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COMPENSATORY DAMAGES: PAYING FOR HARM Compensatory Damages: Provide an award of money damages to aggrieved party to compensate for any loss or injury. Compensatory Damages = General Damages +
Consequential (Special) Damages??
General (Direct) Damages: Initial impact of the wrong, value of what was took (value of what was taken, destroyed, damages, or failed to deliver) **rough definition Consequential (Special) Damages: Things that come after the initial wrong
[everything that happens as a consequence of the initial impact] **rough definition
In Tort: Objective of damages it to make the plaintiff whole by awarding sufficient money to indemnify the plaintiff for the loss (position that would have been occupied "but for the wrong") In Contract: Of course, position would have occupied "but for the wrong", but what does that mean?
o Expectation: seeks to place Plaintiff in the position she would have occupied if the contract had been performed [this embodies the true rightful position standard, Neri]
? Gross Expectancy: measured by the full payment or performance promised under the contract, which seller expected would cover the full cost of their own payment or performance plus a profit margin
? Net Expectancy: expected profit on the contract o Reliance: seeks to put P in the position she would have occupied if the contract had never been made
? Essential Reliance: expenditures necessary to perform the contract
? Incidental Reliance: all other reliance, etc. foregone opportunities
? **If defendant can prove that plaintiff would have lost money on the contract, the rule is that any loss must be subtracted from any reliance recovery (damages for breach should not make P better off than if K was fully performed)
CONTRACT COMPENSATORIES All these remedies attempt to put buyer/seller in place they would have been had contract been performed (the parties "rightful position") Market price not necessarily = TC?
Incidental Damages reasonable charges incurred because of other party's breach (cost to store goods because of breach, cost to advertise to try and resell because of breach etc.) Consequential Damages Everything that comes after the initial wrong ("everything that happens as a consequence of the initial impact")Under UCC Seller CANNOT recover consequential damages, Buyer CAN (but remember Hadley v. Baxendale - in order to have proximately caused that damage buyer must have made it known to seller)
SELLER'S REMEDIES FOR BUYER BREACH UCC Gives Seller Choice of Three Remedies - SS2-703: When buyer rejects or revokes acceptance of goods or fails to pay, seller may: (a) withhold delivery of such goods, (d) resell and recover damages as provided in SS 2-706, recover damages for non-acceptance in SS 2-708, or in a proper case the price in SS2-709 UCC Resale SS 2-706: Seller can resell the goods to another buyer "in good faith and in a commercially reasonable manner" and recover
= (contract price - resale price) + incidental damages - expenses saved by buyer's breach UCC Damages for Non-Acceptance - SS2-708(1):
[Market Price (at time and place for tender) - Contract Price] + incidental damages- expenses saved by buyer's breach. Subject to (2) [below:SS2-708(2): If (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit which seller would have made from full performance + any incidentals o This is the VOLUME SELLER provision - If you have many of X that you are selling, breach of K means you could have sold one more if buyer did not breach. If you are just selling one car though, you still would have only sold one car
? Volume Seller does not work for (1) because assuming contract price=market price, your damages would only be incidental costs (but you lost a sale). So invoke SS2-708(2) and get lost profits + incidentals applied in Neri v. Retail Marine
UCC Action on the Price - SS2-709: When buyer fails to pay for goods as they are due and either keeps the goods or the goods are lost or damages after risk of loss has passed to buyer OR has made a reasonable effort to resell them at a reasonable price and could not =
[Contract price + incidental damages]
BUYER'S REMEDIES FOR SELLER BREACH UCC Buyer Choice of Remedy in Case of Seller Breach, SS 2-711: Where seller fails to make delivery or repudiates, buyer may recover the price he has paid plus: (1) "cover", (2) damages for non-delivery, SS2-713, damages in regard to the accepted goods SS2-714 UCC Cover, SS 2-712: A buyer can cover by making a good faith purchase of substitute goods without unreasonable delay. [MUST ATTEMPT TO COVER FIRST TO LIMIT CONSEQUENTIALS - DUTY TO MITIGATE]: Formula: Amount toward purchase price paid to seller + (cover price - contract price) + incidental &
consequential damages - expenses saved UCC Market Damages, SS 2-713:
[(Market P when buyer learned of the breach) - (K price)] + (incidental/consequential damages) but minus (expenses saved in consequence of breach) UCC Damages for Breach in Regard to Accepted Goods, SS 2-714: The measure of damage for breach of warranty = [market value of goods as accepted (at time and place of acceptance) - market value they would have had been as warranted (at time and place of acceptance)], unless special circumstances show proximate damages of a different amount?
