[Music] hey y'all this is Professor Tracy back with another contracts video this one is an introduction to remedies so the last few lessons we've been looking at breach and related topics like conditions and anticipatory repudiation and now we're looking at sort of the goal here right which is to get a remedy for our clients so let's get right to it since there's quite a bit to talk through so we're going to first look at the theories of recovery so we're going to cover all the different possible theories of recovery and there are three interest when we think about remedies so one is an expectation interest two is what's called a Reliance interest and three is restitution and these are words that we've thrown around throughout all the lessons that we've covered but we're going to you look at those words in the context of Remedies in particular so when we are thinking about what is the plaintiff's desire in other words what's motivating the plaintiff in each of these contexts if they're seeking an expectation recovery or a reliance-based recovery or a restitution-based recovery what's their desire expect under expectation it would be that they wish that the other party had done what they had promised to do because expectation is meaning put me where I expected to be Reliance interest instead is saying put me back where I was before I had The Misfortune to rely on the promise you made to me so it's I wish I had never contracted with you in the first place and restitution interest is saying I wish you would give back to me the value of that I have bestowed on you whether that's the value of the service or the good or the property or rather or will see that it could be giving back the very thing that has been bestowed on them so here uh what is the approach that we're taking with each of these interests if we have an expectation-based recovery then we're looking to the Future and trying to put the plaintiff where she expected to be whereas Reliance we're looking to the past and we're saying What expenses did that party incur in Reliance on the promises that were made to her and can we give her the money to put her back to where she was before she relied on this promise and restitution is saying in what way is it that the other party the defendant has been unjustly enriched and we then seek to disgorge from the defendant the value that has been bestowed on them that they by which they've been unjustly enriched and so when we are talking about each of these interests and the approaches and the motives we then need to think well what is the remedy that's typically given that furthers those interests so with expectation it will be money damages or an order of specific performance will unpack all of these in more detail later in the lesson for now we're just introducing these Concepts so with Reliance or it is typically the person's out of pocket costs that we're giving with restitution we're giving that party either a monetary restitution which is what we have typically thought of as restitution throughout all these lessons or specific restitution meaning give back to me the good or the or the property that I bestowed upon you meaning not money equating the to the value of it but the thing itself so when we think about these questions here uh these are questions from material that I provide to my students so with the purpose of contract remedies is to do what it here remember that contracts isn't about punishing somebody or seeking to reward them instead it's just about compensating for losses so the answer here would be be so question two says which of the following is a correct statement of the law regarding the three interest expectation Reliance and restitution um here that the reality is you can have a remedy that is based on more than one of these interests the typical thing would be to only reward on one which is what C says but in some situations a court may choose to blend remedies together and we'll talk about why they might do that so the answer there is C so with question three we talk about expectation interest uh what is it seek to do well we've already talked about this that a says the non puts the right the non-breaching party in the same position as if the contract never had is never formed no that's not correct right that would be a Reliance recovery so that means B has to be the answer and indeed it is because we're saying we want to put the non-breaching party the injured party in the same position they would be in if the contract had been fully performed so b gets at that answer so here is this question we're looking at something more more broad here and we're going to look at a couple different parts of it so here the question reads painter enters into a contract with owner to paint owner's house for five thousand dollars to the contract price is five thousand dollars by November one painter projects the total cost for the job are four thousand five hundred dollars which includes supplies salaries of his employees consequently painter expects to make some profit of five hundred dollars so the math is done for you there not that it's super complicated but it's done for you there painter purchases some of the supplies and Begins the job when painter has painted exactly one half the house owner unjustifiably terminates the contract and insist that painter leave at this point painter has spent two thousand five hundred dollars on supplies and labor none of the unused supplies can be reused on another job owner then contracts with contractor to finish painting the other half of the house for three thousand dollars so painter and contractor are of equal skill and three thousand dollars represents the fair market value of painting half of owner's house so here if we're asking what are painters expectation damn it money damages but let's back up because let's nail down who's the plaintiff who's the defendant because that's important to know so the breaching party here it says owner unjustifiably terminates right owner unjustifiably so owner is the defendant they are the breaching party and the injured party is painter painter is forced to leave the job without having finished the job and being paid for the the rest of that job so what are painters expectation money damages well to know that we have to say we have these three interest right now we're looking at expectation and expectation money damages but we need to know how to calculate them so how do we do that well when we're looking at this there's a couple things to say is that one