LSB 3213 1st Edition Lecture 22Today:- 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 itwas necessary to run the mill and the mill should mitigate damages, if possibleNew 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 good- many companies can build it, too close to personal servicesWhat 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 $7.5millionAfter 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 substitutesLiquidated 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 breachLiquidated 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 valueExample 2: SportsCoach 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 contracto 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 tortsTwo Types of Tort Damages- Compensatoryo Direct/immediate harms - Injuries, medical costs, lost wageso 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 wellStandard of Judgment:- Four levels of “wrongfulness” (Hierarchy)o Intentional: intentionally harm someoneo Reckless: didn’t intend to do it, but close to intentionalo Negligence: carelesso Strict Liability: happened and you are