There are three methods of calculating damages:
Seller's Remedies in General.
Where the buyer wrongfully rejects or revokes acceptance of goods or fails to make a payment due on or before delivery or repudiates with respect to a part or the whole, then with respect to any goods directly affected and, if the breach is of the whole contract ([UCC § 2-612]), then also with respect to the whole undelivered balance, the aggrieved seller may
- withhold delivery of such goods;
- stop delivery by any bailee as hereafter provided ([UCC § 2-705]);
- proceed under the next section respecting goods still unidentified to the contract;
- resell and recover damages as hereafter provided ([UCC § 2-706]);
- recover damages for non-acceptance ([UCC § 2-708]) or in a proper case the price ([UCC § 2-709]);
Seller's Resale Including Contract for Resale.
- Under the conditions stated in[UCC § 2-703] on seller's remedies, the seller may resell the goods concerned or the undelivered balance thereof. Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of this Article ([UCC § 2-710]), but less expenses saved in consequence of the buyer's breach.
- Except as otherwise provided in subsection (3) or unless otherwise agreed resale may be at public or private sale including sale by way of one or more contracts to sell or of identification to an existing contract of the seller. Sale may be as a unit or in parcels and at any time and place and on any terms but every aspect of the sale including the method, manner, time, place and terms must be commercially reasonable. The resale must be reasonably identified as referring to the broken contract, but it is not necessary that the goods be in existence or that any or all of them have been identified to the contract before the breach.
- Where the resale is at private sale the seller must give the buyer reasonable notification of his intention to resell.
- Where the resale is at public sale
- only identified goods can be sold except where there is a recognized market for a public sale of futures in goods of the kind; and
- it must be made at a usual place or market for public sale if one is reasonably available and except in the case of goods which are perishable or threaten to decline in value speedily the seller must give the buyer reasonable notice of the time and place of the resale; and
- if the goods are not to be within the view of those attending the sale the notification of sale must state the place where the goods are located and provide for their reasonable inspection by prospective bidders; and
- the seller may buy.
- A purchaser who buys in good faith at a resale takes the goods free of any rights of the original buyer even though the seller fails to comply with one or more of the requirements of this section.
- The seller is not accountable to the buyer for any profit made on any resale. A person in the position of a seller ([UCC § 2-707]) or a buyer who has rightfully rejected or justifiably revoked acceptance must account for any excess over the amount of his security interest, as hereinafter defined ([UCC § 2-711(3)]).
Seller's Damages for Non-acceptance or Repudiation.
- Subject to subsection (2) and to the provisions of this Article with respect to proof of market price ([UCC § 2-723]), the measure of damages for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in this Article ([UCC § 2-710]), but less expenses saved in consequence of the buyer's breach.
- If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this Article ([UCC § 2-710]), due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.
Action for the Price.
- When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under the next section, the price
- of goods accepted or of conforming goods lost or damaged within a commercially reasonable time after risk of their loss has passed to the buyer; and
- of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing.
- Where the seller sues for the price he must hold for the buyer any goods which have been identified to the contract and are still in his control except that if resale becomes possible he may resell them at any time prior to the collection of the judgment. The net proceeds of any such resale must be credited to the buyer and payment of the judgment entitles him to any goods not resold.
- After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated ([UCC § 2-610]), a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for non-acceptance under the preceding section.
Seller's Incidental Damages.
Incidental damages to an aggrieved seller include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer's breach, in connection with return or resale of the goods or otherwise resulting from the breach.
- Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract ([UCC § 2-612]), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid
- Where the seller fails to deliver or repudiates the buyer may also
- On rightful rejection or justifiable revocation of acceptance a buyer has a security interest in goods in his possession or control for any payments made on their price and any expenses reasonably incurred in their inspection, receipt, transportation, care and custody and may hold such goods and resell them in like manner as an aggrieved seller ([UCC § 2-706]).
- After a breach within the preceding section the buyer may "cover" by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.
- The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined ([UCC § 2-715]), but less expenses saved in consequence of the seller's breach.
- Failure of the buyer to effect cover within this section does not bar him from any other remedy.
Buyer's Damages for Non-delivery or Repudiation.
- Subject to the provisions of this Article with respect to proof of market price ([UCC § 2-723]), the measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this Article ([UCC § 2-715]), but less expenses saved in consequence of the seller's breach.
- Market price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.
- Where the buyer has accepted goods and given notification ([UCC § 2-607(3)]) he may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable.
- The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.
- In a proper case any incidental and consequential damages under the next section may also be recovered.
Buyer's Incidental and Consequential Damages.
- Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.
- Consequential damages resulting from the seller's breach include
Deduction of Damages From the Price.
The buyer on notifying the seller of his intention to do so may deduct all or any part of the damages resulting from any breach of the contract from any part of the price still due under the same contract.
Proof of Market Price: Time and Place.
- If an action based on anticipatory repudiation comes to trial before the time for performance with respect to some or all of the goods, any damages based on market price ([UCC § 2-708] or [UCC § 2-713]) shall be determined according to the price of such goods prevailing at the time when the aggrieved party learned of the repudiation.