when we're thinking about expectation money damages or just the expectation interest generally this is by far the most common basis for recovery and it gives the plane of What's called the benefit of the bargain meaning the benefit of the bargain that they made with the defendant they're getting the full benefit of that by being put monetarily if it's money damages putting them where they expect it to be and it is as we've already said it's future looking we're looking forward and we're saying where is it that they expected to be now we're so we're saying okay in order to calculate expectation money damages we need to know if both parties fully performed meaning if they fully perform where is it monetarily that the plaintiff painter expected to be and what I'm going to show you here and this may seem kind of uh you know sort of simplistic but I'm going to use a number line approach and I'll explain it more in a second but the reason I have this this language here where it says zero dollars is the starting point is that I'm using essentially a number line approach where zero is where we would start when we're thinking about where is it that the plaintiff expected to be and then where is it that the plaintiff actually is our starting point is always going to be in the middle of that number line on zero it's called the comparative method of calculating expectation damages and it is perfectly legitimate there's nothing uh you know nothing Elementary about it but it essentially is works on a number line and I will visually show you that here in just a second so where would painter have been remember the contract price was five thousand dollars so he would have expected to receive five thousand dollars from owner and to have been to have spent or to have paid out four thousand five hundred dollars we're getting that just from the facts themselves which told us that so we would expect that at the end of this that painter would be 500 up that they'd have a net gain of 500 having received five thousand from the owner but having spent four thousand five hundred they their expected money position ultimately would be a positive five hundred dollars so we can map this out on a number line like so so the starting position is going to be zero because that's how we do this when we are using the comparative approach so then right so that was our first step or starting money position zero realize I'm just estimating that I'm not doing any sort of exactness of where I'm marking these things obviously that is in the middle but in terms of the things I'm later going to Mark don't look at this and go well it's not perfect because it you know he didn't it's it's not you know it doesn't equal the same distance on the number line or that's not the point I'm just trying to illustrate it for you so you can see it so what we're going to Mark now the second thing it says painter's position if the parties had fully perform well we said he would be positive 500 dollars right we just showed that he would have received five thousand dollars but spent four thousand five hundred so that's the expectation the expectation interest there that's where they expected to be painter would have been up five hundred dollars what's their actual money position meaning as things unfolded and there was a breach where is it that they actually were with only half the job done and receiving no money from the owner so we're told in the facts that what what what do they actually occupy that's what we're now we're you know taking a break here and deciding well what do what position do they actually occupy we would start at zero again and say how much did they receive of the five thousand that they were supposed to from owner zero how much did they spend the facts told us that they had spent 2 500 for supplies and the salaries of employees so that means that there's two thousand dollars that they would have spent that they didn't right which we can say okay that's an avoided cost so we it we're accounting for that and you'll see how but here their actual money position then having received nothing and having spent 2 500 is a negative 2 500 so we can go back to our number line and go what's their actual money position it's a negative two thousand five hundred dollars so then we say okay this is a comparative method so we are subtracting the actual position from the expected position so which you'll see us do that right how to organize here you can visually see right we're asking with expectation money damages how do we get painter from where he actually is to where he expected to be and it's pretty obvious if you look at this we can say well it would be it would take 2 500 to bring to bring them back to zero but they expected to end this contract to be at 500 so we need to give them another 500 so we can add those and say that's a positive three thousand dollars to put them in their expected money position right that you can see that visually why that's true another way you can think about this and why it's often called the comparative method is that you say what's the expected position well it's it's positive 500. what's their actual position it's negative two thousand five hundred that we're subtracting right the subtracting the 2500 from the 500 if you subtract a negative two negatives make a positive you would add right so that would give us the three thousand dollars the same way so by that's just comparative comparing the expected position to the actual position we subtract and then we get to the same number so three thousand dollars so what are his expectation money damage is three thousand dollars right we can see it right there well what about though it why not just give the full it would certainly be simpler if we could just say well give painter the five thousand dollar contract price and that would be simple but what if we did that what if we did that well realize what it would do it would be saying okay we half of the five thousand two thousand five hundred puts them back to to zero but then if the full five thousand would mean what that we're giving another two thousand five hundred right because two thousand five hundred plus two thousand five hundred is five thousand so if we gave five thousand that would over compensate them right because they would then be put in the position of being positive two thousand five hundred so that means since they would be overcompensated by two thousand dollars so that is why we don't do it we're not trying to give the painter a windfall we're not trying