BCOR 3000 1nd Edition Lecture 18 Outline of Last Lecture I Discharge of Duties II Discharge by agreement of Parties A Mutual Rescission B Novation C Substituted Contract D Accord and Satisfaction III Discharge Impossibility IV Subjective Impossibility Outline of Current Lecture I Damages II Benefits of the Bargain III Applying the Benefit of Bargain Damages Amount IV Applying the Benefit Bargain Alternative Performance V Consequential Damages VI Mitigation VII Liquidated Damages VIII Rescission and Restitution Current Lecture Chapter 14 Contract Breach and Remedies Damages Term is used 2 ways What the non breaching party has lost What the non breaching party can recover to compensate for what was lost These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Used to compensate the non breaching party for anything short of full performance Damages Generally Infinite variety of contracts Infinite ways can be breached Thus No single damage formula Flexibility in remedies General principles and goals Protect the non breaching party Protection of the non breacher not to take it out on the breacher Benefits of the Bargain Benefit of the Deal Puts the non breaching party where they would have been if the contract had been properly performed Expectation damages damages computed to get what you expected Not a return to the status quo First goal of remedies try to get what you negotiated or as close to that as you can Cannot always be done though Applying Benefit of Bargain Damages Amount Compare the value s of What was promised To What was delivered In other words how much less did the non breacher get compared to what was promised If seller breaches price paid is usually not relevant Except as used to establish value Can t use benefit of bargain if can t determine the 2 values Often happens with unique items or services The difficulty comes when you have items and there is not objective fair market value for the item Price is not what is looked at value of item is what is looked at Sometimes we have to go to the contract to figure out what the contract is If we CANNOT determine the market value then benefit of the bargain does not work Most likely will go back to restitution Benefit of Bargain Alternative Performance After someone breaches the non breacher finds another buyer another seller someone else to do the work or Damages what it takes to for non breacher to get same deal Ex Have signed a lease for an apartment in Boulder for the year Owner breaches contract You are not going to sit out for a whole year instead you are going to search high and low for a place to live Therefore this is alternate performance Example Contract for Sale of Car for 10 000 Buyer breaches seller sells to another what could seller collect as damages if sold for 7 800 10 000 11 000 Steps 1 Analyze the bargain what was it Get rid of car with in pocket 2 If buyer breaches the buyer has to do whatever takes to get the car sold to someone else 3 If sold for only 7800 the breaching buyer has to compensate the seller for 2200 4 If sold for 10 000 seller has got his bargain so he cannot recover anything No damages 5 If sold for 11 000 got bargain so there are no damages or recovery Neither party owes anything even if there is a gain on sale price If original buyer breaches very seldom does a seller not sell that item again 99 of the time the seller will find another party to sell to Example Seller Breaches a Contract for the Sale of a car for 10 000 Seller breaches buyer gets similar car from another for 8 500 10 000 12 000 Buyer does not buy another but can prove car was worth 11 500 Steps 1 Analyze bargain from buyers perspective benefit of the bargain 2 Where do I stand 3 If you have to pay 8500 no recovery b c less then what originally was going to pay 4 If you pay 10 000 still no recovery b c same price as what you were going to pay for the prior car 5 If you buy it for 12 000 seller owes you damages of 2000 6 If you can prove that the car is actually worth 11 500 and you were supposed to pay 10 000 Your bargain was to come out 1500 ahead and therefore you can recover that 1500 from the seller If you make a contract that is unfair and very 1 sided it increases the chance of someone breaching the contract If seller under prices it then the seller is more willing to breach Example Contract to Paint House for 6000 Painter breaches does no work homeowner must pay another 7 000 Painter does 50 of the work another paid 5 000 to finish Painter does 10 of the work another paid 6 800 to finish If the breach is by the painter the painter must do whatever it takes to get the house painted for 6000 Where does buyer stand out an extra 1000 therefore painter owes the buyer 1000 7000 6000 1000 If painter does 50 of the work paid up front 6000 and must pay another 5000 to hire another painter to finish the work The first painter must compensate you the 5000 extra you had to spend to finish the job If you did not pay all 6000 upfront you will have to pay the painter a reasonable amount for the work he did do If painter does 10 of the work and you haven t paid them yet They disappear therefore you have to contract someone else for 6800 The painter will have to compensate you 800 b c you had to spend more to get the job done Example Homeowner breaches Painting Contracts for 6000 Homeowner cancels breach painter supplies materials of 1500 Painter can get no other work Painter gets other job netting 3 500 Painter has already spent 700 on supplies nonrefundable and can find no other work The bargain we use the net Costs of job minus tools supplies Therefore 6000 1500 4500 The homeowner shows up to paint but the homeowner just lost their job and cannot pay This is a breach The painter has to try to find other work but the assumptions are that they don t The paint is entitled to the benefit of the bargain of 4500 therefore the painter ended out getting ahead because they didn t have to do the work If painter nets 3500 from another job painter is supposed to be 4500 ahead but is only paid 3500 Is not ahead by what he originally was therefore can get 1000 from breacher homeowner Painter is out 700 on supplies b c he has not completed work the homeowner owes the 700 4500 5200 to the painter If the painter cannot return anything then the homeowner must compensate the painter for the …