PCL 1L Contracts
Part I
Review
Damages and Remedies
Monetary Remedies (aka Damages)
Compensatory Damages
To put the non-breaching party in the position they would have been had there been no breach.
A plaintiff must show that: the breach caused the damages, the damages were foreseeable at the time of contract, that the damages are certain, and that they were unavoidable. (CFCU)
Compensatory Damages
- Expectation Damages (Benefit of the Bargain, AKA Standard Measure)
- Reliance Damages
- Consequential Damages
- Incidental Damages
Expectation Damages
Damages that put plaintiff in the place they would have been had the other party performed.
- D to paint treehouse for $500, breaches, P gets another party to paint for $600. P can get $100 from D expectation damages.
Reliance Damages
Damages that put plaintiff in the place they would have been had contract never been formed.
Usually when:
- Difficult or speculative to show expectation damages
- Detrimental reliance or promissory estoppel situations
Consequential Damages (special)
Damages reasonably foreseeable at the time of contract that reflect losses over and above expectation damages (typically lost profits). Plaintiff must show that breaching party knew or had reason to know of special circumstances.
"arising naturally … from such breach of contract itself" Hadley v. Baxendale 558 6th Edition
Consequential Damages
What are some possible reasons for this rule on Consequential Damages?
The notes after Hadley v. Baxendale are an excellent condemnation of capitalism, even if that's not what the editor intended.
Consequential Damages
Incidental Damages (UCC)
Reasonable expenses associated with goods rejected under the Perfect Tender Rule (e.g. storage, return shipping, reselling, etc.)
Certainty Rule
Damages must be certain and ascertainable, not speculative.
Punitive Damages
Generally not awarded. Where these has been tortious conduct by the other party (e.g. fraud, intentional or negligent misrepresentation, etc.) in conjunction with the contract, a party may sue in tort under those theories.
Nominal Damages
Breach, but no proven loss. Typically $1.00
Liquidated Damages
Expressly defined in the contract. The requirements for enforcement: the damages must have been difficult to estimate or ascertain at the time of formation; must have been a reasonable forecast of damages; must not function as a penalty.
Liquidated Notes
The reasonable test will compare actual damages of the breach at the time of formation to forecasted amount. Under the UCC can be compared to breach at the time of breach.
- May be recovered even if there are no damages.
- Elections of liquidated or actual damages.
Liquidated Example
Part II
Compensatory Damages Continued
Contracts for the Sale of Goods
Buyer's Damages
Seller does not deliver, or goods are nonconforming to contraction (i.e. buyer rejects or revokes acceptance). Difference between contract price and one of market price OR cost of buying replacement goods ("cover"), plus any incidental or consequential damages. Expenses saved by seller's breach will be offset. In the case of anticipatory repudiation, damages are measured at time of breach.
Difference between contract and market price
Damages measured generally at the market price when buyer learns of breach at the place of tender, plus any incidental or consequential damages.
Difference between contract and cost of replacement goods "UCC Cover"
Standard buyer's measure for damages. Replacement goods contract must be reasonable, in good faith, and without unreasonable delay.
Buyer Accepts Nonconforming Goods
Must provide seller notice in a reasonable time after discovery of defects. Entitled to:
Warranty Damages the difference between the value of the goods contracted for and the value of the goods as delivered, plus any incidental or consequential damages.
Note on Consequential Damages under UCC
Barbri notes that sales to parties engaged in:
- resale
- manufacturing
puts the seller on notice of foreseeable damages.
Sellers Damages
Buyer refuses to accept goods or repudiates the contract. Difference between contract price and one of market price at the time and place of delivery OR the resale price, plus any incidental damages. If market price does not make seller whole, they may recover lost profits plus incidentals. In the case of anticipatory repudiation, damages are generally measured at time of tender.
Difference Between Contract Price and Market Price
Measured at time and place of tender of delivery.
Difference Between Contract Price and Resale Price
Standard measure of seller's damages. Good faith, commercially reasonable resale.
Lost Volume Seller (Damages for Lost Profits)
Where a seller can obtain or manufacture as many goods as they can sell, the profit lost on make only one sale versus two will be the measure of damages. Generally the contract price minus the seller's cost of the good.
Action for Price
If the buyer has not paid, or wrongfully refused to accept goods, and seller is unable to resell at reasonable price, or goods lost or damaged when the risk is on buyer, the seller is entitled to full contract price.
Texbook Supplement
(p.678) Hessler v. Crystal Lake Chrysler-Plymouth, Inc. This case focuses upon the reasonableness of buyer’s cover under UCC § 2-712 following seller’s anticipatory repudiation.
As a basic introduction to Code remedies, it makes sense to point out the menus in §§ 2-703 and 2-711 and to compare market and cover (or resale) formulas. This is a good time to reinforce the differences between general, consequential and incidental damages, making sure that students understand why these are general damages.
Other
Land sale: difference between contract price and fair market value
Employment contracts, breach by:
- Employer — full contract amount
- Employee — cost to replace employee
Construction Contracts
Breach by owner
- Before construction — builder's profits
- During construction — contract price minus price of completion
- After completion — full contract price plus interest
Breach by builder
- Before or during — completion cost and delay compensation
- Late completion — value of lost use
Part III
Questions, then Cases.
Our cases this week
Hessler v. Crystal Lake Chrysler-Plymouth, Inc.
National Controls, Inc. v. Commodore Business Machines, Inc
Horton v. O’Rourke
