Potential Exceptions or Limitations To General Rule On Measure of Damages (expectation Damages)
- Duty to mitigate - the aggrieved party has a duty to take reasonable steps to mitigate damages. Failure to take such steps can cut off damages which arose from such a failure to take reasonable steps to mitigate. This is a duty of reasonable care thus no duty to take steps which are unreasonably burdensome. Example - buyer breaches contract to purchase produce; seller is expected to mitigate e.g., "cover" under the U.S. Uniform Commercial Code or resale; failure to make reasonable attempts to resell can be a ground to deny damages arising from breach e.g., spoilage. Breaching party is liable for costs which arise from an effort to take reasonable steps to mitigate. E.g., party continues to work after being notified of a breach and running up the bill. (however, this might be reasonable if the aggrieved party reasonably believed they had a better chance of selling a completed product to an alternative buyer).
- Reasonable certainty - must be able to calculate the damages based on reasonably certain facts or comparable situations. Cannot have a calculation based wholly on guesses. In cases of doubt, many jurisdictions have adopted a view that the breaching party should bear the risk of doubt rather than the aggrieved party.
- Foreseeability - Generally, no consequential damages unless they are known or foreseeable. e.g., No lost profits for third party transactions (e.g., Hadley v. Baxendale case below), holding that Baxendale could only be held liable for losses that were generally foreseeable, or if Hadley had mentioned his special circumstances in advance. The mere fact that a party is sending something to be repaired does not indicate that they would lose profits if it were not delivered on time. The court suggested various other circumstances under which Hadley could have entered into this contract that would not have presented such dire circumstances, and noted that where special circumstances exist, provisions can be made in the contract voluntarily entered into by the parties to impose extra damages for a breach. e.g., http://en.wikipedia.org/wiki/Hadley_v_Baxendale
- Cost of performance or a proposed measure of damage greatly exceeds market value of full performance (Peevyhouse v. Garland Coal Mining Co) E.g., land owner contract with coal company promised restoration of land after mining complete - coal company refused to comply; court found the cost of restoration (~$30k) grossly exceeded value of the property in unrestored condition ($300 price difference between condition before and after coal mining). However, this case has been widely criticized; 2nd Restatement of the Law criticized it; many courts will not follow this rule thus would decline to award damages based on market value based on view that damages should be awarded based on actual harm to injured party versus hypothetical market value - dependent on jurisdiction)
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