Yes Damages (continued)

What are Reliance Damages?

Expenditures induced by reliance on the contract itself and rendered worthless by its breach.

You spend $50K preparing to perform.
If the contract would’ve gone through, you would’ve lost $20K.
You get $30K in damages.

Is this an example of Reliance Damages?

Yes

What are the limits on reliance damages?

1. Proof the breach caused the damages is required

2. If it would’ve been a losing contract, reliance damages can be limited

3. If mitigation is costly/requires substantial obligations, mitigation is not necessary

When is Restitution typically elected by the non-breaching party?

For a losing contract (because expectation damages would be $0)

When is Restitution Damages used for a breaching party?

When the breaching party has partially performed or relied and the non-breaching party has received a benefit greater than their loss. No windfalls allowed.

Describe the jurisdiction split under Common Law and Restatement for breaching parties attempting to recover.

Common Law

• A defaulting party cannot recover payments made prior to default. We want to punish them.

Restatement

No windfalls. Let’s make everyone whole and restore them to pre-contracting.

When is Specific Performance awarded?

As an alternative to damages.

It’s awarded when 1) damages are unable to be calculated OR 2) contract (or item) is unique (e.g. real property)

Is Specific Performance a last resort?

Yes

When don’t we use Specific Performance?

When damages are easily calculable, court just awards damages.

When it’s for personal services, court awards damages. We don’t want angry contractors finishing the job.

In terms of policy, why do we avoid Specific Performance?

• Waste of judicial resources

• Difficulties in supervision - how do we know if the breaching party actually did a good job?

• We don’t want involuntary servitude