reliance Interest Reliance Interest Where Profit Uncertain A gives B a “dealer franchise” to sell A's products in a stated area for one year. In preparation for performance, B spends money on advertising, hiring sales personnel, and acquiring premises that cannot be used for other purposes. A then repudiates before performance begins.

Answer 25

If neither party proves with reasonable certainty what profit or loss B would have made if the contract had been performed, B can recover as damages his expenditures in preparation for performance.

Question 26

Restatement § 349 Damages Based on Reliance Interest Reliance Interest Where Profit Uncertain A contracts with B to stage a series of performances in B's theater, each to have 50 per cent of the gross receipts. After A has spent $20,000 in getting ready for the performances, B rents the theater to others and repudiates the contract, and A stages the performance at another theater. A's expenditures in preparation for performance of the contract with B are worth $8,000 to him in connection with staging the performances at the other theater.

Answer 26

If neither party proves with reasonable certainty what profit or loss A would have made if the contract had been performed, A can recover as damages the $12,000 balance of his expenditures in preparation for performance.

Question 27

Restatement § 349 Damages Based on Reliance Interest Reliance Interest Where Profit Uncertain A contracts to build for B a factory of experimental design for $1,000,000. After A has spent $250,000 and been paid $150,000 in progress payments, B repudiates the contract and A stops work. A's expenditures include materials worth $10,000 that he can use on other jobs.

Answer 27

If neither party proves with reasonable certainty what profit or loss A would have made if the contract had been performed, A can recover as damages the $90,000 balance of his expenditures in preparation for performance.

Question 28

Restatement § 349 Damages Based on Reliance Interest Reliance Interest Where Profit Uncertain A contracts to sell his retail store to B. After B has spent $100,000 for inventory, A repudiates the contract and B sells the inventory for $60,000.

Answer 28

If neither party proves with reasonable certainty what profit or loss B would have made if the contract had been performed, B can recover as damages the $40,000 loss that he sustained on the sale of the inventory.

Question 29

Restatement § 371 Measure of Restitution Interest

Answer 29

If a sum of money is awarded to protect a party's restitution interest, it may as justice requires be measured by either (a) the reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimant's position, or (b) the extent to which the other party's property has been increased in value or his other interests advanced.

Question 30

Restatement § 371 Measure of Restitution Interest Choice of Measure A, a carpenter, contracts to repair B's roof for $3,000. A does part of the work at a cost of $2,000, increasing the market price of B's house by $1,200. The market price to have a similar carpenter do the work done by A is $1,800.

Answer 30

A's restitution interest is equal to the benefit conferred on B. That benefit may be measured either by the addition to B's wealth from A's services in terms of the $1,200 increase in the market price of B's house or the reasonable value to B of A's services in terms of the $1,800 that it would have cost B to engage a similar carpenter to do the same work. If the work was not completed because of a breach by A and restitution is based on the rule stated in § 374, $1,200 is appropriate. If the work was not completed because of a breach by B and restitution is based on the rule stated in § 373, $1,800 is appropriate.

Question 31

Restatement § 371 Measure of Restitution Interest Choice of Measure A, a surgeon, contracts to perform a series of emergency operations on B for $3,000. A does the first operation, saving B's life, which can be valued in view of B's life expectancy at $1,000,000. The market price to have an equally competent surgeon do the first operation is $1,800.

Answer 31

A's restitution interest is equal to the benefit conferred on B. That benefit is measured by the reasonable value to B of A's services in terms of the $1,800 that it would have cost B to engage a similar surgeon to do the operation regardless of the rule on which restitution is based.

Question 32

Restatement § 371 Measure of Restitution Interest Choice of Measure A, a social worker, promises B to render personal services to C in return for B's promise to educate A's children. A renders only part of the services and B then refuses to educate A's children. The market price to have a similar social worker do the services rendered by A is $1,800.

Answer 32

If A recovers in restitution under the rule stated in § 373, an appropriate measure of the benefit conferred on B is the reasonable value to B of A's services in terms of the $1,800 that it would have cost B to engage a similar social worker to do the same work.