- If evidence of a price prevailing at the times or places described in this Article is not readily available the price prevailing within any reasonable time before or after the time described or at any other place which in commercial judgment or under usage of trade would serve as a reasonable substitute for the one described may be used, making any proper allowance for the cost of transporting the goods to or from such other place.
- Evidence of a relevant price prevailing at a time or place other than the one described in this Article offered by one party is not admissible unless and until he has given the other party such notice as the court finds sufficient to prevent unfair surprise.
Admissibility of Market Quotations.
Whenever the prevailing price or value of any goods regularly bought and sold in any established commodity market is in issue, reports in official publications or trade journals or in newspapers or periodicals of general circulation published as the reports of such market shall be admissible in evidence. The circumstances of the preparation of such a report may be shown to affect its weight but not its admissibility.
Seller's Incidental Damages.
Buyer's Incidental and Consequential Damages.
- Consequential damages resulting from the seller's breach include
Restatement Second of Contracts § 348
Alternatives to Loss in Value of Performance
- If a breach delays the use of property and the loss in value to the injured party is not proved with reasonable certainty, he may recover damages based on the rental value of the property or on interest on the value of the property.
- If a breach results in defective or unfinished construction and the loss in value to the injured party is not proved with sufficient certainty, he may recover damages based on
- If a breach is of a promise conditioned on a fortuitous event and it is uncertain whether the event would have occurred had there been no breach, the injured party may recover damages based on the value of the conditional right at the time of breach.
There are three limiting factors to recovery:
Restatement Second of Contracts § 351
Unforeseeability and Related Limitations on Damages
Copyright, The American Law Institute
- Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made.
- Loss may be foreseeable as a probable result of a breach because it follows from the breach
- in the ordinary course of events, or
- A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in the circumstances justice so requires in order to avoid disproportionate compensation.
- Determined at the time the contract was entered into
Restatement Second of Contracts § 350
Avoidability as a Limitation on Damages
Copyright, The American Law Institute
- Except as stated in Subsection (2), damages are not recoverable for loss that the injured party could have avoided without undue risk, burden or humiliation.
- The injured party is not precluded from recovery by the rule stated in Subsection (1) to the extent that he has made reasonable but unsuccessful efforts to avoid loss.
Employer hires employee for two-year contract at $50,000/year, but employer wrongfully terminates him six months in. Employee looks for new job for three months unsuccessfully, then hires an employment agency for $1,000 and finds a new job paying $45,000 per year.
Employee's damages would be $31,000:
- Direct loss: $50,000 × 1½ = $75,000
- Extra loss: $1,000
- Cost avoided: $0
- Loss avoided: ($45,000 × 1) = $45,000
- $75,000 + $1000 - $0 - $45,000 = $31,000
Employer hires employee for two-year contract at $50,000/year, but employee wrongfully quits six months in. Employer looks for a replacement for three months unsuccessfully, then hires an employment agency for $2,000 and finds a temp replacement for $30,000 for three months, then hires a permanent replacement for $55,000 per year.
Employer's damages would be $24,500:
- Direct loss: $50,000 × 1½ = $75,000 (value of employee to employer)
- Extra loss: $2,000 + $30,000 + ($55,000 × 1) = $87,000
- Cost avoided: $50,000 × 1¾ = $75,000 (cost of paying employee)
- Loss avoided: $50,000 × 1½ = $62,500 (value of work covered by other workers)
- $75,000 + $87,000 - $75,000 - $62,500 = $24,500
Some damages will not fit this formula exactly though.
Restatement Second of Contracts § 90
Promise Reasonably Inducing Action or Forbearance
- A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.
- A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance.
Such reliance must be reasonable.
Restatement Second of Contracts § 349
As an alternative to the measure of damages stated in [R2C § 347], the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed.
Restitution is an obligation imposed by law on ground of justice and equity. Its purpose is to prevent unjust enrichment. Unlike express contracts or contracts implied in fact, restitution does not rest upon the assent of the contracting parties.
The "officious intermeddler doctrine" holds that where a person performs labor for another without the latter's request or implied consent, however beneficial such labor may be, he cannot recover therefor.
An exception is that of emergency aid, where the service is needed to prevent the others' bodily harm and the helper is a doctor and therefor doesn't give the implication of gratuitousness.
Restatement Third of Restitution § 1
Restitution and Unjust Enrichment
A person who is unjustly enriched at the expense of another is subject to liability in restitution.
Restatement Third of Restitution § 2
Restatement Second of Contracts § 272
Relief Including Restitution
- In any case governed by the rules stated in this Chapter, either party may have a claim for relief including restitution under the rules stated in [R2C § 240] and [R2C § 377].
- In any case governed by the rules stated in this Chapter, if those rules together with the rules stated in Chapter 16 will not avoid injustice, the court may grant relief on such terms as justice requires including protection of the parties' reliance interests.
