Contracts Outline
This outline covers the concept of expectation damages in contract law, focusing on its rules, applications, and key cases to effectively understand how to recover damages for breach of contract.
Expectation damages are designed to put the injured party in the position they would have been in had the contract been fulfilled. The primary goal is to ensure that a party receives the benefits they reasonably expected from the contract. To calculate expectation damages, a court will typically assess the monetary value of the promised performance and subtract any costs saved due to the breach.
The expectation shall be measured based on the profits that the non-breaching party would have made had the contract been performed as agreed. This is often articulated as the 'profit expectancy' or the 'benefit of the bargain.' For expectation damages to be recoverable, it must be shown that the loss was foreseeable and not too speculative. This aligns with the principle of certainty in damages as upheld in contract law.
To calculate expectation damages, parties must identify the difference between the value of the promised performance and the value of the actual performance received. This difference may also involve the consideration of any consequential damages, which are losses that occur as a direct result of the breach and are recoverable if they were within the contemplation of the parties at the time of contracting.
The computation may involve three steps: first, determine the value that the promised performance would provide; second, calculate the actual performance's value; and finally, assess any ancillary costs or damages incurred as a result of the breach. Certain aspects such as incidental damages can also influence the overall compensation. Courts also consider whether the injured party made reasonable efforts to mitigate their damages, as the doctrine of mitigation plays a vital role in the enforcement of expectation damages.