Contracts Outline

Topics: Contract law, Contract, Breach of contract Pages: 27 (9706 words) Published: March 5, 2014
Contracts II Outline
Fall 2005
Professor Jean Powers
Cited to Crandall & Whaley’s Contracts, 4th Edition

I) Damages (227)
A) Introduction (227)
1) General Rule – Contract damages should put the π in as good of a position as if the contract was fulfilled. 2) No action on a contract need be present for damages to be proper. An executory contract will suffice. B) Measuring Expectation Damages (229)

1) Expectation = Expected Value + Costs – Expenses Mitigated 2) Repair Theory – Damages should put things in the state that they were specified in the contract (IE fix the land as per the contract) (a) Argument against repair theory is that given a large quantity of money to repair land, the π will simply keep the money, ensuring a dramatic windfall. 3) Diminution in Value Theory – Damages should pay the difference between value delivered and value as promised (IE pay the devaluation of the land because it wasn’t fixed after strip mining) (a) Diminution is compared to what the property would be worth if proper, not compared to any appreciated value. 4) Generally, courts favor repair theory damages, unless economic waste will occur through granting of repair damages (IE economic waste occurs if a home constructor is forced to tear down a house and rebuild it in order to use the correct type of water pipes). (a) Economic waste is found if the repairs cost as much or more than the property is worth. 5) Rule: You have the right to do what you want with your property. (a) IE if you want to devalue your land (by putting neon green siding on your house) and you find that the contractor put grey siding on against your wishes, there has been an actual upturn in the value of your land (as compared to the green siding), but the damages will be for repair, not devaluation. 6) In general, the repair theory is appropriate cases of aesthetics, safety, or usability. (a) Aesthetics comes from the right to do as you will with your property and the other come from the fact that the breach has rendered your property totally unusable, and as such, the breaching party should fix it. 7) In general, the repair theory is usually granted in breaches that are to the heart of the bargain, while diminished value may be assessed in incidental breaches 8) Useful Life – The court can diminish replacement value of an item by the amount of use (percentage of useful life) the π had received from the goods. (a) The court will not allow the Δ to pay for part of the life of an item that must (for the sake of efficiency) by replaced when the entire group is replaced (i) IE if you run over a 10 year old power pole that needs be replaced in 5 years. The pole’s owner did get 67% of the life of the pole, but in the sake of efficiency, the pole will be replaced with all of the others. Thus, no windfall will befall the π by the Δ purchasing a new pole. C) The Reliance Interest (247)

1) The reliance interest is intended to bring the non-breaching party back to the status quo (the level prior to the contract). This should give everyone back what is theirs. (a) The reliance interest is equal to what the non-breaching party spent in preparation or performance of the contract, less any losses the breaching party can prove with reasonable certainty that the non-breaching party would have suffered. (b) Reliance is available in the alternative to the expectancy. 2) Pain & Suffering may be available under reliance if pain and suffering outside the expected scope of the contract is incurred (subject to certainty, foreseeability, etc.) (a) There must be pain and suffering inherent in the contract for compensation to be found in contract law. (b) Doctor’s breach – only an express guarantee from a doctor is actionable (outside malpractice). Some states include this in their statute of frauds. (c) Pain and suffering may (in theory) be collectable in expectation in a case where the π “paid” the pain and suffering inherent in the contract, but received nothing in return...
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