Restatement Second of Contracts § 374
Restitution in Favor of Party in Breach
- Subject to the rule stated in Subsection (2), if a party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by the other party's breach, the party in breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he has caused by his own breach.
- To the extent that, under the manifested assent of the parties, a party's performance is to be retained in the case of breach, that party is not entitled to restitution if the value of the performance as liquidated damages is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss.
Restatement Second of Contracts § 373
Restitution When Other Party Is in Breach
- Subject to the rule stated in Subsection (2), on a breach by non-performance that gives rise to a claim for damages for total breach or on a repudiation, the injured party is entitled to restitution for any benefit that he has conferred on the other party by way of part performance or reliance.
- The injured party has no right to restitution if he has performed all of his duties under the contract and no performance by the other party remains due other than payment of a definite sum of money for that performance.
Restatement Second of Contracts § 371
If a sum of money is awarded to protect a party's restitution interest, it may as justice requires be measured by either
- the reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimant's position, or
- the extent to which the other party's property has been increased in value or his other interests advanced.
Liquidation or Limitation of Damages; Deposits.
- Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.
- Where the seller justifiably withholds delivery of goods because of the buyer's breach, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds
- The buyer's right to restitution under subsection (2) is subject to offset to the extent that the seller establishes
- Where a seller has received payment in goods their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subsection (2); but if the seller has notice of the buyer's breach before reselling goods received in part performance, his resale is subject to the conditions laid down in this Article on resale by an aggrieved seller ([UCC § 2-706]).
Restatement Second of Contracts § 356
Liquidated Damages and Penalties
- Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty.
- A term in a bond providing for an amount of money as a penalty for non-occurrence of the condition of the bond is unenforceable on grounds of public policy to the extent that the amount exceeds the loss caused by such non-occurrence.
Restatement Second of Contracts § 361
Effect of Provision for Liquidated Damages
Restatement Second of Contracts § 355
Restatement Second of Contracts § 353
Loss Due to Emotional Disturbance
Recovery for emotional disturbance will be excluded unless the breach also caused bodily harm or the contract or the breach is of such a kind that serious emotional disturbance was a particularly likely result.
It may also be ordered in contracts for the purchase of rare or sentimental items which are unique and irreplaceable.
Restatement Second of Contracts § 357
Availability of Specific Performance and Injunction
- Subject to the rules stated in §§ 359-69, specific performance of a contract duty will be granted in the discretion of the court against a party who has committed or is threatening to commit a breach of the duty.
- Subject to the rules stated in §§ 359-69, an injunction against breach of a contract duty will be granted in the discretion of the court against a party who has committed or is threatening to commit a breach of the duty if
- the duty is one of forbearance, or
- the duty is one to act and specific performance would be denied only for reasons that are inapplicable to an injunction.
Restatement Second of Contracts § 359
- Specific performance or an injunction will not be ordered if damages would be adequate to protect the expectation interest of the injured party.
- The adequacy of the damage remedy for failure to render one part of the performance due does not preclude specific performance or injunction as to the contract as a whole.
- Specific performance or an injunction will not be refused merely because there is a remedy for breach other than damages, but such a remedy may be considered in exercising discretion under the rule stated in [R2C § 357].
Restatement Second of Contracts § 360
Restatement Second of Contracts § 362
Effect of Uncertainty of Terms
Restatement Second of Contracts § 364
Effect of Unfairness
- Specific performance or an injunction will be refused if such relief would be unfair because
- Specific performance or an injunction will be granted in spite of a term of the agreement if denial of such relief would be unfair because it would cause unreasonable hardship or loss to the party seeking relief or to third persons.
Restatement Second of Contracts § 365
Effect of Public Policy
Restatement Second of Contracts § 366
Effect of Difficulty in Enforcement or Supervision
A promise will not be specifically enforced if the character and magnitude of the performance would impose on the court burdens in enforcement or supervision that are disproportionate to the advantages to be gained from enforcement and to the harm to be suffered from its denial.
Restatement Second of Contracts § 367
Contracts for Personal Service or Supervision
- A promise to render personal service will not be specifically enforced.
- A promise to render personal service exclusively for one employer will not be enforced by an injunction against serving another if its probable result will be to compel a performance involving personal relations the enforced continuance of which is undesirable or will be to leave the employee without other reasonable means of making a living.
Buyer's Right to Specific Performance or Replevin.
- Specific performance may be decreed where the goods are unique or in other proper circumstances.
- The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just.
- The buyer has a right of replevin for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered. In the case of goods bought for personal, family, or household purposes, the buyer's right of replevin vests upon acquisition of a special property, even if the seller had not then repudiated or failed to deliver.
In addition to ordering a "positive injunction" requiring parties to complete a contract, a court may also issue a negative prohibitory injunction, forbidding a party from doing a particular action in violation of a contract.
Specific restitution is a remedy to place the parties in the positions they would have been in had the contract not been entered into by disgorging unjust enrichment gained by the contract. It is available if restitution relief should be awarded,but restiutionary damages are not adequate. Usually it involves a rare or sentimental item being restored to the plaintiff.