Contracts- Rules & Terms

Expectation damages

damages that put the injured party in as good a position if the contract had been performed

Hawkins v. McGee

Expectation damages = put the injured party in the same position they would be in if the contract was completed (Value promised − Value received)

Groves v. John Wunder

Damages can be based on the reasonable cost to complete the work, instead of the decrease in property value, even when the breach was willful

Peevyhouse v. Garland Coal Mining

If the promised work is only incidental to the main purpose of the contract AND the cost to complete the work is much greater than the increase in property value, damages are usually based on the change in property value, not the full cost of completion

Reliance damages

put the non-breaching party where they were before the contract was put in place

Gianetti v. Norwalk Hospital

Someone is a lost volume seller when they (1) had the capability to perform both contracts simultaneously, (2) the second contract would have been profitable, and (3) they likely would have made the second contract even if the first had not been terminated

Chicago Coliseum Club v. Dempsey

Reliance damages include damages incurred from relying on a contract… therefore damages incurred after a breach do not count

Security Stove v American Railway

When a breaching party has notice of special circumstances surrounding the contract, nonbreaching party may recover foreseeable and reasonably certain expenses made in reliance of the contract

Merry Gentleman v. George and Lona Productions

Reliance damages are (1) not insurance, (2) require showing that expenses were caused by breach, (3) require some causal connection between breach and loss

Rockingham County v. Luten Bridge

Upon notice of anticipatory repudiation, the non-breaching party must stop work and mitigate damages; Recovery is limited to (1) reliance expenditures up to breach and (2) expected profit that would have been realized had the contract been performed

Parker v. Twentieth Century Fox

Damages = agreed salary − money the employee could have earned from another substantially similar job; The employer must prove the employee could have earned money from another similar job. The employee must try to mitigate damages by looking for a substantially similar job. They do not have to accept a job that is very different or worse.

In re WorldCom

The breaching party must first prove that the injured party did not try to reduce their damages. Then, the plaintiff must show they made a reasonable, good-faith effort to reduce their damages, such as finding another contract. There is generally a duty to mitigate damages, unless the non-breaching party is a lost-volume seller