Contract Remedies and UCC Buyer/Seller Remedies

The Three Damage Interests

Contract law's goal is compensation, not punishment — punitive damages are generally unavailable for breach. Three interests measure recovery:

• Expectation (benefit of the bargain): the default. Put the injured party where they WOULD have been had the contract been fully performed. The Restatement formula: loss in value + other loss (incidental and consequential) − cost avoided − loss avoided. Example: a contractor promised $100,000 to build a deck who has spent $40,000 and would have spent $30,000 more, when the owner breaches, recovers the lost profit ($30,000 = $100,000 − $70,000 total cost) plus costs already incurred not otherwise recouped.
• Reliance: out-of-pocket expenditures made in reliance on the contract, restoring the injured party to their PRE-contract position. Used when expectation is too speculative (e.g., a new business's lost profits) or under promissory estoppel.
• Restitution: the value of the benefit conferred on the other party, preventing unjust enrichment. Available to a non-breaching party, and even to a breaching party for the value of partial performance exceeding the non-breacher's damages (in many jurisdictions). Measured by the reasonable value of services/goods (quantum meruit), which can EXCEED the contract rate.

Nominal damages are available when a breach causes no provable loss.

Limits on Damages: Foreseeability, Certainty, Mitigation, Liquidation

Four doctrines police the size of a damage award:

Under Hadley, 'general' damages (those flowing naturally from the breach) are always recoverable; 'special' (consequential) damages require foreseeability. Under the UCC, a buyer's consequential damages (2-715) include lost profits the seller had reason to know of, subject to mitigation by cover. Incidental damages — costs of inspection, transportation, storage, and arranging substitute transactions — are recoverable by both buyers (2-715(1)) and sellers (2-710).

UCC Buyer's and Seller's Remedies

For goods, the UCC supplies a structured menu keyed to who breached.

Buyer's Remedies (seller breaches / fails to deliver / repudiates)

• Cover (2-712): buy substitute goods in good faith without unreasonable delay; recover (cost of cover − contract price) + incidental + consequential − expenses saved.
• Market damages (2-713): if the buyer does not cover, recover (market price when the buyer learned of the breach − contract price) + incidental + consequential − expenses saved.
• Accepted nonconforming goods (2-714): recover the difference between the value as warranted and the value as accepted (breach-of-warranty measure), plus incidental/consequential.
• Specific performance (2-716): for unique goods (art, heirlooms, custom items) or 'other proper circumstances' (output the buyer cannot cover elsewhere).
• Replevin for identified goods the buyer cannot cover.

Seller's Remedies (buyer breaches / repudiates / wrongfully rejects)

• Resell (2-706): resell in good faith and recover (contract price − resale price) + incidental − expenses saved.
• Market damages (2-708(1)): (contract price − market price at time and place of tender) + incidental − expenses saved.
• Lost-volume seller profit (2-708(2)): when resale at market does not make the seller whole because it could have made BOTH sales (a dealer with unlimited inventory), recover the lost profit plus incidental. This is the classic lost-volume seller rule.
• Action for the price (2-709): the price (plus incidental) when the buyer has accepted the goods, the goods are lost/damaged after risk passed to the buyer, or the goods cannot be resold at a reasonable price. This is the seller's analog to specific performance.

Buyer's cover vs. market mnemonic: 2-712 (cover) uses the buyer's ACTUAL substitute purchase; 2-713 (market) uses a HYPOTHETICAL market price measured when the buyer LEARNED of the breach. Sellers' 2-706 (resale) is actual; 2-708 (market) is hypothetical.

Equitable Remedies

When money damages are inadequate, courts grant equitable relief:

• Specific performance compels the breaching party to render the agreed performance. It requires: (1) a valid contract with definite and certain terms; (2) all conditions to the plaintiff's right satisfied; (3) legal remedy inadequate (the subject matter is unique — land is always deemed unique, as are rare goods); (4) feasibility of enforcement (courts avoid ongoing supervision); and (5) no equitable defenses (laches, unclean hands, hardship, mistake).
• Personal-service contracts: courts will NOT order specific performance of personal services (involuntary-servitude concerns and supervision difficulty). They MAY issue a negative injunction barring the breaching party from performing similar services for a competitor, if the services are unique (a star performer), provided the injunction is reasonable in scope and does not effectively force the person to work.
• Rescission and reformation: rescission unwinds a contract for a formation defect (fraud, mistake, duress); reformation rewrites a writing to reflect the parties' true agreement after a mutual mistake or scrivener's error.

Essay tip: In a sale-of-land breach by the seller, the buyer can almost always get specific performance because land is unique. In a sale-of-goods breach, push expectation/cover/market damages FIRST and reserve specific performance for genuinely unique goods. Always run the mitigation and foreseeability filters before stating the final number.