Contract And Off Contract Remedies Outline

1. CONTRACT REMEDIES

   1. Expectancy

      1. Calculating Expectancy

Expectancy is the principle of putting Π in the position he would have occupied absent the breach. It is the meta-principle of contract remedies.

• Objective Expectancy: This means giving Π the fair market value of what he would have had but for the breach.

  • Rest. § 348 (2): For defective or unfinished construction, Π may recover

    • (1) The cost of mitigation, if it is feasible doesn’t require unreasonable waste; or

    • (2) The difference in value of the property as it is and as it would have been absent the breach. (Groves v. John Wunder Co.)

• Subjective Expectancy: Where Π’s expectancy interest exceeded the market rate, we may award this instead. (Landis v. Fannin Builders: where Δ got the color of Π’s dream house wrong, Π may recover the cost of new stained siding rather than the cost of painting the existing siding).

  1. Market Differential & Substitution

A party may collect the difference between the contract price and the price of obtaining a substitute contract when the other party breaches. (See: MITIGATION)

• Π recovers the difference between the contract price and the market price at the time Π learns of the breach. If the difference in price is in Π’s favor, then the contract was a “dog” and Π’s expectation interest is negative (zero). (Acme Mills v. Johnson)

• UCC § 2-712: (See: MITIGATION) (c.f. Missouri Furnace v. Cochran)

• UCC § 2-713: (See: MITIGATION)

• UCC §§ 2-602 et seq.: Buyer’s remedies.

• UCC §§ 2-703 et seq.: Seller’s remedies.

  1. Lost Profits & Consequential Damages

A party may collect lost profits resulting from the breach, within limits.

• UCC § 2-708: Expectancy is the full contract price if the party is a “volume seller;” i.e., we can assume that the substitution contract would have happened regardless of the buyer’s breach. (Neri v. Retail Marine Corp: seller of a custom boat who sold the boat at the contract price shortly after buyer’s breach could still collect full contract price).

• Reasonable Certainty Principle: A party seeking to collect lost profits may only collect those profits which were “reasonably certain” to materialize. (See: Chicago Coliseum Club v. Dempsey, MindGames v. Western Publishing).

  1. Reliance

     1. General

Reliance damages are costs incurred in fulfillment of the contract. Reliance damages are meant to restore Π to the status quo ante.

• Rest. § 349: Expectancy Caps Reliance. Where Π’s contract was a “dog” and Π’s expectancy is negative, Π may recover reliance damages but only up to the point of expectancy. The burden of showing Π’s losses falls on Δ. (L. Albert & Sons v. Armstrong Rubber).

• Reliance damages may be sought as an alternative theory where expectancy is hard to quantify.

• Fixed and Variable Costs: Π may typically recover variable costs incurred in performance of the contract only. (Chicago Coliseum Club v. Dempsey: Π may recover wages of secretarial staff hired to promote event but not salaries of its officers).

• If Δ made a promise and had reason to believe Π would detrimentally rely on the promise, Π may have a promissory estoppel claim to collect reliance (or expectancy) damages. (See: PROMISSORY ESTOPPEL)

  1. Restitution

Restitution is sought as an alternative to reliance or expectation damages. Restitution may be sought where Δ has been unjustly enriched by Π’s performance of the contract, in part or in full. Alternatively, it may be sought where no contract is found (See: DEFENSES TO FORMATION), but Π has still conferred some benefit upon Δ which it would be unjust to leave intact. Restitution has a close relationship with equity.

1. Quantum Meruit

Quantum Meruit: or “quasi contract.” This is a legal action in equity to recover the value of what was conferred upon Δ.

• To recover in QM, it is not sufficient to say that Π has lost something. Δ must have gained something. (Boone v. Coe)

• However, if Δ performed something at Π’s specific request, then Π may collect the fair value of his performance even if Δ never actually received the benefits. (Kearns v. Andree)

• But preparatory work which does not benefit Δ and which was not done at Δ’s specific request is only recoverable on the contract, not in quantum meruit. (Curtis v. Smith: stone quarry)

• Where Π has substantially performed the contract, the contract price will be used as the measure of Π’s damages. Courts like using the contract as evidence of damages when it is possible to do so. (Oliver v. Campbell)

• However, where Π has partially performed, Π may instead seek the market price for what was done. (United States v. Algernon Blair)

• Wilful Breacher: The breaching party may not sue in quantum meruit if he didn’t have a good excuse for breaching. This is because QM is an equitable remedy and thus imports the concerns for motive and morality that are absent in contract analysis. (Stark v. Parker)

• Excusable Breacher: The breaching party may sue in QM if he has a good reason and can show that the other party would be unjustly enriched in keeping what he has conferred. (See: Vines v. Orchard Hills). However, the breaching party’s award is capped by expectancy, and may be reduced by as much as the other party can show it was injured by the breach. (Britton v. Turner).

• Where the party has substantially performed but breached by performing incorrectly, the party may recover on the contract price minus the diminution in value to the other party. (Pinches v. Swedish Evangelical Lutheran Church)

• FOUR SCENARIOS:

  • Π substantially performs and Δ takes the benefits: Π gets K price minus damages

  • Π does not substantially perform but Δ takes the benefits: No K, but QM

  • Π does not substantially perform but breaches unintentionally: QM capped by K

  • Π does not substantially perform, Δ takes no benefits, wilful breach: No recovery

    1. Wilful Breach

A wilful breacher may not typically recover in restitution. The trouble is defining willfulness.

• Intentional standard: did Π mean to breach? (Pinches)

• Premeditated breach at...

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