to give them you know a prize or to punish the the other party contract law for the most part does not do that kind of thing so there are no for instance there are no punitive damages those kinds of things we're not doing that here so we're trying to put them compensate for losses and that's it and if we were to give the straight up the contract price they would end up overcompensated by two thousand dollars so that's why we don't do it right this is just an explanation in writing of what I just said to you so I will move on what are painters Reliance money damages now we're looking at this second interest of Reliance and saying what about Reliance money damages what we already said that the Reliance interest is about out-of-pocket cost compensating the um the plaintiff for her expenses and we'll talk about well why would you ever do that go for uh for Reliance recovery rather than expectation we'll talk about it in a minute but here when we look at this remember what it is we're trying to wind back the clock and say let's put the plaintiff back to where she was before she made the mistake of relying on the defendant's promises and so we're saying What expenses did she incur in Reliance on the contract so here why are we doing it I mentioned this just a second ago why do we do this why oh why oh why would you ever get a Reliance interest recovery typically it'll be because there's some problem with proving uh the what your expectation money damages are and we'll talk about where that might come up like being able to if you cannot prove them with certainty or they're speculative then you cannot receive expectation money damages you would have to shoot for one of the other things um then the other place would be if you're using promissory estoppel so those are the two places you would typically be able to get or would seek a Reliance recovery now keep in mind with promissory estoppel that that Reliance damages are not the only damages you could ever possibly receive the court can limit a plaintiff's recovery under promissory verstapple to Reliance damages but they could and also give the playth the full value of the promise meaning expectation damages but the court has discretion it's an equitable cause of action they can say that Justice here requires a limitation of the remedy that you that the plaintiff should not get the full value of the defendant's promise but just be limited Reliance damages so here if we go back to the fact pattern with painter and owner well what would painters out what would the recovery be here it would remember what we would be doing we're seeking to put the plaintiff back to where they were before they expended money and Reliance on the Promises coming from the defendant here if the starting point again number line approach comparative approach we use zero the only expenses the facts tell us about that the painter and current are two thousand five hundred dollars so that those are the total expenses out of pocket so it's pretty easy to map out Reliance money damages in this fact pattern we can sit we start our starting position is zero then we can say well what is the amount that they incurred in Reliance on that we said it's two thousand five hundred so we can put it back Mark it out there and then we're not trying to put them where they expected to be but only to cover their out-of-pocket expenses to put them back to zero where they were before they relied on this so that would mean giving them two thousand five hundred dollars that covers it so pretty straightforward right with Reliance money damages here so so what here what here's a question that's interrupting us as we go through the various possible recoveries for painter but Reliance interest what is it we just talked about it um that it puts them in the same position as if the contractor had never formed does it put the breaching party in that position no no no no no it doesn't it puts the non-breaching party in the same position as if the contract had never formed so the answer should be B so the answer is B there now what about the third interest which is restitution restitutionary base restitution-based recovery how do we do that we're calculating the value of the benefit conferred on the other party and if it's monetary restitution which is what we have in view in this question rather than specific then it's money right it's money we're talking about a money Recovery here and we're talking we are looking at what is the value you that has been bestowed on the other party and similar to Reliance recovery we're going to do this when um they might be suing in restitution or again there might be a problem with damages uh that they're uncertain or speculative or they're they're not they weren't foreseeable if we're talking about consequential damages um that there's some reason they may not be able to recover them the other thing is if the contract has been rescinded because of a defense then restitution is your only Avenue recovery there's no way to recover expectation damages because there is no contract on which to recover all you can do is receive for for some sort of other um cause of action like restitution so restitution how do we calculate it we're going to look here again we said there's monetary there's specific those pretty straightforward um but how do we calculate it here with painter and owner well conveniently the facts tell us the value here was three thousand dollars right so now keep in mind I'm making a big deal of this just because we're measuring we're asking to what extent has the owner here been unjustly Rich at what extent has the debt has the defendant received the benefit for which they have not paid and so that's why we're focused in on in right because that's what we're concerned about here is what's what have they received and we're told by the facts that three thousand dollars represents the fair market value of the house so the value that has been bestowed on there or the value fair market value painting half the house and you might say well that means his work was actually worth 6 thousand dollars and he was only going to get five and the answer is yes but that's okay people make contracts all the time that don't exactly mirror the market value of their labor or their services or the the house they're selling or whatever it may be so don't get hung up on that and be like well that can't possibly be right no it is right because the question tells us it's right so we know that only and we know from the facts that exactly one