Question 33

Restatement § 373 Restitution When Other Party Is in Breach

Answer 33

(1) Subject to the rule stated in Subsection (2), on a breach by non-performance that gives rise to a claim for damages for total breach or on a repudiation, the injured party is entitled to restitution for any benefit that he has conferred on the other party by way of part performance or reliance. (2) The injured party has no right to restitution if he has performed all of his duties under the contract and no performance by the other party remains due other than payment of a definite sum of money for that performance.

Question 34

Restatement § 373 Restitution When Other Party Is in Breach Restitution as Alternative Remedy for Breach A contracts to sell a tract of land to B for $100,000. After B has made a part payment of $20,000, A wrongfully refuses to transfer title.

Answer 34

B can recover the $20,000 in restitution. The result is the same even if the market price of the land is only $70,000, so that performance would have been disadvantageous to B.

Question 35

Restatement § 373 Restitution When Other Party Is in Breach Restitution as Alternative Remedy for Breach A contracts to build a house for B for $100,000, progress payments to be made monthly. After having been paid $40,000 for two months, A commits a breach that is not material by inadvertently using the wrong brand of sewer pipe.

Answer 35

B has a claim for damages for partial breach but cannot recover the $40,000 that he has paid A.

Question 36

Restatement § 373 Restitution When Other Party Is in Breach Restitution as Alternative Remedy for Breach On February 1, A and B make a contract under which, as consideration for B's immediate payment of $50,000, A promises to convey to B a parcel of land on May 1. On March 1, A repudiates by selling the parcel to C. On April 1, B commences an action against C

Answer 36

. Although under the rule stated in § 253(1), B has no claim against A for damages for breach of contract until performance is due on May 1, B can recover $50,000 from A in restitution. See Illustration 4 to § 253.

Question 37

Restatement § 373 Restitution When Other Party Is in Breach Restitution as Alternative Remedy for Breach A, who holds a mortgage on B's land, promises B that he will not foreclose the mortgage for another year, even if B makes no payments. In reliance on A's promise, B makes valuable improvements. A forecloses in breach of his promise and buys the land at a judicial sale for the amount of the mortgage debt.

Answer 37

B can recover in restitution for the value of the improvements.

Question 38

Restatement § 373 Restitution When Other Party Is in Breach When Contract Price is a Limit A contracts to work for B for one month for $10,000. After A has fully performed, B repudiates the contract and refuses to pay the $10,000.

Answer 38

A can get damages against B for $10,000, together with interest, but cannot recover more than that sum even if he can show that the benefit to B from the services was greater than $10,000.

Question 39

Restatement § 373 Restitution When Other Party Is in Breach When Contract Price is a Limit A contracts to sell a tract of land to B for $100,000. After B has paid the full $100,000, A repudiates and refuses to transfer title.

Answer 39

B has a right to $100,000 in restitution.

Question 40

Restatement § 373 Restitution When Other Party Is in Breach When Contract Price is a Limit A contracts to build a building for B in return for B's promise to transfer a tract of land to A and to pay $10,000. After A has built the building, B refuses to transfer title or to pay the $10,000.

Answer 40

A has a right to the reasonable value of his work and materials.

Question 41

Restatement § 351 Unforeseeability and Related Limitations on Damages

Answer 41

(1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made. (2) Loss may be foreseeable as a probable result of a breach because it follows from the breach (a) in the ordinary course of events, or (b) as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know. (3) A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in the circumstances justice so requires in order to avoid disproportionate compensation.

Question 42

Restatement § 351 Unforeseeability and Related Limitations on Damages Requirement of Foreseeability A, a carrier, contracts with B, a miller, to carry B's broken crankshaft to its manufacturer for repair. B tells A when they make the contract that the crankshaft is part of B's milling machine and that it must be sent at once, but not that the mill is stopped because B has no replacement. Because A delays in carrying the crankshaft, B loses profit during an additional period while the mill is stopped because of the delay.

Answer 42

A is not liable for B's loss of profit. That loss was not foreseeable by A as a probable result of the breach at the time the contract was made because A did not know that the broken crankshaft was necessary for the operation of the mill.

