UBE / MEE Contract Damages - Common Law vs. UCC

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Common Law vs. UCC Contract Damages / Remedies

The contracts sub-topic of remedies can be rather difficult to master.  It is, however, a crucial component of contract law for the UBE because we are likely to see at least three up to as many as six MBE questions in the area of remedies/damages.  Moreover, it is extremely likely that if we have a contracts essay, damages will likely be a part of an issue if not an entire issue completely.  If mastered, we ultimately garner crucial points on the exam.  

 We must differentiate between (1) monetary v. non monetary damages AND (2) common law v. UCC damages.  Toward the bottom of this post, there is a four step formulaic approach to calculating contract damages.  Before we get there, let us briefly discuss all aforementioned damages.
NON Monetary Remedies:
1 – Specific Performance is an equitable remedy available ONLY if monetary damages are inadequate to compensate an injury.  Specific Performance may be available in the following situations:

A – Real Prop – Specific performance is the usual remedy because the property is“unique.”
B – Sale of Goods – Only available if the goods are unique or there are other proper circumstances such as an inability to buy substitute goods in the marketplace.
C – Service K’s –  Specific Performance is not available in service contracts however injunctive relief may be available.  Preventing someone from working for someone else (non-compete agreement, for example) is one such example.

2 – Unpaid Seller’s Right to Reclaim Goods – Generally unavailable under Article 2 with two exceptions:
      EXCEPTION 1 –  If  the buyer was insolvent when it received the goods AND the seller makes a demand within ten days after buyer received them.  NOTE - Do NOT assume insolvency!  Check the fact pattern for this fact.
EXCEPTION 2 – The seller can reclaim goods at ANY TIME if  the buyer misrepresented its solvency to the seller in writing within three months before delivery.

Monetary Remedies:

1 – Punitive Damages – These damages are not awarded for breach of a contract and we compensate the injured party, we do NOT punish the breaching party.

2 – Liquidated Damages –  Upheld if damages were difficult to estimate and are a reasonable forecast of probable damages but can not operate as a penalty.  There is usually a clause in the contract specifying damages.  NOTE - A lump sum of liquidated damages is not proper.

3 – Expectation Damages – Deigned to put an injured party in as good of a position as they would have been in had there been full and proper performance.
      A – Common Law - You receive the damages needed to make you whole from what you spent as well as lost profits.

      B – Sale of Goods (Art 2 UCC) - 
              BUYER'S DAMAGES – (3 options) –
                       1 – Cover Damages – The contract Price if the buyer covers in good faith.  This is the usual measure of damages.

                        2 – Market Damages – The contract price if the buyer does NOT cover in good faith or fails to cover at all.

                        3 – Loss in Value –  The value delivered if the buyer keeps any or all non conforming goods.

                SELLER'S DAMAGES (4 options) –
                        1 – Resale Damages – The resale price if the seller resells the goods in good faith.

                         2 – Market Damages – The market price if seller does NOT resell in good faith or does not resell at all.

                         3 – Lost Profits – HEAVILY TESTED – If the seller is a lost volume dealer (for example, a car salesman, or paper salesman, etc).  Be aware of a common MBE trick: The question will say that this lost volume dealer sold a car for the same price to someone else thus there are no lost profits, correct?   WRONG!  This lost volume dealer lost that sale and could have had two sales (the first sale to the breaching party as well as the subsequent second sale to a new buyer) and thus this lost volume dealer lost profits

                         4 – Contract Price - Available if the seller can't resell the goods.  In other words, if there is no market for the items or goods? This remedy is the appropriate remedy.

4 - Incidental Damages – The cost to the injured buyer or seller of transporting and/or caring for goods after a breach in addition to the possibility of arranging a substitute transaction.

5 – Consequential Damages – (A remedy that is always on the exam) – These are damages special to this particular plaintiff that were reasonably foreseeable to the breaching party at the time of contract.  NOTE – Consequential damages are not available to the seller under Article 2 and the reason for that is the issue is foreseeability and not causation.

6 – Avoidable Damages – An injured party can't recover damages that he or she could have avoided or mitigated, with reasonable effort.

HOW TO CALCULATE CONTRACTUAL DAMAGE:
1 – First calculate the COMPENSATORY damage(s) - Compensatory damage includes the actual out of pocket loss suffered by the aggrieved party.
2 – Add CONSEQUENTIAL damage(s) - These damages were reasonably foreseeable at the time of formation, and place the aggrieved party in the position as if the contract was performed.
3 – Subtract reasonable mitigation – This is what the NON breaching party should have done or did do to reduce the consequential damage.

4 – Add all INCIDENTAL damages – These are incurred while the non breaching party attempts to mitigate by finding substitute performance.
For more information about contract damages or the bar exam in general, feel free to email us at PassYourBarExam@gmail.com  

Good luck!

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