Yes Remedies

What interest do Expectation damages protect?

The value of expected benefit under the contract.

“Give me what I expected to get.”

What’s the default for remedies?

Expectationn damages

When does Expectation Damages apply?

Party A has breached an otherwise valid agreement with Party B

What’s the goal of Expectation Damages?

Put the non-breaching party in as good a position as they would have been in if the contract been performed on both sides

Who does Expectation Damages benefit most?

The non-breaching party since he gets all his expected profits

What interest do Reliance damages protect?

Reasonable detrimental reliance on the other party’s promise

When does Reliance damages apply?

Party A has incurred expenses in reliance on Party B’s promise

What is the goal of Reliance damages?

Put the non-breaching party back in the position they would have been in had they not detrimentally relied

Painter contracts to paint Owner’s house for $10K.
Painter expects $4K profit.
He spends $2K on paint, primer, and drywall.
After completing 10% of the job, Owner breaches and fires Painter.

What’s his reliance damages?

$2K

Who does Reliance damages benefit?

It’s in the middle

What interest do Restitution damages protect?

Unjust enrichment. No one should get a windfall.

When does Restitution damages apply?

Non-breaching party has conferred some benefit to the breaching party

How is Restitution damages calculated?

The measure of the value conferred on the breaching party

Painter contracts to paint Owner’s house for $10K.
After completing 10% of the job, Owner breaches. Painter painted 10% of the house. What would likely be the Restitution damages?

$1K

Who does Restitution damages benefit?

The breaching party. He only has to pay for what he got and nothing more.

The contract is a losing contract. What type of damages should the non-breaching party seek?

Restitution - get paid for the value you provided, not for the expected profits (since there were none)

What type of remedies are available for promissory estoppel? What’s the most common?

All are available, but expectation is most common

What’s the Master Formula for Expectation Damages?

LOCA:
LOSS in value + OTHER loss incurred – Cost AVOIDED – avoided LOSS

(Last two only for total breach)

Hypo I made up:

Morflow Heating & Air contracts with Bob for an HVAC system for $13K. Bob pays a $5K deposit. Bob calls and says, “No longer interested. I’m not paying a dime more.

Morflow expected $8K more in damages.

They spent $1K on returning the system to Bosch.

They didn’t have to pay Edwin $1K to install it.

They got a $5K refund from Bosch.

Formula: $8K + $1K - $1K - $5K = Bob owes $3K

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Sum of Loss in value (what did you not get paid that you would’ve?) + other loss incurred (never add what you spent. This is only for storage fees, penalties, etc.) - cost avoided (what did you avoid paying due to the breach?) – loss avoided (salvaging the material)

(the latter two are only included for TOTAL breaches)

What are Incidental Damages?

Non-breaching party incurs reasonable costs trying to avoid further loss — even if the effort fails.

Restaurant owner contracts with furniture company for 100 chairs at $15K. Company fails to send the chairs; owner runs to Home Depot to buy same chairs for $20K to avoid delay of store grand opening. Furniture company is liable for $5K. What is this an example of?

Incidental Damages

What are Consequential Damages?

Damages that arise naturally from the breach, or that may be reasonably foreseen at time of contract formation

Restaurant owner says, “Because you didn’t ship the chairs, I had to close my restaurant for 3 weeks until I find a viable replacement. Pay for those three weeks of lost profits.”

What is this an example of?

What could be the chair retailer’s defense?

1. Consequential Damages

2. “You had a duty to mitigate”

When calculating expectation damages for Real Estate sales, how do you calculate it?

FMV at time of breach - contract price

No double recovery - earnest money is subtracted

When calculating expectation damages for Construction, how do you calculate it?

builder’s expected net profit + builder’s reimbursed expenses

How are Expectation Damages calculated for Employment Relationships?

Cost of obtaining other services + consequential damages

TechNova hires Sarah, a SWE, for a fixed 1 year contract. After 3 months, Sarah quits/breaches. TechNova needs to hire someone instantly to finish the project. Due to short notice, they hire Mike, a replacement consultant. He charges $15K/month for the remaining 9 months. TechNova also pays a headhunter $5K to find Mike. What are the expectation damages?

$5K + $45K = $50K

What are the two approaches when a Contractor’s performance deviates from the agreement?

Default Approach: Cost of Completion:

The promisee deserves the thing they contracted for.

(e.g. In Jacoby & Youngs, the contractor would have to replace the pipes.)

Exception Approach: Diminution in Value Elements

1. There has been substantial performance in good faith,

2. The breach is incidental to the main purpose of the contract, and

3. Repair costs would be grossly disproportionate to the resulting increase in value, such that awarding cost-to-complete would create economic waste.
(e.g. Jacoby & Youngs outcome)

What is a Lost Volume Seller? What are the elements?

When the victim would have been able to enter into both transactions irrespective of the breach.

Non-breaching party should have:

1. possessed the capacity to make an additional sale

2. been profitable to make an additional sale and

3. probably made an additional sale absent the buyer's breach

Modern Living sells the Cloud Sofa for $3,500. It costs them $2,200 to source. They have 1,000 sofas in stock. Alice contracts to buy the Sofa but breaches 3 days later. Modern Living sells the same sofa for $3,500. Modern Living incurs $75 in admin costs to update their inventory system and cancel Alice’s order. How much does Alice have to pay in damages?

$1375

$1300 + $75

Suppose the real estate buyer breaches, but the FMV is higher than the contract price. Damages?

No, it was a losing contract. But could still get consequential damages.

What is an Efficient Breach?

When a D’s breach allows for both P and D to earn more and pay less.

Classic Restorations restores vintage motorcycles. They contracted with A to sell it for $15K. B passes by and offers $25K. CR breaches and sells to B. A is forced to find a similar restored motorcycle, costing him $18K. What is this an example of?

Calculate what Classic Restorations must pay.

Efficient Breach.

$3K in damages, but CR made an additional $10K, profiting $7K.

What are limits on Expectation Damages?

1. If the victim didn’t mitigate

2. If the damages weren’t caused by the breach

3. If the damages couldn’t be foreseen as a result of the breach

Homeowner hires Painter. Homeowner repudiates after Painter painted 30% of house. Painter continues painting the house and demands full damages. What is the Homeowner’s best defense?

You didn’t mitigate. You had to stop painting.

What’s Certainty of Damages?

Damages are not recoverable for loss beyond what can be established with reasonable certainty.

Restaurant hired a designer to remodel by March 1 to boost business. Designer repudiates on Feb. 28, causing a one-month delay. Restaurant claims, “We would’ve doubled our sales if the remodel happened on March 1.”

What’s the Designer’s best defense?

These lost profits are too speculative under §352 and not recoverable.

A bakery contracts with a delivery company to transport a broken crankshaft to a repair shop. The delivery company is never told that the bakery’s entire oven cannot operate without that crankshaft. The delivery is delayed by 4 days. Because of the delay, the bakery loses $10,000 in profits from being unable to bake.

What’s the delivery’s company best defense to Expectation Damages?

It wasn’t foreseeable

When do you NOT have a duty to mitigate?

If the injured party would have had to expend significant money or incurred substantial obligations to mitigate

A seller breaches a contract to sell a restaurant custom kitchen equipment. To mitigate, the restaurant would have to pay another vendor $100K. Is this mitigation necessary?

No, too costly