Contract law provides various measures of damages to compensate injured parties. Expectation damages aim to put the injured party in the position they would have been in if the contract was fully performed. Reliance damages restore the injured party to their pre-contract position, while restitution damages prevent unjust enrichment.

Calculating damages involves specific formulas and considerations. Expectation damages use the contract price minus actual value, while reliance damages subtract benefits received from expenses incurred. Restitution focuses on returning benefits conferred on the breaching party to prevent unjust enrichment.

Measures of Damages in Contract Law

Measures of contract damages

• Expectation damages compensate injured party by putting them in position they would have been in if contract fully performed
• Reliance damages restore injured party to position they were in before contract formed by reimbursing expenses incurred in reliance on contract
• Restitution damages prevent unjust enrichment of breaching party by requiring return of benefits received from injured party

Calculation of expectation damages

• Expectation damages formula calculates difference between contract price and actual value: $Expectation\ Damages = Contract\ Price - Actual\ Value$
  • Contract Price represents agreed-upon value of performance under contract (price of goods or services)
  • Actual Value represents value of performance actually received by injured party (market value of defective goods)
• Consequential damages compensate for additional losses suffered by injured party as result of breach
  • Must be reasonably foreseeable at time of contract formation (lost profits due to delayed delivery)
• Duty to mitigate requires injured party to take reasonable steps to minimize losses
  • Failure to mitigate may reduce amount of recoverable damages (refusing to accept substitute goods)

Assessment of reliance damages

• Reliance damages formula calculates difference between expenses incurred and benefits received: $Reliance\ Damages = Expenses\ Incurred - Benefits\ Received$
  • Expenses Incurred include costs incurred in preparation for or performance of contract (materials purchased, equipment rented)
  • Benefits Received include any benefits obtained from partial performance of contract (progress payments, usable goods)
• Types of reliance expenses include preparation costs, partial performance costs, and opportunity costs if proven with reasonable certainty (foregone alternative contracts)
• Limitations on reliance damages require expenses to be reasonable and foreseeable and subject to duty to mitigate (cannot claim excessive or avoidable costs)

Concept of restitution in contracts

• Restitution damages restore injured party to pre-contract position by returning benefits conferred on breaching party
  • Prevents unjust enrichment of breaching party (retaining goods without payment)
• Measuring restitution damages involves determining value of benefit conferred on breaching party
  • May include goods, services, or money provided by injured party (down payment, custom-made products)
• Restitution in quasi-contract applies when no valid contract exists but one party unjustly benefits at expense of other
  • Quantum meruit allows recovery for reasonable value of services rendered (consulting work without formal agreement)
  • Quantum valebant allows recovery for reasonable value of goods provided (materials delivered without purchase order)