half of the house was was completed by painter so the value so the benefit that was bestowed on on owner was one half of the house being painted and we're told by the facts that that's worth three thousand dollars so we know that that's the value that has been bestowed on them and for which they have not paid so here pretty easy if we map this out on a number line again our start the owner's starting position is zero but then once this has been conferred on owner the painting of half the house they're up three thousand dollars and once they're up three thousand dollars we know to how much they have they they paid for that nothing they haven't paid anything back representing payment for that value they've received so in this case it's straightforward we can say it's three thousand dollars right in order to say to write the scales right you to move it back to zero year with any sort of uh Reliance recovery then we need to give the three thousand dollars to painter to represent that so when we ask what's the restitutionary money damages it would be three thousand dollars so that's just words saying what we just said so I want to focus in primarily on the expectation recovery or an expectation based interest here and when we talk about that there are two right we said there are two common recovery remedies that are based on this expectation interest one is specific performance two is money damages we've talked some about money damage even shown how you might calculate it but there's more to say with specific performance one could say well isn't that the perfect remedy because it's an order from the court that is requiring the defendant to perform exactly what she was supposed to under the agreement so it's giving the plaintiff exactly what she expected so in that sense it looks perfect right well how does it work well one thing to know up front is it's not always available talk exactly what needs to be shown and here these are the two most common I probably state that wrong you know a little too broadly or too um definite here to say these are the only two instances um because generally available in the word only they're um are a little bit intention it would be better to say it's generally available in two instance and take out the word only these are common places where it would be ordered would be a real estate contract where because we view land as unique so giving someone money to go buy some other piece of land rather the one they contracted for is deemed to be inadequate that that's not an adequate remedy so instead they are given and they can get an order of specific performance requiring for instance the seller to convey the property to them and then if we're Under the UCC and we're talking about Goods then anytime you're thinking of something that is unique like some sort of Fine Art or rare um you know some sort of rare Goods uh if it's a special order item or Antiques and sort of one-of-a-kinds or almost one-of-a-kind things then those are again giving me money to go buy something else isn't going to be helpful because this is the thing that I wanted so an orders of performance makes sense now when you talk about if I'm seeking an order for specific performance then I need to show three things I need to show that that the inadequacy of money damages in other words giving me money is not going to adequately compensate me it will not be able to put me where I expected to be or not entirely and then that the terms of the agreement must be certain and definite meaning that the court needs to be able to look at the contract and see enough detail now realize do not do not look at this and go well that's the same thing as an offer you wouldn't even have a contract uh if you know you wouldn't be this far if you didn't have certain indefinite terms and the answer is no you're wrong that the certainty and the deaf Fitness we're talking about here is of of an even higher standard than what we're talking about with uh the you know what's necessary to have an offer and to have an enforceable contract here we're saying if a court were to try to Fashion an order of specific performance is there enough there that they know exactly what it is the defendant should be ordered to do or is it left too vague or open for them to be able to order it and then for them to know whether or not the defendant is fulfilling the terms of the agreement that's what we're getting at so do not conflate the two because they are not the same and then when we talk about feasibility we're not saying oh is an order of specific performance something that we could actually draft on a piece of paper what we're saying is is it feasible for the court for the judge to one to oversee that right do they have the expertise necessary to know whether the party is fulfilling the terms of that order of specific performance and two is it something that there that given the constraints of uh you know if we're talking about judicial economy and saying okay there are scarce judicial resources is it a wise is it a feasible and wise use of those resources like is it going to take too long is this going to retire the judge to check in on this for three years or five years or ten years or whatever it may be or is this a one-off thing and it's not necessarily meaning that if any of those things are true that it requires multiple check-ins or whatever then it's not going to be ordered but it raises questions so all three of those have to be proved and so when is it that money damage are inadequate so this the one I talked about with property and with Goods is the difficulty in procuring a substitute meaning if if it's a piece of property every piece of land is unique so give me money to buy someone else is not really a substitute from the land that I wanted that is no that is very clear if you start thinking about oh this one piece of property is lakefront property this other piece of property is in you know in downtown in the middle of a city well those are obviously not the same pieces of property we can all agree but we take that to be true in every situation with land so there's difficulty in procuring a substitute or you could say if if it's Unique that yeah so if it's Unique whether Goods or land then procuring substitute is difficult then but realize it doesn't have to be one of a kind it could be something where it's like well you might be able to give me money to buy another one of these say these particular types of vases that are uh say mean phases and uh there might be other ones but the