Remedies : Contract Law

150 150 tony
  1. Remedies
    1. Introduction
      1. Expectation Damages: Plaintiffs recover enough money to fulfill their economic expectations for the contract.
        1. Contract literature and UCC have formulas to measure expectation damages. For example, Prof. Farnsworth uses general measure = loss in value + other loss – cost avoided – loss avoided.
          1. Loss in value = difference in value b/w what the injured party would have received under the contract and what the party has received
          2. Other loss = injured party’s cost due to breach
          3. Cost avoided = what the injured party does not have to pay out as a result of breach
          4. Loss avoided = any savings the injured party may make after the breach
        2. Under the UCC, the standard formula for breach of warranty as to goods that the buyer has accepted is: damage = value as warranted – value as delivered. For example, you buy something for $1,500, but it’s only worth $1,200 b/c of a defect, then the damage is $300. This formula comes from §2-714.
        3. Direct damages: As stated above, from UCC §2-714.
        4. Consequential damages: There’s a foreseeability requirement; a car-defect not only makes it less valuable, but causes it to run through your garage door. The damages incurred for the garage door are the consequential damages (b/c they are not a direct result). Look to the test under UCC §2-715 and Hadley v. Baxendale.
        5. Other formulas in the UCC:
          1. Damage= reliance expenditure + anticipated profit – savings as a result of breach (Prof. notes this formula, too). Hypo is O contracted with B to build a house for 100K. B bough 20K worth of materials. O breached. B can return items for 18K. It was going to cost B 85K to do the job. Total damages, using this OR Farnsworth (above) is 17K.
            1. Usual damages for buyers or sellers of goods are found in 2-713 and 2-708(1), respectively. In general these formulas direct one to subtract market price from contract price (or vice versa).
      2. Reliance Damages: Return to the plaintiff of his outlay in performing the contract. (P may use this when he can’t show what his expectation damages would be.) [rarer]
      3. Restitution Damages: Part of the plaintiff’s outlay that actually benefited the defendant. (Concern here is about unjust enrichment.) [rarest]
      4. Specific performance or injunction: Rarest of them all. Rst. 2d, Sec. 359(1): such will not be ordered if damages would be adequate to protect the expectation interest of the injured party.
      5. Duty to mitigate: Plaintiff has a duty to make a diligent effort to mitigate damages so that the he does not so increase the loss suffered. If not, damage recovery is reduced by the amount that it would have saved by diligent mitigation. Minimizes waste and promotes efficiency.