- Professor Name
- Gegan
- Textbook Title
- Cases and Materials on Contracts
- Textbook Author
- Farnsworth
- Class Year
- 1994
Extensive contracts law outline, 64 pages in Microsoft Word format, includes over 100 case summaries, rulings and points.
1. Incidental and Consequential Damages
a. Incidental Damages: Additional costs incurred after the breach in a reasonable attempt to avoid loss, even if the attempt is unsuccessful. e.g. Seller breaches and Buyer spends money on telephone and fax costs to locate cover. (added to damages)
b. Consequential Damages: Injury to property / person caused by the breach, e.g. $20 battery explodes and destroys entire machine worth far more than the cost of the battery - a consequence of the explosion was the damage of an expensive machine. (added to damages)
2. Louise Caroline Nursing Home v. Dix Construction: 209
Facts: ∆/Builder abandoned project in mid-construction and didn't complete the roof of a nursing home. An alternate contractor was hired and finished the roof at a cost below the original contract price. π wante d to recover the "value" rule from the ∆, the value of a building finished with a roof minus the value of a building without a roof (as done by the builder).
Holding: For ∆/builder. Damages should be the cost to complete the nursing home. Since alternate contractor completed home within contract price, π had no real damages.
(a) If the π got what he expected from the contract at a price less than he expected, then to award π damages would result in the unjust enrichment of the π. Gains Prevented - Cost Avoided = $0. In fact, due to the breach the π saved money by getting a cheaper builder and it would be a windfall to award him damages.
3. Example: Contract Price $33,000. Builder is paid $10,500, breach by buyer after builder incurs $21,500 of expenses:
i. Gains Prevented - Cost Avoided = damages
($33,000 - 10,500) - (30,000-21,500) = $14,000 + interest at time of breach
ii. Net Costs Incurred + Margin of Profit on Entire Contract (including reasonable overhead) - payments by breaching party
($21,500) + ($33,000-30,000) - ($10,500) = $14,000 + interest at time of breach
4. Hawkins v. McGee: 192
Facts: ∆ had a damaged hand and Surgeon promised π to deliver a "perfect hand" but the surgery was unsuccessful. π gets rewarded for the failed surgery, but the question is whether to use a "cost to complete" formula or a "value" formula.
Holding: π recovers using the value method in expectation damages. Not possible to find cost to complete because damage to hand was irreversible. If the performance cannot be undone, you look to value measure of market. FMV of good hand - FMV of current hand.
5. City School District of Elmira v. McLane Construction: 220
Facts: ∆/builder had a contract for a swimming pool building, whose architectural plans included many items to enhance its aesthetic beauty, such as the roof which would feature special laminated wood beams. ∆ willfully breached by using discolored beams. π wanted cost to complete damages of $357,000 while ∆ argued 3,000 diminution in value of the building as a cause of the breach (ass this would limit economic waste).
Holding: Court awarded the cost to complete of $357,000 instead of diminution in value of $3,000. The willfulness of the breach combined with the fact that the substantial value of the breach to the specific π are major factors here; the appearance was most important to π. Note court doesn't usually take into regard the willfulness factor as it does here.
1. Incidental and Consequential Damages
a. Incidental Damages: Additional costs incurred after the breach in a reasonable attempt to avoid loss, even if the attempt is unsuccessful. e.g. Seller breaches and Buyer spends money on telephone and fax costs to locate cover. (added to damages)
b. Consequential Damages: Injury to property / person caused by the breach, e.g. $20 battery explodes and destroys entire machine worth far more than the cost of the battery - a consequence of the explosion was the damage of an expensive machine. (added to damages)
2. Louise Caroline Nursing Home v. Dix Construction: 209
Facts: ∆/Builder abandoned project in mid-construction and didn't complete the roof of a nursing home. An alternate contractor was hired and finished the roof at a cost below the original contract price. π wante d to recover the "value" rule from the ∆, the value of a building finished with a roof minus the value of a building without a roof (as done by the builder).
Holding: For ∆/builder. Damages should be the cost to complete the nursing home. Since alternate contractor completed home within contract price, π had no real damages.
(a) If the π got what he expected from the contract at a price less than he expected, then to award π damages would result in the unjust enrichment of the π. Gains Prevented - Cost Avoided = $0. In fact, due to the breach the π saved money by getting a cheaper builder and it would be a windfall to award him damages.
3. Example: Contract Price $33,000. Builder is paid $10,500, breach by buyer after builder incurs $21,500 of expenses:
i. Gains Prevented - Cost Avoided = damages
($33,000 - 10,500) - (30,000-21,500) = $14,000 + interest at time of breach
ii. Net Costs Incurred + Margin of Profit on Entire Contract (including reasonable overhead) - payments by breaching party
($21,500) + ($33,000-30,000) - ($10,500) = $14,000 + interest at time of breach
4. Hawkins v. McGee: 192
Facts: ∆ had a damaged hand and Surgeon promised π to deliver a "perfect hand" but the surgery was unsuccessful. π gets rewarded for the failed surgery, but the question is whether to use a "cost to complete" formula or a "value" formula.
Holding: π recovers using the value method in expectation damages. Not possible to find cost to complete because damage to hand was irreversible. If the performance cannot be undone, you look to value measure of market. FMV of good hand - FMV of current hand.
5. City School District of Elmira v. McLane Construction: 220
Facts: ∆/builder had a contract for a swimming pool building, whose architectural plans included many items to enhance its aesthetic beauty, such as the roof which would feature special laminated wood beams. ∆ willfully breached by using discolored beams. π wanted cost to complete damages of $357,000 while ∆ argued 3,000 diminution in value of the building as a cause of the breach (ass this would limit economic waste).
Holding: Court awarded the cost to complete of $357,000 instead of diminution in value of $3,000. The willfulness of the breach combined with the fact that the substantial value of the breach to the specific π are major factors here; the appearance was most important to π. Note court doesn't usually take into regard the willfulness factor as it does here.