#11392 - Compensatory Damages Paying For Harm - Modern American Remedies 4th Ed. Laycock

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 - §2-703: 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 § 2-706, recover damages for non-acceptance in § 2-708, or in a proper case the price in §2-709

UCC Resale § 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 - §2-708(1):

[Market Price (at time and place for tender) – Contract Price] + incidental damages– expenses saved by buyer’s breach. Subject to (2) [below:

• §2-708(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

  • 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 §2-708(2) and get lost profits + incidentals applied in Neri v. Retail Marine

UCC Action on the Price - §2-709: 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]

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BUYER’S REMEDIES FOR SELLER BREACH

UCC Buyer Choice of Remedy in Case of Seller Breach, § 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, §2-713, damages in regard to the accepted goods §2-714

UCC Cover, § 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, § 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, § 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

  • Degree of reasonableness of expectation somewhere between Chatlos and Cancer Cure Hypo

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

  • 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]

  • 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”

        • 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]