Question 43

Restatement § 351 Unforeseeability and Related Limitations on Damages Requirement of Foreseeability A contracts to sell land to B and to give B possession on a stated date. Because A delays a short time in giving B possession, B incurs unusual expenses in providing for cattle that he had already purchased to stock the land as a ranch. A had no reason to know when they made the contract that B had planned to purchase cattle for this purpose.

Answer 43

A is not liable for B's expenses in providing for the cattle because that loss was not foreseeable by A as a probable result of the breach at the time the contract was made.

Question 44

Restatement § 351 Unforeseeability and Related Limitations on Damages “General” and “Special” Damages A and B make a written contract under which A is to recondition by a stated date a used machine owned by B so that it will be suitable for sale by B to C. A knows when they make the contract that B has contracted to sell the machine to C but knows nothing of the terms of B's contract with C. Because A delays in returning the machine to B, B is unable to sell it to C and loses the profit that he would have made on that sale.

Answer 44

B's loss of reasonable profit was foreseeable by A as a probable result of the breach at the time the contract was made.

Question 45

Restatement § 351 Unforeseeability and Related Limitations on Damages “General” and “Special” Damages A, a manufacturer of machines, contracts to make B his exclusive selling agent in a specified area for the period of a year. Because A fails to deliver any machines, B loses the profit on contracts that he would have made for their resale.

Answer 45

B's loss of reasonable profit was foreseeable by A as a probable result of the breach at the time the contract was made.

Question 46

Restatement § 351 Unforeseeability and Related Limitations on Damages “General” and “Special” Damages A and B make a contract under which A is to recondition by a stated date a used machine owned by B so that it will be suitable for use in B's canning factory. A knows that the machine must be reconditioned by that date if B's factory is to operate at full capacity during the canning season, but nothing is said of this in the written contract. Because A delays in returning the machine to B, B loses its use for the entire canning season and loses the profit that he would have made had his factory operated at full capacity.

Answer 46

B's loss of reasonable profit was foreseeable by A as a probable result of the breach at the time the contract was made.

Question 47

Restatement § 351 Unforeseeability and Related Limitations on Damages “General” and “Special” Damages A and B make a written contract under which A is to recondition by a stated date a used machine owned by B so that it will be suitable for sale by B to C. A knows when they make the contract that B has contracted to sell the machine to C but knows nothing of the terms of B's contract with C. The profit that B would have made under his contract with A was extraordinarily large because C promised to pay an exceptionally high price as a result of a special need for the machine of which A was unaware.

Answer 47

A is not liable for B's loss of profit to the extent that it exceeds what would ordinarily result from such a contract. To that extent the loss was not foreseeable by A as a probable result of the breach at the time the contract was made.

Question 48

Restatement § 351 Unforeseeability and Related Limitations on Damages “General” and “Special” Damages A and B make a contract under which A is to recondition by a stated date a used machine owned by B so that it will be suitable for use in B's canning factory. A knows that the machine must be reconditioned by that date if B's factory is to operate at full capacity during the canning season, but nothing is said of this in the written contract. Because A delays in returning the machine to B, B lost profit that B would have made from the use of the machine was unusually large because of an abnormal use to which he planned to put it of which A was unaware.

Answer 48

A is not liable for B's loss of profit to the extent that it exceeds what would ordinarily result from the use of such a machine. To that extent the loss was not foreseeable by A at the time the contract was made as a probable result of the breach.

Question 49

Restatement § 351 Unforeseeability and Related Limitations on Damages Other Limitations on Damages A, a private trucker, contracts with B to deliver to B's factory a machine that has just been repaired and without which B's factory, as A knows, cannot reopen. Delivery is delayed because A's truck breaks down.

Answer 49

In an action by B against A for breach of contract the court may, after taking into consideration such factors as the absence of an elaborate written contract and the extreme disproportion between B's loss of profits during the delay and the price of the trucker's services, exclude recovery for loss of profits.

Question 50

Restatement § 352 Uncertainty as a Limitation on Damages

Answer 50

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

Question 51

Restatement § 352 Uncertainty as a Limitation on Damages Requirement of Certainty A contracts to publish a novel that B has written. A repudiates the contract and B is unable to get his novel published elsewhere.