other ones that I might get are not of the same quality or they are uh whether that means substantially worse or that means substantially better meaning that you would have to give me substantially more money than the value of the one I had so all the either of those kinds of things would all be about difficulty in procuring a substitute the other part uncertainty and money damages is getting it something I've talked about already when we talked about Reliance and restitution if I cannot prove out my damages my expectation money damages then in order for specific performance might make sense now that uncertainty it could come in different ways it could be that yeah it's just hard to know because it's not clear how much I would make for instance in profit you know how many Prof how much profit I would make or it could be um some other reason that it's speculative or difficult to nail down then unlikely to be collected is the idea that sometimes people are judgment proof and if you're gonna give me money sit an order you know a judgment for money damages that may not be of much value if in fact they're just going to go bankrupt and so it may be better to order them to provide what it is they were supposed to even if it's not unique Etc so in looking at this I already talked about what we mean by certain certain indefinite terms and the need for that in order to Fashion in order for specific performance and then feasibility is talking about expertise things like that so remember so remember before we go on that in what in order for specific performance is it's an order from the court ordering the the defendant to do what it is she was supposed to do Under the agreement if she does not then she it there's the penalty is contempt it's going to typically realize the penalty for contempt is typically either some is some monetary sanctions or it or sitting in jail until the person complies so the other possibility right we just looked at specific performance and we talked about money damage but we need to unpack it right we've talked about what it is what we're doing we're trying to put them where they would be if the party had fully performed I've told you we're using comparative or comparison method where we're comparing where they expected to be to where they actually are and what's the basic formula I mentioned this but again the starting point will always be zero right so I picture here even if I'm not laying out a number line again there is an imaginary number line behind this where the starting point is the middle it's zero and then we're saying where did the what was their expected money position where would they have been if they had spent all the money they were going to spend to perform and receive all the money they were going to receive from the other party had ever they performed where would they have been and then what is their actual money position after the breach and we are comparing those by subtracting them right so that's why you see it there and then that will give us our expectation money damages but we need to break it down right that the starting position here as I've said over and over again it's going to be zero and we're looking forward and saying where did they expect to be and figuring that here I'm noting that realize there's some things that are included in expectation money damages that are what are called consequential damages we'll talk about that in a second and we're looking at the actual money position and when we look at actual it we're looking at General consequential incidental so okay when you think expectation money damages there are three kinds they are General damages consequential damages and incidental damages okay there are three kinds so how do we work this out so here they are well the general damages part of it the general damages part of it there are two part possibilities either what's called replacement cost or repair cost replacement or repair costs or the difference in value the difference in value so replacement or repair cost is we're saying give me the money to if say if it's a repair uh if if it's uh some sort of a contractor doing is say a remodeling in your house and they botched the job and they do a crappy job then the repair cost would be the cost to repair to meaning to put that job in the position I expect that you so as give me the money so that it can be repaired meaning repaired to the point that it's now the job I expected so if they were remodeling in my kitchen and they botched it then it's giving me money to pay somebody else to repair the crappy job to put it in the position it would have been in the other possibility is the way to think of it is replacement right it's the cost of replacing what was done that thing that was done so here difference in value is the difference between what I expected to receive the value of the good or the service or the land that I expected to receive versus they what I the value of what I actually received so that's saying the difference in value and with consequential damages so General damages this is important because you know I I introduce General damages and said well it's usually like repair replacement cost or if the difference in value but what I didn't say is this is that we think about General damages those are the damages that flow in the natural course from naturally flow from the breach in the ordinary circumstances so meaning whoever the plaintiff is regardless of their circumstances this would be their damages because they naturally flow from this kind of Breeze now realize when we say that we don't mean that the money the amount would be the same regardless of the plaintiff but that this kind of money this kind of damage that this loss would be is the kind of loss that everyone will suffer in this circumstance where but in comparison consequential damages are those damages that flow from the special the plane of special circumstances so they flow from the special circumstances of the plan they are unique to the plant not meaning they're the only one in the world who you know has this thing but they are not they are not the kind of this is not the kind of loss that every plant would have but rather they are it's a kind of loss that's specific to this kind of planum and so with consequential you want to think of well we look at this example to consider okay what's General what's consequential so here it says Tracy enters into a contract with Tire King to purchase a set of four tires for his Honda Fit for four hundred dollars so a