Remedies and the Expectation Interest Flashcards

1
Q

What is the expectation interest and what are the two types?

A

The expectation interest looks to where the parties would have been if the contract had been completed.

If both parties had fully performed, where would the plaintiff be monetarily? There are two ways in which a party’s expectation can be met:

  • (a) Specific performance
  • (b) Money damages
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2
Q

How is specific performance determined?

A

Generally only available in two instances: in real estate contracts, and for unique goods such as fine art, antiques, or special order items. To get specific performance, there are three things which must be shown by the plaintiff:

  • (1) inadequacy of money damages;
  • (2) certain and definite terms; and
  • (3) feasibility.
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3
Q

How are money damages calculated?

A

Look at the position the non-breaching party (plaintiff) is in after the breach and compare it to the position she would have been in if the contract had been fully and properly performed as expected. Basic formula:

  • (1) Establish the starting money position of the plaintiff (almost always $0).
  • (2) Mark the amount of money that represents the money position the plaintiff would have been in had the contract been performed as expected.
  • (3) Subtract the amount of money that represents the money position the plaintiff is actually in after the other party breached the contract.
  • (4) Determine the amount of money necessary to take the plaintiff from her actual money position to her expected position.
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4
Q

General damages

A

General damages are those which flow naturally from the breach. These are the ordinary circumstances which anyone in the plaintiff’s position would also suffer. Normally, general damages fall into one of two broad categories:

  • (A) Replacement Cost → The amount of money necessary to get a replacement.
  • (B) Difference in Value → The difference between the value of the performance actually tendered and the performance promised in the contract.
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5
Q

Consequential damages

A

Consequential damages are unique to the circumstances of the parties. These damages compensate a plaintiff for additional losses (other than the value of the promised performance) that are incurred as a result of the defendant’s breach.

Examples: lost profits, loss of use, injury to person or property, liability to third parties, or government fines and fees. Depending on what the consequential damages are, the damages will be either part of the plaintiff’s expectation money position or actual money position. Lost profits are part of the expectation money position, while the other examples are part of the actual money position.

Limit → Consequential damages can only be recovered if at the time of contract formation, the defendant had reason to foresee the damages as a probable result of the breach. For example, if lost profits are not foreseeable, they will not be included in consequential damages.

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6
Q

Incidental damages

A

Expenses incurred by the plaintiff in dealing with the breach. A plaintiff must take steps to mitigate and avoid additional losses, and may incur additional expenses while seeking to mitigate. These expenses may be collected by the plaintiff as incidental damages even if the expenses are not successful in mitigating additional losses.

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7
Q

Limits on expectation damages

A

(1) Certainty → Both as to whether loss occurred and as to amount, with no speculation.
(2) Causation → Damages must have flowed naturally from the breach.
(3) Foreseeability → Damages must have been foreseeable to a reasonable person familiar with the circumstances (or put on special notice) at the time of formation of the contract.
(4) Mitigation → No recovery for damages that are easily mitigated.

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8
Q

What is the reliance interest?

A

Reliance interest is typically used when it is difficult to calculate expectation damages with certainty, or when the plaintiff sues for promissory estoppel because he was unable to sue for breach on the contract. Reliance interest looks to the past and puts the plaintiff in the same position as he would have been if the contract had never been formed.

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9
Q

What is the restitution interest?

A

Restitution interest looks at how the defendant had been unjustifiably enriched and disgorges that benefit in favor of the plaintiff.

Calculating out of pocket expenses → The calculation differs depending on the type of restitution sought:

  • Monetary → Give the plaintiff money damages equal to the fair market value of the property or services bestowed on the breaching party.
  • Specific → Restore the plaintiff an identifiable thing or piece of property.
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