Answer 51

If the evidence does not permit B's loss of royalties and of reputation to be estimated with reasonable certainty, he cannot recover damages for that loss, although he can recover nominal damages.

Question 52

Restatement § 352 Uncertainty as a Limitation on Damages Requirement of Certainty A contracts to sell B a tract of land on which B plans to build an outdoor drive-in theatre. A breaks the contract by selling the land to C, and B is unable to build the theatre.

Answer 52

If, because of the speculative nature of the new enterprise the evidence does not permit B's loss of profits to be estimated with reasonable certainty, his recovery will be limited to expenses incurred in reliance or, if none can be proved with reasonable certainty, to nominal damages.

Question 53

Restatement § 352 Uncertainty as a Limitation on Damages Requirement of Certainty A and B make a contract under which A is to construct a building of radical new design for B for $5,000,000. After A has spent $3,000,000 in reliance, B repudiates the contract and orders A off the site.

Answer 53

If the evidence does not permit A's lost profits to be estimated with reasonable certainty, he can recover the $3,000,000 that he has spent in reliance. He must, however, then prove that amount with reasonable certainty.

Question 54

Restatement § 352 Uncertainty as a Limitation on Damages Requirement of Certainty A, a manufacturer, makes a contract with B, a wholesaler, to sell B a quantity of plastic. B resells the plastic to dealers. The plastic is discovered to be defective and B has many complaints from dealers, some of which refuse to place further orders with him.

Answer 54

B can recover the loss of good will if his loss can be estimated with reasonable certainty by such evidence as his business records before and after the transaction and the testimony of his salespersons and that of dealers.

Question 55

Restatement § 350 Avoidability as a Limitation on Damages

Answer 55

(1) Except as stated in Subsection (2), damages are not recoverable for loss that the injured party could have avoided without undue risk, burden or humiliation. (2) The injured party is not precluded from recovery by the rule stated in Subsection (1) to the extent that he has made reasonable but unsuccessful efforts to avoid loss.

Question 56

Restatement § 350 Avoidability as a Limitation on Damages Effect of Failure to Make Efforts to Mitigate Damages A contracts to build a bridge for B for $100,000. B repudiates the contract shortly after A has begun work on the bridge, telling A that he no longer has need for it. A nevertheless spends an additional $10,000 in continuing to perform.

Answer 56

A's damages for breach of contract do not include the $10,000

Question 57

Restatement § 350 Avoidability as a Limitation on Damages Effect of Failure to Make Efforts to Mitigate Damages A contracts to lease a machine to B and to deliver it at B's factory. B repudiates the contract, but A nevertheless ships the machine to B, who refuses to receive it.

Answer 57

A's damages for breach of contract do not include the cost of shipment of the machine.

Question 58

Restatement § 350 Avoidability as a Limitation on Damages Effect of Failure to Make Efforts to Mitigate Damages A sells oil to B in barrels. B discovers that some of the barrels are leaky, in breach of warranty, but does not transfer the oil to good barrels that he has available.

Answer 58

B's damages for breach of contract do not include the loss of the oil that could have been saved by transferring the oil to the available barrels.

Question 59

Restatement § 350 Avoidability as a Limitation on Damages Effect of Failure to Make Efforts to Mitigate Damages A contracts to sell flour to B. The flour is defective, in breach of warranty, as B discovers after delivery. B nevertheless uses it to bake bread to supply his customers.

Answer 59

B's damages for breach of contract do not include his loss of business caused by delivering inferior bread made from the flour.

Question 60

Restatement § 350 Avoidability as a Limitation on Damages Substitute Transactions A contracts to sell to B a used machine to be delivered at B's factory by June 1 for $10,000. A breaks the contract by repudiating it on May 1. By appropriate efforts B could buy a similar machine from another seller for $11,000 in time to be delivered at his factory by June 1, but he does not do so and loses a profit of $25,000 that he would have made from use of the machine.

Answer 60

B's damages do not include the loss of the $25,000 profit, but he can recover $1,000 from A.