hundred dollars a tire tire King never delivers the tires Tracy then locates a replacement set of tires for his car that cost him five hundred dollars water rent damages pause here a second there are a hundred dollars you know that this is not hard right because how do what if I have to turn around and do this now think about this what did I expect where did I expect to be I expected to be 400 out of pocket negative 400. and to have four tires where am I actually I'm at negative 500. and I have four tires so to put me where I expected to be I need a hundred bucks right I need a hundred bucks to put me from negative 500 to negative 400 so my damages are a hundred dollars so are those General are those consequential well guess what anybody in this circumstance who is Contracting for a set of tires and the the tire provider the seller doesn't give any tires and they have to go pay somebody else more will suffer damages will be exactly a hundred dollars every time no it might be fifty dollars it might be two hundred dollars it might be 75 it would be whatever the greater amount they had to turn around and pay what's the the difference between the greater amount and the lesser amount that they would have paid but those are General damages they flow from the they flow from the breach and and the ordinary circumstances because everybody in this circumstance would have the same damages as opposed to now in the unlikely event that I'm actually running an auto repair shop up now it says this he that is Tracy has a customer that needs a set of four new tires for a Honda Fit Tracy enters into a contract with Tiger King to purchase the tires for 400 and explains he needs the tires quickly so he can use them for a customer Tire King never delivers the tires Tracy then locates replacement out of tires for the customer costs cost him five hundred dollars so far those are General damages just like the previous question anybody in that circumstance have a hundred dollars in general damages however the delay in getting the tires meant the tire that Tracy had to Discount the amount he charges customer so he ended up earning fifty dollars less from the customer so let's think this through where did I expect to be I expected to be 400 out of pocket and to have fifty dollars extra from the from the customer right to have fifty dollars more than I ended up with so but I'm not there where am I I'm 500 and down 50 right so I'm 500 out of pocket so I'm at so here you could say well um yeah I guess the better way to talk about the 400 part would be to say I didn't expect any discounts I just expected 400 out of pocket so that would be where I was but then where am I well I'm 500 out of pocket plus I'm negative five fifty dollars by having to to get to cut in to give a discount so the discount here right is is a is consequential Damages they flow from what they flow from the special my special circumstances not everybody who's has a contract with Tire King for a 400 set of tires is also an auto repair shop and is has a client that they might have to knock off money for because of the delay so we'd say a hundred dollars General fifty dollars in lost profits here is special part of the special circumstance those are consequential so here question six what is the correct statement General damages rise from the ordinary sector now that sounds good variety special that sounds perfect let's go with a so let's look then here it says consequential damages here are a bunch of examples of consequential Damages they are flowing from the breach but they are flowing from the plane of special circumstances the original losses monetary losses and these are the typical kinds of things you would say like lost profits meaning exactly it is money I expected to make that I'm not going to be able to make liability to third parties meaning let's say You're A supplier and I run a factory and I'm assembling cars you're sending me tires and if you breach the contract I may have to breach contracts with the uh say car dealerships that I am selling my cars to so that would be a liability of the third party injury to person or property that because of the breach Not only was there just direct monetary loss but there was an injury right that there was something wrong with the property there was something wrong with the good there's something wrong with the service that was done uh that caused injury to me or injury to my property that whatever loss you know injury you know medical expenses Etc related to that maybe things that I can get as consequential damages loss of use is often that is so if I for instance you're let's say You're supposed to remodel my entire house and I have to be out of the house for that then uh that I have a loss of use there if you breach and take say six months longer than it's supposed to then loss of use there would typically be measured by it would be what well I've lost the use of my house for an extended period of time because of you and we would measure that typically by what is it that it costs Tracy in order to uh cover that loss of use so if I had to run another place what was the rent then it might be instead of liability third party that liability is not to like my customer a car dealership but basically liability government that because of what has happened you you have knocked me out of compliance I'm being fined or I have some sort of fee that is I need to pay so here I'm looking at sort of how do we categorize each of these types of consequential Damages well if it's lost profits that's money I expected to make but did not make because of your breach right lost profits would go under my expected money position because I expect but everything else is go under my actual money right because it's money I had to pay out because as a result of your breach and so it's like well my actual money position is this not only did I lose this amount of money because of your breach but I also was liable the third party I also had injury to person or property I also was liable to the government I also lost the use of this right so let's keep trucking here what are the limitations on consequential Damages well they're really you know I I throw that out there because this is often where these limitations come up but realistically limit limitations that we're talking about here um let me talk about them briefly we'll talk about these but the limits that exist on Damages are some of the more likely to occur in consequential Damages yes and the biggest one would be foreseeability um