Limitations on Recovery Certainty

P cannot recover damages that P cannot prove with reasonable certainty.

Foreseeability P cannot recover damages that D did not

have reason to foresee at the time the K was entered.

Avoidability P cannot recover damages that P could have

reasonably avoided.

Freund v. Washington Square Press

P book DFreund Washington Sq Press

publish, pay royalties, $2000 advance

P delivers book. D pays advance.D fails to publish.P sues for specific performance and damages.T Ct: No specific performance.

$10,000 damages.

Freund damages Where did T Ct get $10,000? What is wrong with that amount? What is awarded on appeal? Why so low? What is purpose of nominal

damages? Would reliance or restitution have

worked here?

Problem 68

P participate in contest DSusie Big Winner

pay $25,000 to winner

Big Winner withdraws. Susie sues for prize money.

Can she prove damages with sufficient certainty?

Humetrix v. Gemplus P market smart card DHumetrix

Gemplussupply, co-operate

What is P claiming? Is there a breach of K?What are the damages for breach of K?

Does the award hold up on appeal?What is the issue on appeal?

Certainty requirement P cannot recover damages that

cannot prove with reasonable certainty.

New Business Rule: If claim is for profits for a new

business, cannot prove lost profits with reasonable certainty.

Profits too uncertain. No track record.

New Business Rule application Per se/Normative rule

Traditional approach If new business, cannot recover lost

profits – do not consider evidence. Evidentiary/Empirical

Gaining favor with courts Fact that new business indicates

likelihood cannot prove with sufficient certainty – still consider evidence to prove otherwise.

D’s objection to expert testimony on lost profits:

If use per se rule, no reason to admit. Cannot get lost profits as matter of law.

If using evidentiary rule, still arguing that testimony cannot support lost profits recovery.

Are these arguments successful?

Certainty Requirement: (1) Certainty as to causation

Required. Cannot recover damages if cannot prove with reasonable certainty that they were caused by the breach.

(2) Certainty as to amount – Get to the extent can prove with

reasonable certainty. Some flexibility. D’s breach, after all,

caused uncertainty.

Hadley v. Baxendale

D deliver crank shaft PsCarrier Millers

pay

What was the breach?What damages do Ps seek?

How are breach of K damages measured? What damages are recoverable?

Elements of expectation – Benefit of the bargain General Damages – arise naturally

from the breach under ordinary circumstances

Special/Consequential Damages – arise as a consequence of the breach due to circumstances of the particular case

Foreseeability requirement – R2K 351

Not recoverable if D did not have reason to foresee as probable result of breach when K entered.

Applies to both general and special damages, but need info for special

May also limit damages in the interest of justice (Ex: Sullivan)

Foreseeability Requirement – UCC 2-715(2)

Consequential damages include Loss from general OR particular

requirements seller At time of K Had reason to know . . . and

Injury to person or property proximately resulting from breach of warranty.

Problem 69

D deliver play by 10/12 POvernite Bill Gilbert

pay

Plane crashed. Play not delivered. (a) Is at least a “tacit agreement” for liability for

consequential damages required for recovery?

(b) Does it make a difference as to damages if the plane crash was unforeseeable?

AM/PM Franchise v. Atlantic Richfield

D supply gasoline. . . PARCO AM/PM

pay . . .

What is the cause of action?What is the issue on appeal?What kind of damages are recoverable in

a breach of warranty case?

Breach of Warranty DamagesGeneral damages (UCC 2-714)

Difference in value between value of goods as warranted and value as delivered.

Consequential damages (UCC 2-715)Losses from “the general or particular requirements and needs of which the seller. . .had reason to know” at K time.

General damages Tire example

Tires warranted to be worth $2500 Actually worth nothing damages $2500

($2500 warranted – 0 value = $2500) Actually worth $1500 damages $1000 ($2500 warranted - $1500 value =

$1000)

(These numbers assume P has paid for the goods – acceptance requires payment.)

Consequential Damages – Lost Profits

Primary Profits – from sale of goods under K: Can’t sell tires –

Would have made $2000 profit on sales – $2000 damages caused by breach

Must sell for less due to defect – Would have made $2000 profit – Must sell for profit of only $1000 – $1000 damages caused by breach

Could be combination of no sales and sales at discount

MUST still prove losses caused by breach.

