BLAW - Chapter 20b

BLAW - Chapter 20b - Class # 21 Damages part 2 IDENTIFYING...

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Class # 21 Damages part 2 IDENTIFYING THE “INTEREST” TO BE PROTECTED The first step that a court takes in choosing a remedy is to decide what interest it is trying to protect. (An interest is a legal right in something. ) There are four principal contract interests that a court may seek to protect : Expectation interest. This refers to what the injured party reasonably thought she would get from the contract. The goal is to put her in the position she would have been in if both parties had fully performed their obligations under the contract. Reliance interest. The injured party may be unable to demonstrate expectation damages, perhaps because it is unclear he would have profited. But he may still prove that he expended money in reliance on the agreement and that in fairness he should receive compensation. Restitution interest. The injured party may be unable to show an expectation interest or reliance. But perhaps she has conferred a benefit on the other party . Here, the objective is to restore to the injured party the benefit she has provided. Equitable interest. In some cases, money damages will not suffice to help the injured party. Something more is needed, such as an order to transfer property to the injured party (specific performance) or an order forcing one party to stop doing something (an injunction). In this chapter, we look at all four interests. EXPECTATION INTEREST This is the most common remedy that the law provides for a party injured by a breach of contract. The expectation interest is designed to put the injured party in the position she would have been in had both sides fully performed their obligations. A court tries to give the injured party the money she would have made from the contract. If accurately computed, this should take into account all the gains she reasonably expected and all the expenses and losses she would have incurred. Courts typically divide the expectation damages into three parts: (1) compensatory ( or “direct”) damages, which represent harm that flowed directly from the contract’s breach; (2) consequential ( or “special”) damages, which represent harm caused by the injured party’s unique situation; (3) incidental damages, which are minor costs such as storing or returning defective goods, advertising for alternative goods, and so forth. Compensatory damages are designed to put the plaintiff in the position he or she would have been in had the contract been fully performed. The injured party must prove compensatory damages that can be quantified with reasonable certainty.
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This note was uploaded on 05/31/2010 for the course ACCT 1237 taught by Professor Hillman during the Spring '10 term at Drake University .

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BLAW - Chapter 20b - Class # 21 Damages part 2 IDENTIFYING...

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