Question 61

Restatement § 350 Avoidability as a Limitation on Damages Substitute Transactions A contracts to supervise the production of B's crop for $10,000, but breaks his contract and leaves at the beginning of the season. By appropriate efforts, B could obtain an equally good supervisor for $11,000, but he does not do so and the crop is lost.

Answer 61

B's damages for A's breach of contract do not include the loss of his crop, but he can recover $1,000 from A.

Question 62

Restatement § 350 Avoidability as a Limitation on Damages Substitute Transactions A contracts to buy from B a used machine from B's factory for $10,000. A breaks the contract by refusing to receive or pay for the machine. By appropriate efforts, B could sell the machine to another buyer for $9,000, but he does not do so.

Answer 62

B's damages for A's breach of contract do not include the loss of the $10,000 price, but he can recover $1,000 from A.

Question 63

Restatement § 350 Avoidability as a Limitation on Damages Substitute Transactions A contracts to employ B for $10,000 to supervise the production of A's crop, but breaks his contract by firing B at the beginning of the season. By appropriate efforts, B could obtain an equally good job as a supervisor at $100 less than A had contracted to pay him, but he does not do so and remains unemployed.

Answer 63

B's damages for A's breach of contract do not include his $10,000 loss of earnings, but he can recover $100 from A.

Question 64

Restatement § 350 Avoidability as a Limitation on Damages Lost Volume A contracts to buy grain from B for $100,000, which would give B a net profit of $10,000. A breaks the contract by refusing to receive or pay for the grain. If B would have made the sale to A in addition to other sales, B's efforts to make other sales do not affect his damages.

Answer 64

B's damages for A's breach of contract include his $10,000 loss of profit.

Question 65

Restatement § 350 Avoidability as a Limitation on Damages Lost Volume A contracts to pay B $20,000 for paving A's parking lot, which would give B a net profit of $3,000. A breaks the contract by repudiating it before B begins work. If B would have made the contract with A in addition to other contracts, B's efforts to obtain other contracts do not affect his damages.

Answer 65

B's damages for A's breach of contract include his $3,000 loss of profit.

Question 66

Restatement § 350 Avoidability as a Limitation on Damages What is a Substitute A contracts to employ B for $10,000 to supervise the production of A's crop, but breaks his contract by firing B at the beginning of the season. With appropriate efforts B could only obtain a job as a farm laborer at $6,000, but he does not do so and remains unemployed.

Answer 66

B's damages for breach of contract include his $10,000 loss of earnings.

Question 67

Restatement § 350 Avoidability as a Limitation on Damages What is a Substitute A contracts to sell to B a used machine to be delivered at B's factory by June 1 for $10,000. A breaks the contract by repudiating it on May 1. By appropriate efforts B could buy a similar machine from another seller for $11,000 in time to be delivered at his factory by June 1, but the other seller will not deliver the similar machine to B's factory, and insists that B take possession of it two weeks earlier than he can install it in his factory, but B can arrange to have it stored for two weeks and shipped to his factory for $1,500.

Answer 67

B's damages do not include the loss of the $25,000 profit, but he can recover the $1,500 as well as the $1,000 from A.

Question 68

Restatement § 350 Avoidability as a Limitation on Damages What is a Substitute A contracts to bale hay on B's farm so that B can use it later to feed his livestock. A does the work so defectively that the hay is worthless. B can buy similar hay in bales in Central City, 100 miles from his farm, for $10,000. The cost to ship the bales between Central City and his farm is $1,000.

Answer 68

B's damages include the $10,000 market price and the $1,000 cost of shipment. If B had intended to ship his bales of hay to Central City for sale there, rather than to feed it to his livestock, the $1,000 cost of shipment would be subtracted from the $10,000 market price as cost avoided under § 347(c).

Question 69

Restatement § 350 Avoidability as a Limitation on Damages What is a Substitute A contracts to sell to B a used machine from A's factory for $10,000. A breaks the contract by refusing to deliver the machine at that price, but offers to sell it to B for $11,000 without prejudice to B's right to damages.

