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II

Breach of SERVICES K — SELLER’S BREACH

A

Two ways to calculate damages:

1

Cost of completion

2

Diminished value

B

Cost of completion

1

FORMULA = Cc - K + Ap

2

Damages may also include cost of delay, value of lost enjoyment

C

Diminished value

1

FORMULA = [Value of what owner would have w/ full perf] - [what owner actually received]

2

Awarded sometimes if cost-of-completion would lead to econ waste or would be unr’bly disproportionate

3

This is what P seeks in Louise Caroline

4

Another ex:

a

You have a new TV set w/ a broken fuse.  You could say a non-working set is worth nothing.  But the fixed set might be worth $400.  And the cost to replace the fuse might be only $1

b

So the broken TV is really worth $400 - $1 = $399

c

So there’s theoretically a close relation betw diminished value and cost of completion

D

When cost-of-completion over diminished value?

1

Factors which tend to favor cost of completion over diminished value:

a

Bad faith on contractor’s part (contra Peevyhouse); residential construction (esp sentimental value — wrong pipe brand ex); owner likely to actually complete rather than bank damages

2

There are a variety of TESTS for when there is a substantial diff betw C/C and diminished val damages?

a

TEST: does party seeking C/C intend to actually have the work completed?  (Wilks, p. 242)

b

TEST: rather than choosing betw C/C and diminished val, instead calc value of PROMISEE’S LOST ENJOYMENT

c

TEST: award value diminution if C/C would involve econ waste

i

(But can you really say it’s a “waste” to give somebody damages?  You’re just moving money around)

d

TEST: C/C disproportionate to economic harm?

i

(But this doesn’t always work: I ask painter to paint my house an ugly shade of brown.  Instead, he paints it a nice shade of green.  Painter argues that the green *increased* the value of the house.  The C/C here *would* be disprop to the economic harm.  But we wouldn’t even entertain this argument)

e

Other options:

i

Ct could order spec perf.  But this would encourage behind-the-scenes deal -- promisee releases promisor from spec perf for cash

III

Breach of SERVICES K — BUYER’S BREACH

A

Ways to measure damages.  (Nationwide Tractor Trailer)

1

Two formulas.  These calc same thing UNLESS contractor made losing K:

2

FORMULA 1 = [Expected profits] - [costs paid prior to breach] - [Ap] - [salvage]

3

FORMULA 2 = [K price] - [out-of-pocket costs remaining, which won’t be incurred] - [Ap] - [salvage]

a

Ex: A contracts w/ B to build house for $100k.  B stops payments.  A would have to spend $60,000 to finish work.  A’s damages = $100k - $60k = $40k, less payments B has already made

b

If A has already bought $5k in materials that he can sell or use for other purposes, damages will be $35k less payments B has already made

c

This situation arises where breach allows promisor to MAKE A GAIN he wouldn’t have had an opp to do but for the breach.  Ex: Contractor who can only do one job at a time

IV

Breach of SALE OF GOODS K — SELLER’S BREACH

A

Two types of damages:

21

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