ANSWERS TO PROBLEMS CHAPTER 18
Edward contracted to buy 1,000 barrels of sugar from Marcia. Marcia failed to deliver, and because Edward could not buy
any sugar in the market, he was compelled to shut down his candy factory.
(a) What damages is Edward entitled to recover?
(b) Would it make any difference if Edward had told Marcia that he wanted the sugar to make candies for the Christmas
trade and that he had accepted contracts for delivery by certain dates?
Foreseeability of Damages.
(a) Edward is entitled to recover monetary damages in compensation for such losses as are the usual,
probable, ordinarily-to-be expected consequences of the breach itself.
Hadley v. Baxendale, 9
Exchange 341 (1854).
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.
Second, Contracts, Section 351(1).
(b) Yes, it would make a difference.
Edward would be entitled to recover damages for such losses,
though unusual, as may fairly and reasonably be supposed to have been within the contemplation
of the parties when they made the contract, provided such losses are neither uncertain in their
nature nor remote as to their cause.
Hadley v. Baxendale.
Loss may be foreseeable as a probable
result of a breach because it follows from the breach as a result of special circumstances, beyond
the ordinary course of events, if the party in breach had reason to know of these circumstances.
Restatement, Second, Contracts, Sect. 351 (2).
Daniel agreed to erect an apartment building for Steven for $12 million and that Daniel would suffer a deduction of
$12,000 per day for every day of delay. Daniel was twenty days late in finishing the job, losing ten days because of a strike
and ten days because the material suppliers were late in furnishing materials. Daniel claims that he is entitled to payment in
full (a) because the agreement as to $12,000 a day is a penalty and (b) because Steven has not shown that he has sustained
any damage. Discuss each contention and decide.
The contention that the agreement as to $12,000 a day is a penalty is not tenable.
provision is a modest liquidated damages provision.
The agreed amount of damages is reasonable,
considering the cost of the apartment building and that actual damages are not readily
Restatement, Second, Contracts, Section 356.
(b) Steven does not have to prove damages.
One of the principal purposes of a liquidated damages
provision is to obviate the necessity of proving damages.
Sharon contracted with Jane, a shirtmaker, for 1,000 shirts for men. Jane manufactured and delivered 500 shirts, which
were paid for by Sharon. At the same time, Sharon notified Jane that she could not use or dispose of the other 500 shirts and
directed Jane not to manufacture any more under the contract. Nevertheless, Jane proceeded to make up the other 500