because when we talk about consequential damages um remember that you're saying it's Unique to the special circumstances of the plane in and when we talk about foreseeability in the context of contracts and in the context of consequential Damages what we're saying is that that loss that the person is that the plaintiff is seeking as consequential damages must have been foreseeable to the defendant from formation of the contract and that foreseeability though can come simply from the plane of explaining that if the defendant breaches that this is the consequence so it doesn't it we it can just be literally told or spelled out at formation and the most famous case here is Hadley versus baxendale when you're talking about the shaft for the Grain Mill um and when that is the broken chops was an Old English case and the problem that arises in that case is the shaft and the mill breaks that runs the mill um and it's the only shaft they have and so when they give it to The Courier The Courier is supposed to send it to the to the to the people who are uh crafting a new shaft so that they have one to go by to know how to to craft this shaft for the mill and um they don't say anything to The Courier about if you're late if you're delayed you our Mill is going to be shut down longer or whatever um and so instead the The Courier is unaware that with any delay that means they're shut down another day and they're not making any money and so the The Courier ends up breaching the contract but being delayed and it does result in the mill being delayed but the court ends up saying well the profit you would have made that consequential damage is those those flow from the special circumstances here of they're running a Mill and they don't happen to have a spare uh a spare shop for the mill and so they had to be shut down and so those were not foreseeable they were they are not foreseeable because they're not something that just naturally flows from the ordinary circumstances that everybody so ordinarily General damages foreseeability is not a big problem is it still a requirement yes but because it flows from the ordinary circumstances and it's likely that anybody in that circumstance would do it it's usually just common sense that of course the defendant knows that whereas consequential damages that's not the case because they're unique to those circumstances so in Hadley when The Courier didn't know and wasn't told had no way of knowing those damages aren't recoverable so the other limits we'll see on consequential Damages are their needs that they need to be proved with certainty and there needs to be causation meaning that the the plaintiff needs to show that the breach is what caused those consequential damages and they're typically what's being used is just simple but for causation and if there are multiple blood four causes much like torts then you're just asking well was it a substantial Factor so here lost profits will always be classified as consequential damages and here you just need to be careful um because they maybe they may not be in part it depends um they could be General damages because sometimes the profit somebody expects to make is built into the con is just straight up built into the contract it's not sort of one step removed and we'll see some examples of that in a second but they could be General they could be consequential and if they can't be uh proved with certainty or they're not foreseeable or there's no causation well they ain't going to be anything right so but here what this question is actually intending to get is the idea that sometimes the profit is built in to uh the general it will be part of General damage so if you think back to the painter and the owner he expected to be 500 up and that's his quote profit he would have spent four thousand five hundred dollars and receive five thousand but those aren't consequential damage those are the general damages that that exist in that case so lost profits would be something more removed from that like my question with the um the with Tire King and me running it auto repair shop and here's an example too it says buyer and seller enter into a contract for the sale of black I give it a price of a hundred thousand dollars at Contract formation buyer informed seller that the reason he was entering the contract was to purchase property in order to build a fast food franchise so he's told right so for C Billy's kind of built in here buyer informed seller the reason he was entering the contract was to purchase property in order to build a fast food franchise seller repudiated the contract at a time when the fair market value of black acre was a hundred and twenty thousand dollars you just got to go with that um buyer immediately terminated the contract to sue for breach as a result of the repudiation I had to find a new location for the fast food franchise and his plans to start the business were delayed buyer lost about thirty thousand dollars in profits from them from the sale of fast food during three month delay so here it says what are General damage what are consequential well the general damages here are this is for the purchase and sale of a piece of property okay and so where is it that buyer expected if we just focus first on the property itself not the thirty thousand dollars in profits that are also being claimed we would look at this and go okay a hundred thousand dollars they expected to be have spent a hundred thousand dollars so to be out a hundred but to then have an asset that was worth a hundred and twenty thousand dollars so the value of the property would have been a hundred and twenty thousand dollars so we're measuring the gain they expected to be then at a positive twenty thousand dollars out a hundred thousand dollars but up uh 120 so that would put them at a positive twenty so they didn't get the property at all right so their actual money position as far as we're concerned with the general damage would be zero right that well and remember yeah so we're saying where would they expect to be they're at zero they expected to be a twenty so we give them twenty thousand dollars to put them at a positive twenty thousand that under General damages so twenty thousand dollars they're in anybody in that circumstance right those flow from the ordinary circumstances from the from the breach and but here the unique thing here is that the property was going to be used in order to build a fast food franchise and so this thirty thousand dollars in lost profits is consequential right