Answer 69

B refuses to buy it at that price and, since he cannot find a similar machine elsewhere, loses a profit of $25,000 that he would have made from use of the machine. B's damages do not include the loss of the $25,000 profit, but he can recover $1,000 from A.

Question 70

Restatement § 350 Avoidability as a Limitation on Damages What is a Substitute A contracts to sell to B a used machine from A's factory for $10,000. A breaks the contract by refusing to deliver the machine at that price, but offers to sell the machine at $11,000 is conditioned on B's surrendering any claim that he may have against A for breach of contract. B refuses to buy it at that price and, since he cannot find a similar machine elsewhere, loses a profit of $25,000 that he would have made from use of the machine.

Answer 70

B's damages may include the loss of the $25,000 profit.

Question 71

Restatement § 350 Avoidability as a Limitation on Damages Time for Arranging Substitute Transaction On May 1, A contracts to sell to B a stated quantity of grain for $100,000, delivery and payment to be made on July 1. On July 1, A breaks the contract by refusing to deliver the grain, but B does not buy substitute grain on the market on that date although he could do so for $110,000. On July 10, B buys substitute grain on the market for $120,000.

Answer 71

B's damages for A's breach of contract do not include the $20,000 above the contract price that he paid on July 10, but he can recover $10,000 from A.

Question 72

Restatement § 350 Avoidability as a Limitation on Damages Time for Arranging Substitute Transaction On May 1, A contracts to sell to B a stated quantity of grain for $100,000, delivery and payment to be made on July 1. A breaks the contract by repudiating it on June 1 and on the same day B tells A that he considers the repudiation final. B does not buy substitute grain on the market on that date although he could do so for $105,000 for delivery and payment on July 1.

Answer 72

B's damages for A's breach of contract do not include the $20,000 above the contract price that he paid on July 10, but he can recover $5,000 from A.

Question 73

Restatement § 350 Avoidability as a Limitation on Damages Efforts Expected A contracts to build a building for B for $100,000. B repudiates the contract shortly before A has finished work. Because A has duties to subcontractors and will have difficulty in calculating his damages, A spends an additional $10,000 and completes the building.

Answer 73

If stopping work would not have been reasonable in the circumstances, A can recover the full $100,000, including the $10,000 that he spent after B's repudiation.

Question 74

Restatement § 350 Avoidability as a Limitation on Damages Efforts Expected A contracts to supervise the production of B's crop for $10,000, but commits a material breach of the contract by failing to begin on time. By appropriate efforts, B could obtain an equally good supervisor for $1,000 more than he had contracted to pay A, but he does not do so because A assures him that the delay is only temporary. By the time that B discovers that A will be unavailable for the entire season, it is too late to hire another supervisor and the crop is lost.

Answer 74

If B's delay in hiring another supervisor was reasonable in the circumstances, B's damages for A's breach of contract may include the loss of his crop.

Question 75

Restatement § 350 Avoidability as a Limitation on Damages Efforts Expected A, a motion picture company, contracts to have B star in a musical comedy for $100,000. A breaks the contract and engages C, a rival of B, to star in the musical comedy, but offers B an equally good role under an identical contract as a star in another musical comedy for $100,000. Because B would be humiliated to work for A after A hired a rival in B's place, B refuses to accept the offer.

Answer 75

If rejection of the offer was reasonable in the circumstances, B can recover the full $100,000.

Question 76

Restatement § 350 Avoidability as a Limitation on Damages Actual Efforts to Mitigate Damages A contracts to sell to B a used machine to be delivered at A's factory by June 1 for $10,000. A breaks the contract by repudiating it on May 1. B makes a reasonable purchase of a similar machine for $12,000 in time to be delivered at his factory by June 1. It later appears that, unknown to B, a similar machine could have been found for only $11,000.

Answer 76

Nevertheless, B can recover $2,000 from A.

Question 77

Restatement § 350 Avoidability as a Limitation on Damages Actual Efforts to Mitigate Damages A contracts to supervise the production of B's crop for $10,000, but breaks his contract and leaves at the beginning of the season. B makes a reasonable substitute contract with another supervisor for $12,000 in time to save his crop. It later appears that, unknown to B, a suitable supervisor could have been found for only $11,000.

