Damages

Question 1

Expectation Damages Rule

Answer 1

Expectation damages are the loss in value due to the breach. If the buyer breaches, it is the K price minus the amount received from another buyer. If the seller breaches it is FMV minus the K price.

Issues:

• Foreseeable - damages must be something the other side should expect to occur due to his breach
• Certainty - damages may not be speculative
• Causation - damages must be proximately caused by the breach
• Mitigation - the party seeking the damages must take reasonable steps to keep damages low
• Consequential damages - damages that are incurred as a direct result of the breach. Must be foreseeable, certain, and there must be causation
• Attorney’s fees - generally in America AFs are not recoverable, but they are in Arkansas!
• Pre-judgment interest - must be certain
• Post-judgment interest - interest on outstanding principal until the judgment is paid
• Punitive damages - not recoverable for breach of K. No penalty damages for breach of K.

Question 2

Reliance Damages Rule

Answer 2

As justice requires . . . Court’s discretion. Usually out-of-pocket expenses granted.

Issues:

-Damages sought for promissory estoppel

Question 3

Restitution Damage Rule

Answer 3

Allows party to recover value given regardless of whether party would have lost money under the K if full performance. Also known as quantum meruit for services and quantum valebant for goods.

Issues:

• Not allowed if express K covers issue in dispute
• Other party must be in total breach. No restitution if non-breaching party has performed all obligations under K and only thing left is for breaching party to pay.
• Restitution is available for non-breaching party and for breaching party.

Question 4

Specific Performance

Answer 4

Seeking a court order that the breaching party must perform the K. Allowed when the goods/services are unique (monetary damages not adequate).

Question 5

Agreed Remedies (Liquidated Damages)

Answer 5

The parties may agree, in the K, to a liquidated damage amount. Liquidated damages may not constitute a penalty and must be reasonable forecast of potential damages.

Question 6

Third Party Beneficiaries Rule

Answer 6

The rights of third parties (no privity) to bring suit to enforce a benefit that would have been conferred upon them had the K been performed.

3rd parties have standing to sue if they are the intended beneficiary and:

Test 1 - Dual intent of promisor and promisee to confer benefit upon third party

Test 2 - Intent of promisee to confer benefit upon third party beneficiary (restatement) (Majority)

Test 3 - Intent of promisee to confer benefit upon third party beneficiary coupled with promisor’s reason to know of promisee’ s intent

Issues:

• Determine if intended beneficiary by language of K, circumstantial evidence from language of K, background, and fairness.
• Incidental beneficiary - no standing to sue
• Vested rights -The promisor and promisee may change K terms unless vested in third party beneficiary.
  - Vesting Occurs when:
  1. Third party has provided assent
  2. Third party has materially changed its position in reliance
  3. Third party has sued before the change
• Defenses to third party beneficiary claims -
  1. K between promisor and promisee unenforceable, void, or voidable
  2. K not binding due to impracticability, public policy, non-occurrence of condition, failure of performance then the rights of the beneficiary are discharged or may be modified.
  3. Except for above, promisor may not assert claims or defenses if has against promisee as a claim or defense against the third party beneficiary. Additionally, the promisor may not assert claims or defenses the promisee has against the third party beneficiary.
  4. Promisor may assert a claim or defense against the third party beneficiary regarding the third party beneficiary’s own conduct.
• Third party beneficiaries under government Ks - look to see if intended beneficiary, are there any administrative procedure/dispute resolution requirements in implementing legislation of regulations. Check regulation/government K to see if exclusive remedy in hands of government. If not, third party beneficiary may sue (has standing). However, generally a promisor in a government K will not be liable to a member of the public as a third-party beneficiary unless the K so provides.

Question 7

Punitive Damages

Answer 7

Not recoverable for breach of K

Restatement 2nd Section 355

Question 8

Elements to prove for recovery

Answer 8

1. That there was a contract
2. Plaintiff substantially performed its part of the K
3. Other side has breached
4. Breach has caused plaintiff damages