CHECKLIST: CALCULATING DAMAGES

DOES THE CONTRACT HAVE A DAMAGES CLAUSE?

The parties may specify the amount of damages due upon breach of contract in a damages clause
of the contract. Although U.C.C. Section 2-719 permits liquidated damages that approximate loss,
courts will not enforce punitive damage clauses.
F NOT, HOW DO YOU CALCULATE THE BENEFIT OF THE BARGAIN?
Generally, the court attempts to put the promisee in the position he would have been in had the
promise been performed. The plaintif's beneft of the bargain includes both the decline in his
position caused by breach and the gains he expected to make on the deal.
ARE THE ELEMENTS OF THE CALCULUS FORESEEABLE?
To import certainty and stability to the contract regime, contract law excludes speculative
and unforeseeable movements of plaintif's economic position from the calculation of damages.
Plaintifs cannot recover speculative profts nor unusual damages; defendants cannot reduce the
damage award by speculating on the benefts conferred to plaintif through breach.
WERE ANY ELEMENTS OF THE CALCULUS AVOIDABLE?
To keep economic waste to a minimum, contract law does not award compensation for a particular
element of damages that plaintif could have avoided without undue risk, expenses or humiliation.
Where plaintif retains exclusive control of the goods or services under contract, he may not
increase recovery through unreasonable failure to avoid harm.
CONSIDER: RELIANCE INTEREST AS ALTERNATIVE
A plaintif who incurs costs in the pursuit of speculative proft may seek remedy for the reliance
interest disappointed at breach. Courts awarding reasonable damages made in reliance on
defendant's promise in order to put the plaintif in as good a position as never making the
agreement in the frst place.
CONSIDER: RESTITUTION INTEREST AS ALTERNATIVE
In some cases the breaching party may be entitled to the defendant's money to remedy unjust
enrichment. One measure of this restitution interest is the market value of beneft conferred to
defendant by the plaintif's partial performance of the contract. These plaintif do not sue on the
contract but rather by the doctrine of quantum meruit ("as much as he deserves.")
CONSIDER: SPECIFIC PERFORMANCE INSTEAD
When money is not enough to equitably remedy plaintif's disappointed expectations, the non-
breaching plaintif may demand that defendant perform as specifed in the contract or that the
court impose an injunction against defendant behavior destructive to plaintif.