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c.
Expectation interest
i.
Definitions
1.
Expectation interest – The interest
in getting the value you would have gotten if the contract had been
performed, or in other words, getting damages such that you’d be in the same
position that you’d be in if the promise hadn’t been broken.
2.
“One is entitled to recover an amount
that will put one in as good a position as one would have been in had the
contract been performed.” – Farnsworth § 12.8
3.
This gives the injured party the
“benefit of the bargain”.
4.
It is based on the actual value the
contract would have had to the injured party if the contract had been
performed.
5.
Damages = loss in value + other loss
– cost avoided – loss avoided
ii.
Expectation damages cap the
amount a plaintiff can recover for breach.
iii.
When expectation damages are improper
or insufficient, reliance and restitution damages may be substituted in
certain cases. (Dempsey)
iv.
Uncertainty as a Limitation
1.
We put the burden on the plaintiff to
prove their damages to a reasonable degree of certainty. If you can’t or
don’t, you don’t recover, even though that will put you in a worse position
than performance would have done.
2.
You must lay an evidentiary
foundation for your damages. “The uncertainty principle boils the bullshit
out of claims.” (Security Stove)
3.
When you think about “certainty”,
think about the necessity of establishing an evidentiary foundation for
damages.
d.
Reliance interest
i.
Definitions
1.
Reliance interest – the interest in
getting back the value you lost because you were counting on the contract to
be performed
2.
“The interest a nonbreaching party
has in recovering costs stemming from that party's reliance on the
performance of the contract.” – Black’s 7th
3.
This attempts to put the injured
party in the position it would have been in if the contract had never been
made.
4.
It’s a cost that came out of the
plaintiff’s pocket but didn’t go into the defendant’s pocket. It
might have gone to a third party, for example, Hawkins’s hospital fees.
ii.
Reliance damages should be granted
when expectation damages are seen as excessive (because, for example, the
defendant was not liable for negligence) or too uncertain but
restitution damages are seen as insufficient (because the agreement ought to
be at least minimally enforced).
iii.
Example – Dempsey’s case
iv.
Most contract breach cases award
expectation damages. However, there seem to be a few cases where reliance
damages are favored. Why don’t we usually go with reliance?
1.
Reliance is a lot harder to prove
than expectation, and so if you want to ensure good contracts from a policy
standpoint it’s more practical to use expectation.
2.
When we don’t get what we’re
promised, our feelings are hurt. There is an interest in protecting against
the stress of broken promises that is best enforced with expectation
damages.
3.
A modern economy based on credit
needs remedies based on expectation because of the risk and uncertainty
involved in changing markets.
4.
Expectation damages prevent promisors
from being tempted by gain through breach of contract.
e.
Restitution interest
i.
Restitution interest – the interest
in getting the money back that you paid while trying to do your part of a
contract
ii.
With restitution you’re merely taking
the benefit away from the defendant that the plaintiff gave him/her.
iii.
Statute of frauds – restitution ≠
enforcement – that is, even if the contract is unenforceable under the
statute of frauds or for some other reason, you can still get your money
back.
f.
Buyer in Breach and Seller’s Damages
under the UCC (generally at § 2-703)
i.
Resell the goods and recover damages
(§ 2-706) – seller’s “cover”
1.
The resale must be made in good faith
and a commercially reasonable manner
2.
The seller can recover the difference
between the resale price and the contract price (only if the resale price
is less than the contract price)
3.
The seller can also recover
incidental damages (§ 2-710)
4.
The seller must deduct expenses saved
due to the buyer’s breach
ii.
Recover damages for non-acceptance (§
2-708)
1.
The standard measure of damages (§
2-708(1))
a.
The seller can get the difference
between the market price and the contract price (only if the market price
is less than the contract price)
b.
The seller can also get incidental
damages (§ 2-710)
c.
The seller must deduct expenses saved
due to the buyer’s breach
2.
The “lost volume” seller (§ 2-708(2),
like in Neri v. Retail Marine)
a.
If the standard measure is
inadequate, the seller can recover the profit the seller would have made
from the buyer
 
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