in this fact pattern it's consequential because the general just relates to the the purchase and sale of the property itself and the what where the buyer would have been so the 30 here is consequential it's foreseeable why because the buyer specifically informed the seller ad formation about the purpose of it realize there are facts here we don't have which is normally they would still have to prove with certainty that amount that might be difficult unless they have some track record they can show that that's that net number makes sense um but that would be assuming they could prove it and obviously it is cause causation there we can say but for the breach they would have been able to open on time and made made that during the three months um but whether the only open part of that I guess is certainty so we can look at this right I I this is if we're using our formula here right we can say um this is so if we back up using my formula right this comparative method we said they expected to be twenty thousand dollars up so twenty thousand dollars in general expected General thirty thousand dollars in lost profits their expected money position was fifty thousand dollars so we know this is General damages this is consequential Damages so where are they the an actual they're actually they got none of that their start they had zero so to get them the 50 we would need to give them a total of fifty um thousand dollars with 20 of it as we said being General and 30 of it being consequential so incidental damages typically what we're talking about here are expenses that are incurred in order to mitigate damages or to deal with the breach and even if those efforts are uncollectible or not uncollectible even if those efforts are unsuccessful they can still be collected they can still be collected as long as they were reasonable so here you can see an example on December 1 employer employee enter into one year con employment contract for an annual salary 200 000 the start date for the employee is January 1 without justification employer anticipatory repudiates the contract on December 15th so it's the employer who repudiates because of the short time period employee hires a job coach at the cost of a thousand dollars to help him find a replacement job the thousand dollar fee is in the fair market is the fair market value for a job coach it's telling us it's a reasonable expense it's a reasonable attempt to mitigate because of the job coach employee finds another employer willing to hire employee for a year however the new job pays 150 000. so we have here there are no consequential damages listed here but there are General damages right we can say where did they let's focus on the general side of it first which is the expected money position okay let's focus on what was the expected money position here it was to be up two hundred thousand dollars at the end of the year um and so if we were just map this out right we could say Okay 200 where are they actually they're at they're getting 150 000 for the year so their General damages are fifty thousand dollars right so to get them from where they are their actual position with regard to their General damages to their expected would you require 50 Grand then the thousand dollars is part of their actual money position it's incidental damages they expected to um incidental damages that they incurred sorry um and that because and they did it to mitigate or to deal with the breach we're told that it's reasonable uh and therefore it's recoverable so their total damages would be 52 or sorry 51 000 so 50 um they're not both so this we got a multiple choice question dealing with this it says that's incidental the Thousand for the job coach then 50 um so B looks like the right answer yeah limits on expectation damages so I've mentioned these we have they have to be proved all damages but have to be proved with certainty that is often that is often more likely a concern with consequential damages as is causation but does it flow naturally from the breach another way to say that remember is that we use but for causation if there are multiple potent causes then we would use much like Taurus substantial Factor so with foreseeability and predicting the future we said that it must be something if it's if it's General damages then they're likely foreseeable because they flow they they flow from the breach and they naturally flow from the beach they're ordinary circumstances but they must be foreseeable from formation and if it's something like consequential then they have that is becomes a much greater concern because it's less like they're not automatically foreseeable foreign then mitigation is to the extent that your loss is caused by your failure to mitigate then that's not recoverable so that's it except it's not it we're doing a questionnaire if a damage a word appears to be over compensating plan how might of Court limit the award they could do any number of things right they could say a portion of its own is not certain or not foreseeable or that there's no causation any of those are possibilities and even though the question is worded that way I'm not sure that would be the entire reason they would do that I think it's more likely they're limiting it because there's legitimately a problem um so what about question 11 if a breach results in a gain to the non-breaching party I.E they're put in a better position then they would have been have the contract not been breached then what will Court likely do so if they're getting a win fall um if the non-breaching party is already in a better position then what will we do well it says offset the non-breaching burden to keep the gain since they are the innocent party no split the game between no offset the gain against the damages owed to avoid compensation that sounds right that we would offset um so if there is if they've already had some sort of gain then we would offset that against whatever award they're gonna get it's possible if they had a huge gain it would it would wipe out any potential money damage because they're actually in an okay so that's it finally that the the lesson is complete but you know very much looking at and doing practice problems is important hopefully it was helpful I know it was long and I know it's kind of Technical and tedious but it's a very important topic if it was please do give the old thumbs up and hit the Subscribe button uh it means a lot and I appreciate it very much so I will be in touch with more and uh I'll talk to you again soon bye