Applied in Chatlos Systems v. National Cash Register, also appears to be regardless of how reasonable the expectation was FORK: What about something ridiculous, like a cancer cure for $2? Probably no, because we can't value a cancer cure and it is extremely unreasonable to believe this o Degree of reasonableness of expectation somewhere between Chatlos and Cancer Cure Hypo
TORT COMPENSATORIES General Rule for Compensatory in Tort Cases:
= General Damages + Consequential Damages - (Avoidable Consequences)?
Policy goal is to restore Plaintiff to position he would have occupied had but for the harm o When we are speaking bodily injuries or death, realize the consequences of such and howtough it is to value. Sometimes consequences of property damage also tough to value.
? Many rules that attempt to limit liability because of this valuation/speculation problem Consequential Damages: Take Plaintiff as you find him in tort (but still duty to mitigate)
Compensatory Damages in Tort for Property Damage:?Property owner gets lesser of (even if completely destroyed)[LESSER OF TWO RULE FOR PROP DAMAGE]:
1. The diminution of the property's market value; OR
? Fair Market Value: "price at which property would change hands between a willing buyer and willing seller, neither under any compulsion to buy or sell and both having a reasonable knowledge of relevant facts"
? Market value encompasses the present value of the rental streams expected from the property [In re Sept. 11 Litigation, Trinity Church], no double recovery
2. Its replacement cost
+ Potentially recover for loss of use during the reasonable time it takes to replace the property. Jurisdictions are split, allowed it Hatahley, not allowed in In re Sept. 11 (usually allowed when property is only damaged and is awarded during time to repair; when property is completely destroyed, however, we assume the market value encompasses this loss stream of rental payments) Exception for Special Purpose Property: If property is a type that is "seldom traded" and for which there is no market price, REPLACEMENT COST is the proper measure of fixing damages [In re Sept. 11]
o Recovery is "reasonable cost of restoring the property to the condition it was in prior to the tort" minus straight line depreciation.
? Examples are: churches, hospitals, clubhouses and spaces held by non-profits
? Test for specialty properties is "whether the use to which the property is put at the time of the tort is unique, suitable only to the owner, and without fair market value" o Also: "but where one who has arrived at a bargain of unique value to him is deprived of it by the fault of another, and where he can convince the trial court that its value to him was real and not speculative or later devised, he should recover it" [King Fisher Marine Service v. The NP Sunbonnet]
Compensatory Damages in Fraudulent Misrepresentation: Federal Rule: Expectancy damages recoverable only in contract, not in tort State/UCC Rule: Usually allow recovery of non-speculative expectancies in fraud as well as in contract Fraud Cases Measure of Damages = [K Price] - [Actual Value on DAY YOU BOUGH IT]
(i.e. if it was worthless you get everything back?
P must show that he RELIED on the fraudulent misrepresentation (but SCTOUS has held as a matter of law everyone relies on integrity of the market price) In securities fraud cases, simply sowing that the price on the day of purchase was inflated because of the misrepresentation is not enough because at that instant you have suffered no loss (because you could immediately resell at same inflated price) Dura v. Broudo
Consequential Damages Consequential Damages: Generally, things that come after the initial wrong (everything that happens as a consequence of the initial impact)Recoverable, of course, only if the "initial wrong" was the proximate cause of the consequence: o Contract Cases: Hadley v. Baxendale: Must make it known to other party before contract is entered into of the consequences of breach (theoretically then other party will say forget it or raise price to compensate risk)
[encompassed in UCC SS2-715]
? Buck v. Morrow: Lessor revoked Lessee lease, knew lessee was using land to raise cattle, displaced lessee. Lost some cattle and had to pay to look after others as a result of the displacement/contract breach - RECOVERABLE (P is not made whole without consequentials)
? Anuhco v. Westinghouse: Breach of contract to lend money, RECOVERABLE if lendor knew of consequences o NO consequentials for failure to pay money (recovery ONLY for the amount owed plus damages in the form of INTEREST) [Meinrath v. Singer]
o Tort Claims: "Thin Skull Plaintiff"/Take P as you Find Him. If D's actions were PC of harm to P, all consequences of that harm theoretically recoverable (subject to limitations on damages).
Limitations on Remedies Many rules limit damages, often in ways that limit Plaintiff to less than her rightful position Limitations on Remedies Clauses: UCC SS 2-719(1): (a): The agreement may provide for remedies in addition to or in substitution for those provided in this Article and may limit or alter the measure of damages recoverable under this Article, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement (b): Resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy (2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this Act.
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