LSB 3213 1st Edition Lecture 22 Today Finish Chapter 19 Contract Remedies Begin Chapter 6 Torts Remedies for Breach of Contract Direct damages include compensatory and incidental what did you directly lose guaranteed to receive Indirect damages consequentials must be foreseeable and provable not speculative not guaranteed Mitigation innocent party must pursue replacement options to reduce damages caused by breach Specific Performance when the item of the contract is unique no substitute not personal services Hadley v Braxendale 1894 money values changed to reflect their present value Flour mill orders a replacement part for 1 000 and 200 extra for overnight delivery but it s not delivered for 5 days What are the damages Compensatory direct damages 200 plus time value of 1 000 for 5 days What if the flour mill is closed for 5 days because of the late delivery and has a 10 000 daily cost to operate the mill and a 50 000 daily revenue from the mill What damages can the mill win additional damages Consequentials only if foreseeable and provable 50K 10K 40K lost profits Here shutting down factory was not foreseeable as the mill didn t tell the manufacturer that it was necessary to run the mill and the mill should mitigate damages if possible New OSU Business Building Example 40 million contract for new building What if OSU backs out before construction begins Direct damages lost profits 5million Contract price total costs 40million 35million What if OSU backs out half way through Direct damages costs incurred profits 17 5million 5million What if OSU refuses to pay after completion Direct damages full contract price 40million What if contractor backs out before starting the building 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 Direct damages new price old price 50million 40million OSU must mitigate No specific performance available because it is not a unique goodmany companies can build it too close to personal services What if contractor leaves half way through and OSU finds a new builder to finish for 30million Benefit of the bargain OSU still pays 40million total Net 30million to new contractor and 10million to old contractor Old contractor incurred 17 5million in costs but only collects 10million Breaching party pays the increased cost of 7 5million After completion OSU leases top floor for 1m to Conoco for 25 years If OSU backs out what are Conoco s remedies Damages 200K different lease for 1 2m or Specific performance unique no substitutes Liquidated Damages Estimate actual damages incurred by the breach of contract in advance Cannot be viewed as a penalty or an excessive amount Used to avoid proving damages after breach Liquidated Damages Real Estate Example New retail store opening for holiday season If construction is not done by Nov 1 then contractor pays 500 per day for delay Hard to prove actual damages for new store 500 per day 5 000 5 million Has to bare relative value to what the actual value might be so it can t be so high that it is more of a punishment than the actual damage value Example 2 Sports Coach with 5 year contract fired after 2 years termination without cause Three options School pays 3 years salary coach must mitigate by seeking another coaching job not liquidated damage School pays lump sum of one year of salary liquidated as it is reasonable to think that it would take a year to find a new job School pays 2 times salary for all three years not liquidated looks like a punishment not a relative value Torts Chapter 6 Tort means a wrong in French Which wrongs will law try to make right o Protected interest in physical safety and private property In law a tort is a civil i e not criminal wrong that is not a breach of contract o Example assault and battery Assault and battery are criminal charges but you can also sue them as a tort for the harm and medical costs it cost The government prosecutes criminals you can sue for torts Two Types of Tort Damages Compensatory o Direct immediate harms Injuries medical costs lost wages o Intangible harms Privacy reputation emotional distress pain suffering Punitive flagrant reprehensible conduct Punish the person that caused you the harm damages those are paid to you as well Standard of Judgment Four levels of wrongfulness Hierarchy o Intentional intentionally harm someone o Reckless didn t intend to do it but close to intentional o Negligence careless o Strict Liability happened and you are responsible