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a

Ex: buyer plans to resell goods, but seller breaches.  Buyer’s lost profits = conseq dams

i

I think buyer’s lost profits are conseq dams only if he had CONCRETE offer to buy from him.  If he didn’t, he gets FMV anyway, which could be different from price of concrete planned sale

b

Common ways conseq dams are barred: seller not on notice (Hadley); buyer could have covered (duty to mitigate)

3

Ex:

a

S contracts to sell to B on 1/1 for $10.  B makes contract to resell to C for $14.  5/1, S breaches, doesn’t deliver.  Mkt price then is $12.  If non-commodity (i.e., no cover possible) and S doesn’t know about resale, B’s damages = $12 - $10 = $2.  If S knows about resale, then damages = $14 - $10 = $4.  But if commodity, B can cover, so damages = $12 - $10 = $2 regardless

b

This shows that a buyer can get damages for lost profits too — but they’re consequential rather than general damages (for seller, lost profs are general damages)

F

Prof Eisenberg doesn’t like this rule — he’d prefer that sellers explicitly limit their liability, and buyers purchase insurance if they want more extensive liability from sellers

1

Why doesn’t he like it?  Disproportionality problem: potential profit for seller may be miniscule, while potential for lost profit could be huge (as in Hadley)

III

CERTAINTY

A

Damages only awarded w/ ELTS:  (Kenford)

1

Causation demonstrated w/ certainty

2

AND loss proved w/ r’ble certainty (not merely speculative)

B

New-business rule: precludes profit recovery for a new business, b/c of uncertainty involved.  No longer in favor

C

Loss of chance

1

Some cts award.  Two damage measures:

a

[chance of winning] * [value of prize]

b

[amt someone would have paid for the chance] (that is, lost profit)

2

Ex: deprival of membership in ltd class of competitors.  Raffle drawing example (p. 307)

IV

Liquidated damages

A

Ct will not enforce liq dams clause if it finds clause to be a PENALTY

B

ELTS of valid liq dams:

1

R’ble forecast of damages at time K made (forward-looking)

2

OR rough relation of liq damages and actual harm that occurred (backward-looking)

C

This means that if dams easy to estimate at time K made, liq dams gen’y viewed as penalty.  Counter-ex: K for sale of land; mkt fluctuations tough to predict, so liq dams often valid

D

Most cts place burden of proving unr’bleness on breaching party

E

Deposits:

1

Clauses authorizing seller to keep deposit are gen’y viewed as penalties; seller ltd to actual dams

2

UCC: if no r’ble liq dams clause in K, seller keeps smaller of 20% of value of perf or $500.  (UCC § 2-718)

F

Why do parties use liq damages clause?

1

Ct might cut off damages for whatever reason (e.g., certainty), but less likely to do so if damages specified in K; parties in better position to assess their potential loss; allows better planning

G

Why do cts scrutinize liq damages clauses closely?

1

Parties don’t think about breaching — they intend to perform — so liq damages more likely to be unfair; these clauses lend themselves to uncon’y and oppression

Summary of expectation damages for sale of goods

Buyer’s breach (buyer accepts and retains goods — nonpayment)

Seller’s breach (buyer accepts and retains goods — breach of warranty)

24

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