25 March 2014
(Chapter 12, p. 288-305)
DAMAGES is an award of money that is intended to cure a wrongful event, such as a breach of
contract. The plaintiff is not entitled to receive the exact thing that they expected to get under
the agreement. They are entitled to only the monetary value for that thing.
EXPECTATION D AMAGES
• Place plaintiff in position that they would have enjoyed if contract had been performed
EXPECTATION D AMAGES represent the monetary value of the benefit that the plaintiff expected to
receive under the contract. Expectation damages = forward looking, intended to place the
plaintiff in the position that they expected to be in after the contract was properly performed.
Compensatory damages/reliance = backward looking, allow plaintiff to recover the value of
something that was previously enjoyed but lost as a result of the defendant’s wrongful act.
EXPECTATION DAMAGES = EXPECTED BENEFITS UNDER THE CONTRACT – COSTS
UNDER THE CONTRACT
Calculation may seem difficult whenever a sales contract deals with something that may go up
or down in value. Parties agree on a price, but they cannot know what they thing will be worth
when the time for performance arrives. Expectation value is calculated at that time. Buyer
hopes that the thing will go up in value. Seller hopes that it will go down in value.
It is usually easy to calculate expectation damages. Some situations that are difficult:
• Difficulty of calculation
o Available even if it’s hard to calculate
o Court does best
• Cost of cure or loss of value
o Difficult to decide what to receive
o Whether plaintiff expected to receive a service or value of the end product of that
• Alternative performance
o Allow defendant to perform in a variety of ways, some which involve more or
fewer benefits to plaintiff
• Intangible losses and emotional distress
o NTANGIBLE LOSS is a loss that does not have any apparent economic value (IE:
Anger, frustration, sadness)
o REMOTE is when it would be unfair to hold the defendant legally responsible for it
o Loss is not remote if the defendant either should have known or actually did
know that it was the sort of loss that might occur if the contract was breached
Liability may be imposed if a reasonable person would have known that
plaintiff’s loss might result from a breach Liability may be imposed if the defendant actually knew that the plaintiff’s
loss might result from the breach
• Mitigation of damages
o M ITIGATIONis when the plaintiff takes steps to minimize the losses flowing from
the defendant’s breach
Duty to mitigate (failing to do so = poor business decision)
Responsible only for taking reasonable steps to mitigate loss
Damages denied only to the extent that plaintiff unreasonably failed to
Plaintiff can recover costs associated with mitigation
RELIANCE D AMAGES
• Compensate plaintiff for the costs that they incurred in reliance upon the contract
RELIANCE DAMAGES represent the monetary value of the expenses and opportunities that the
plaintiff wasted under a contract. Opposite of expectation damages. Plaintiff entitled to
recover either expectation damages or reliance damages, but not both. Expectation damages
look forward in an attempt to fulfill a contract, represent benefit that plaintiff expected to receive
under contract. Reliance damages look backward in an attempt to undo effects of the contract,
represent cost they incurred. If plaintiff wants benefit, they must be willing to pay the cost.
Reliance limitations are that it can only be awarded to the extent that a contract is not
unprofitable – plaintiff cannot use reliance to avoid a loss that they would have suffered if the
contract had been performed. Claimant bears responsibility for having made a poor deal.
ACCOUNT OF PROFITS
• Strip the defendant of a benefit that they received as a result of breaking a contract
Plaintiff may complain about defendant’s gain (received substantial benefit). Unfair to allow party
to profit from own wrongdoing. Courts traditionally rejected.
• Symbolically demonstrate that defendant breached promise to plaintiff
NOMINAL DAMAGES symbolize the fact that he plaintiff suffered a wrong when the defendant
broke a promise (awarded in small amounts). Bad idea to bring an action to recover nominal
damages, do not like to waste time on trivial matters.