Answer 77

Nevertheless, B can recover $2,000 from A.

Question 78

Restatement § 350 Avoidability as a Limitation on Damages Actual Efforts to Mitigate Damages A pays a premium to B, an insurance company, for a policy of fire insurance on his house for a period of five years. B later repudiates the policy and A reasonably gets a similar policy from another insurer for the balance of the period.

Answer 78

A has a right to damages against B based on the cost of the new policy.

Question 79

Restatement § 359 Effect of Adequacy of Damages

Answer 79

(1) Specific performance or an injunction will not be ordered if damages would be adequate to protect the expectation interest of the injured party. (2) The adequacy of the damage remedy for failure to render one part of the performance due does not preclude specific performance or injunction as to the contract as a whole. (3) Specific performance or an injunction will not be refused merely because there is a remedy for breach other than damages, but such a remedy may be considered in exercising discretion under the rule stated in § 357.

Question 80

Restatement § 359 Effect of Adequacy of Damages A contracts to sell his business, including land, buildings and stock in trade, to B. A repudiates the contract and B sues for specific performance.

Answer 80

Specific performance of the entire contract may be granted, even though the stock in trade is of a kind that could be purchased elsewhere. However, in that case it is also within the court's discretion to require A to convey the land and buildings and to pay damages for failure to deliver the stock in trade.

Question 81

Restatement § 360 Factors Affecting Adequacy of Damages

Answer 81

In determining whether the remedy in damages would be adequate, the following circumstances are significant: (a) the difficulty of proving damages with reasonable certainty, (b) the difficulty of procuring a suitable substitute performance by means of money awarded as damages, and (c) the likelihood that an award of damages could not be collected.

Question 82

Restatement § 360 Factors Affecting Adequacy of Damages Difficulty in Proving Damages A contracts to sell to B a painting by Rembrandt for $1,000,000. A repudiates the contract and B sues for specific performance.

Answer 82

Specific performance will be granted.

Question 83

Restatement § 356 Liquidated Damages and Penalties

Answer 83

(1) Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty. (2) A term in a bond providing for an amount of money as a penalty for non-occurrence of the condition of the bond is unenforceable on grounds of public policy to the extent that the amount exceeds the loss caused by such non-occurrence.

Question 84

Restatement § 356 Liquidated Damages and Penalties Test of Penalty A and B sign a written contract under which A is to act in a play produced by B for a ten week season for $4,000. A term provides that “if either party shall fail to perform as agreed in any respect he will pay $10,000 as liquidated damages and not as a penalty.” A leaves the play before the last week to take another job. The play is sold out for that week and A is replaced by a suitable understudy.

Answer 84

The amount fixed is unreasonable in the light of both the anticipated and the actual loss and, in spite of the use of the words “liquidated damages,” the term provides for a penalty and is unenforceable on grounds of public policy. The rest of the agreement is enforceable (§ 184(1)), and B's remedies for A's breach are governed by the rules stated in this Chapter.

Question 85

Restatement § 361 Effect of Provision for Liquidated Damages

Answer 85

Specific performance or an injunction may be granted to enforce a duty even though there is a provision for liquidated damages for breach of that duty.

Question 86

Restatement § 361 Effect of Provision for Liquidated Damages Rationale A, B and C form a partnership to practice veterinary medicine in a town for ten years. In the partnership agreement each makes an enforceable promise that if, on the termination of the partnership, the practice is continued by the other two members, he will not practice veterinary medicine in the same town during its continuance up to a maximum of three years. Each also makes an enforceable promise that for breach of this duty he will pay $50,000 as liquidated damages. A leaves the partnership, and the practice is continued by B and C. A immediately begins to practice veterinary medicine in the same town. B and C sue A for an injunction and damages.

Answer 86

In spite of the liquidated damage clause, A will be enjoined from practicing veterinary medicine in violation of his promise not to compete. B and C may not then recover damages under the liquidated damage clause but may recover damages for any actual loss caused by A's breach, but not more than $50,000.