Lost Secondary Profits Secondary Profits – those lost from

lost related sales If often sell hubcaps when sell tires,

lose sales when do not sell tires. Again, must prove number of sales

lost with reasonable certainty. What were lost primary profits in

AM/PM? Lost secondary profits?

Categories of lost profits

Past Primary Profits

FuturePrimary Profits (Good will)

Past Secondary Profits

FutureSecondary Profits (Good will)

Problem 70

D burial of daughter PsFuneral Home Parents

pay

Mortician misplaced body.Is parents’ emotional distress

recoverableas consequential damage from breach?

Emotional Distress Damages (R2K 353)

Not recoverable in contract unless: Breach causes bodily harm

Distinguish physical manifestation Breach is of a kind that serious

emotional distress was especially likely Burial cases classic example Generally not ordinary commercial losses

Problem 71

D sports car PCar dealer Andrew

$24,000

Car broke down many times.Andrew sues for $5,000 for mental

anguish.Can he recover this?

Rockingham County v. Luten Bridge

P build bridge DLuten Bridge Rockingham County

pay

D told P to stop construction. P continued.P sued for and recovered full amount spent.

D appealed. What is the issue?

Rockingham County Why did P continue to build?

Was P’s action reasonable? Does that matter?

Does the result make P whole? Does the result give D a windfall?

Avoidability – R2K 350 P cannot recover damages that

could have avoided without undue risk, burden or humiliation.

“Duty to mitigate.” Why are damages limited by

avoidability?

Problem 73

P cigar balloon DBalloons of America

Cuba$13,000

Cuba abandons project when halfway done.What should P do?Does the UCC have an avoidability rule?

UCC 2-715(2) Consequential Damages

Buyer’s consequential damages include “any loss . . . which could not reasonably

be prevented by cover or otherwise.” Is the plaintiff the buyer?

Does this provision apply in this case? Must the P avoid loss?

If so, how?

UCC 2-704(2) If goods are unfinished at the time of

the breach/repudiation the seller may Using “reasonable commercial judgment,” For purposes of avoiding loss:

Complete the goods and ID to the K OR Stop manufacturing and resell for scrap OR Proceed “in any other reasonable manner.”

Seller’s remedies (preview) 2-706 Resale K – resale 2-708(1) Market K – market 2-708(2) Profit 2-709 Action for the Price

Accepted goods “Lost” conforming goods for

reasonable time after risk of loss passed to buyer

ID’d goods that cannot be resold

Complete the balloon

Resale K $13,000- “resale” 1,000

$12,000Price $13,000- credit for salvage 1,000

$12,000

Stop now Profit measure 2-708(2): $ 2500 Profit + 0 incidental das

+ 8000 costs incurred - 120 proceeds resale $10,380 damages

Profit =$13,000 K-10,500 expense 2,500

P’s decision Which way should P proceed?

Why? What is the goal of the decision?

What if P makes the wrong choice? Because P ignored the code

requirement? Because things didn’t turn out as P

reasonable expected?

Parker v. Twentieth Century Fox

P star D Parker Twentieth Century

Fox $750,000

What is the damage measure in an employment contract case?

What is D’s damage argument?Does P have a duty to mitigate?

Damages for breach by employer Amount due under K less income

Actually earned by substitute employment, OR

Could have earned w/ reasonable diligence

D has burden of proving could have earned income through substitute employment. How is that burden to be met?

Factors in Parker Location Musical/western Approval of director/screenplay Q: How do we know she could

have had another job? What is dissent’s argument? What if D offered her another

Hollywood musical?

Substitute employment Generally do not have to accept if

Of inferior rank Salary is lower Unreasonable distance

Recall basic principle – Could P have avoided loss without

unreasonable risk, burden or humiliation?

Are there other factors to consider???

Problem 74

P teach D Alice Chalk School

pay

School principal fires Alice.Accuses her in front of students of being a

drug dealer. Orders her from the building.

Principal offers Alice her old job back.

Alice refuses the offer. Has Alice failed to mitigate

damages?? Is her refusal a failure to mitigate? Does it matter that it was offered by

breaching party? Do her earnings in her job as a waitress

in the all-night diner reduce damages?