Expectation Damages and Uncertainty

Key Concepts

Expectation Damages: Aim to put the non-breaching party in as good a position as if the contract had been performed. Involves imagining a future event that did not occur.
Factual Premise: Expectation damages often rely on hypothetical scenarios, and their calculation can be based on public market values or less certain measures.

Background: Tom Clancy's novel The Hunt for Red October was originally published by Naval Institute Press. Charter Communications was licensed to publish the paperback version not earlier than October 1985.
Breach of Contract: Charter's Berkeley imprint released the paperback on September 15, 1985, violating the contract.

Objective of Damages: To compensate the injured party, not to punish the breaching party.
No Punitive Damages: Unlike tort law, contract law does not aim to punish; focus is on compensation.
Measuring Damages: Difficulty in pinpointing exact losses led the court to use August 1985 sales as a measure.
Court Decision: The appellate court upheld the trial court's decision to use the last full month of unimpeded sales (August 1985) as a basis for calculating expectancy damages.

Uncertainty in Damages: In cases of uncertainty, courts may err in favor of the injured party.
Benefit of the Doubt: The injured party is given the benefit of the doubt when damages are uncertain.

Data Requirement: Expectancy damages require some data; they cannot be based purely on speculation.
Using Previous Sales: Using earlier sales data is deemed appropriate when precise damages cannot be determined.

Expectancy damages may not always be precise due to inherent uncertainties.
Courts aim to fairly compensate the injured party but require some factual basis for calculation.
The next lesson will cover the impact of fixed and variable production costs on expectancy damages.