Question 87

Restatement § 361 Effect of Provision for Liquidated Damages Provision for Alternative Performance Distinguished A sells his grocery business to B for $200,000, of which $100,000 is payable immediately and $100,000 at the end of a year. Under the agreement A makes an enforceable promise not to engage in a business of the same kind within a hundred miles for three years unless he reduces the balance from $100,000 to $50,000 Before the end of the year, A writes B that the balance is reduced to $50,000 and immediately opens a competing business.

Answer 87

A will not be enjoined from operating the competing business.

Question 88

UCC § 2-718. Liquidation or Limitation of Damages; Deposits

Answer 88

(1) Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.

Question 89

UCC § 2-718. Liquidation or Limitation of Damages; Deposits Seller Withholds Goods

Answer 89

(2) Where the seller justifiably withholds delivery of goods because of the buyer's breach, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds (a) the amount to which the seller is entitled by virtue of terms liquidating the seller's damages in accordance with subsection (1), or (b) in the absence of such terms, twenty per cent of the value of the total performance for which the buyer is obligated under the contract or $500, whichever is smaller.

Question 90

UCC § 2-718. Liquidation or Limitation of Damages; Deposits Buyer's Restitution

Answer 90

(3) The buyer's right to restitution under subsection (2) is subject to offset to the extent that the seller establishes (a) a right to recover damages under the provisions of this Article other than subsection (1), and (b) the amount or value of any benefits received by the buyer directly or indirectly by reason of the contract.

Question 91

UCC § 2-718. Liquidation or Limitation of Damages; Deposits Buyer's Restitution Payment to Seller

Answer 91

(4) Where a seller has received payment in goods their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subsection (2); but if the seller has notice of the buyer's breach before reselling goods received in part performance, his resale is subject to the conditions laid down in this Article on resale by an aggrieved seller (Section 2-706).

Question 92

UCC § 2-719. Contractual Modification or Limitation of Remedy

Answer 92

(1) Subject to the provisions of subsections (2) and (3) of this section and of the preceding section on liquidation and limitation of damages, (a) the agreement may provide for remedies in addition to or in substitution for those provided in this Article and may limit or alter the measure of damages recoverable under this Article, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts; and (b) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy. (2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this Act. (3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.

Question 93

Restatement § 355 Punitive Damages

Answer 93

Punitive damages are not recoverable for a breach of contract unless the conduct constituting the breach is also a tort for which punitive damages are recoverable.

Question 94

Restatement § 355 Punitive Damages Compensation not Punishment A is employed as a school teacher by B. In breach of contract and without notice B discharges A by excluding him from the school building and by stating in the presence of the pupils that he is discharged.

Answer 94

Regardless of B's motive in discharging A, A cannot recover punitive damages from B. A can recover compensatory damages under the rule stated in § 347, including any damages for emotional disturbance that are allowable under the rule stated in § 353.

Question 95

Restatement § 355 Punitive Damages Compensation not Punishment A and B, who are neighbors, make a contract under which A promises to supply water to B from A's well for ten years in return for B's promise to make monthly payments and share the cost of repairs. After several years, the relationship between A and B deteriorates and A, in breach of contract and to spite B, shuts off the water periodically.

Answer 95

B cannot recover punitive damages from A. B can recover compensation damages under the rule stated in § 347 if he can prove them with reasonable certainty (§ 352), and the court may take into account the willfulness of A's breach in applying that requirement.

Question 96

Restatement § 355 Punitive Damages Exception for Tort A, a telephone company, contracts with B to render uninterrupted service. A, tortiously as well as in breach of contract, fails to maintain service at night and B is unable to telephone a doctor for his sick child.

Answer 96

B's right to recover punitive damages is governed by Restatement, Second, Torts § 908.

Question 97

Restatement § 355 Punitive Damages Exception for Tort A borrows money from B, pledging jewelry as security for the loan. B, tortiously as well as in breach of contract, sells the jewelry to a good faith purchaser for value.

Answer 97

A's right to recover punitive damages is governed by Restatement, Second, Torts § 908.

Question 98

Damages Formula

Answer 98

(Loss in Value + Other Losses) – (Cost Avoided + Loss Avoided) = Damages