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Types of damages?
- 1) Compensatory
- 2) Liquidated
- 3) Punitive - unavailable for K actions
- 4) Restitution
- 5) Equitable Relief
What are compensatory damages?
- put nonbreaching party in position he would have been had promise been performed
- purpose is to compensate P, not punish D for breach. No punitive damages for breach
- 1) expectation damages (benefit of the bargain)
- 2) incidental damages (costs incurred in dealing with breach, finding a replacement; always recoverable)
- 2) reliance damages (cost of plaintiff's performance)
- 3) consequential damages (special damages)
- Note: P must subtract avoidable damages
- Bar essay: write this
- 1) The purpose of money damages is to compensate.
- 2) In CA, money damage rules are based on protection of the non-breaching partys expectation interests.
- 3) That means that a person making a contract expects that it will be performed without breach.
- 4) That means money damages are based on the amount of money required to put the plaintiff in the same economic position as if the contract had been performed without breach.
- Formula: ($ value of performance w/o breach) ($ value of performance w/breach)
- 1) special damages arising from Ps special circumstances,
- 2) which D knows of at time of K,
- 2) only if foreseeable
- no recovery for damages that could have been avoided w/out undue burden on P
- [Continuing to perform after the other partys breach, not recov.]
- [Turning down other, comparable opportunities, not recov.]
- This is a defense, thus BOP on Defendant, NOT Ps duty to mitigate
Seller breaches, Buyer keeps goods:
(FMV if perfect) (FMV as delivered)
Seller breaches, seller has the goods:
(Mkt price at time of breach [or reasonable replacement price, whichever is greater]) (K price)
Buyer breaches, buyer keeps the goods:
Buyer breaches, seller has the goods
- (K price) (resale price [mkt price @ delivery])
- UNLESS: lost volume seller rule applies
Lost volume seller rule
- 1) supply of goods unlimited
- 2) damages = provable lost profits
- Ex: Seller contracts to sell leather clothing to D for $1,000.
- (Assume that D is buying goods that are part of Seller's regular inventory off the rack so to speak.)
- D breaches. Seller sells the very same items to Buyer2 for $1,000.
- Seller can recover lost profits from D.
- contract provision that sets the amt of damages; concern is penalty is too high, against public policy as a punishment
- 1) Damages were difficult to calculate at the time the K was formed
- 2) Amount must be a reasonable forecast of damages, and NOT a penalty
Damages must be established with reasonably certainty
- Certainty Limitation: Damages must be established with reasonable certainty
- so if new business, try RELIANCE recovery (below)
puts P back in same position as if no K
- Quasi-contract relief
- Measured by value of the benefit conferred:
- 1. Benefit of the bargain: contract price minus cover price
- 2. Net benefit received: reasonable value of breaching partys services less damage incurred due to the breaching partys failure to perform
Contracts sets a limitation of Remedies
- establishes ceiling. If unconscionable- not allowed.
- Concern is penalty is too low
- Type of equitable remedy
- 1) valid K
- 2) satisfaction of P's conditions/Performance
- 3) inadequate remedy at law [money damages not adequate]
- 4) feasibility
Exam tip regarding specific performance
- 1) Judicial administration concern of enforcing specific performance how would the court enforce the order to require player to play for the team he didnt want to? Owner tells the judge he missed 3 shots last night
- 2) balance judicial administration vs. difficulty of determining money damages
What situations are eligible for specific performance?
- 1) Ks for real estate sales (but NO specific performance when theres a 3rd party bona fide purchaser from seller that will be harmed by specific performance)
- 2) Goods if UNIQUE (antique, art, custom-made)
- 3) NEVER SP for services K, but court has discretion to grant injunctive relief to compel someone to not work for a competitor
[limited] right of unpaid seller to get its goods back
Sellers right of reclamation
- 1) Buyer must have been insolvent at the time the goods received,
- 2) Seller demands return of goods within 10 days of receipt of goods, and
- 3) Buyer has goods at the time of demand.
Buyers right of reclamation:
- 1) identified goods
- 2) FULLY PAID for goods
- 3) seller who becomes insolvent within 10 days
- Cancels K for:
- 1) mistake
- 2) fraud
- 3) duress
- 4) breach
modifying a written agreement to reflect the parties' agreement