Expectation Damages
What is the purpose of expectation damages?
To put the injured party in the position they would have been in had the contract been fully performed.
What are reliance damages?
Compensation for expenses incurred in reliance on the contract.
What is cover?
The buyer purchases substitute goods and recovers the difference from the seller.
What are the seller’s remedies when the buyer breaches?
Withhold delivery, cancel contract, resell, recover market damages or full price, and get incidental damages.
What is the duty to mitigate?
The obligation of the non-breaching party to take reasonable steps to avoid further loss.
What is the formula for expectation damages?
Loss in value + incidental and consequential damages – costs avoided.
When are reliance damages appropriate?
When expectation damages are too speculative or the plaintiff entered a losing bargain.
How are cover damages calculated?
Cover price – contract price + incidental and consequential damages – expenses saved.
When can the seller recover the full contract price?
When goods are accepted but not paid for, or can’t be resold after reasonable effort.
What happens if a party fails to mitigate?
Their recovery may be reduced or denied to the extent of avoidable loss.
What are the limits on expectation damages?
Foreseeability, certainty, and duty to mitigate.
What are restitution damages?
A remedy to prevent unjust enrichment by returning the value of the benefit conferred.
What if the buyer does not cover?
They may recover market damages based on the market price at the time of breach
What is a lost volume seller?
A seller with unlimited supply who loses a sale that would not have been replaced by resale — entitled to lost profit.
Can a party recover for loss they could have avoided?
No — damages are not recoverable if they could have been reasonably avoided.
When are expectation damages too speculative?
When the plaintiff cannot prove them with reasonable certainty.
Can a breaching party recover restitution?
Yes — but only if the benefit conferred exceeds the loss caused by the breach.
What are consequential damages under the UCC?
Losses from the breach that the seller had reason to know would occur and that could not be reasonably avoided.
How are resale damages calculated?
(Contract price – resale price) + (incidental damages – expenses saved.)
You’re a seller. You have a contract to sell a laptop to a buyer for $1,000. The buyer breaches and refuses to pay. You quickly resell the laptop to someone else for $800. You also spend $50 on shipping and advertising for the resale (incidental damages). Had the original buyer gone through with the deal, you would’ve spent $20 less overall on logistics — so you saved $20.
Contract price: $1,000
Resale price: $800
Incidental damages: $50
Expenses saved: $20
Resale damages = $1,000 – $800 + $50 – $20 = $230
What principle limits damages that are too remote?
The rule of foreseeability — only losses foreseeable at the time of contracting are recoverable.
What interest do expectation damages protect?
The benefit-of-the-bargain interest.
What is the difference between reliance and restitution?
Reliance measures the plaintiff’s loss; restitution measures the defendant’s gain.
When can a buyer get specific performance under the UCC?
When the goods are unique or cover is impractical.
What restitution is available to a breaching buyer?
Recovery of down payments, minus liquidated damages or a statutory cap, subject to offset for seller’s losses.
What does Rockingham County v. Luten Bridge Co. illustrate?
A party cannot increase damages by continuing performance after repudiation — they must mitigate.