Breach of Contract and Remedies: Damages, Substantial Performance and Specific Performance

Expectation damages

… the injured party has a right to damages based on his expectation interest as measured by (a) the loss in the value to him of the other party’s performance caused by its failure or deficiency, plus (b) any other loss, including incidental or consequential loss, caused by the breach, less (c) any cost or other loss that he has avoided by not having to perform.

Restatement (Second) of Contracts § 347

The goal is to put the injured party where performance would have left it. However, damages must be foreseeable, reasonably certain and not avoidable through reasonable effort.

Foreseeability: Hadley v. Baxendale

… the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.

Hadley v. Baxendale, 9 Ex. 341, 156 Eng. Rep. 145 (1854)

A mill owner could not recover lost profits from a carrier’s delay in delivering a broken crankshaft, because the carrier was never told the mill would stand idle without it.

Substantial performance

Not every flaw is a total breach. In Jacob & Youngs, Inc. v. Kent, 230 N.Y. 239 (1921), a builder used a different brand of pipe than the contract named. Judge Cardozo held that the builder had substantially performed and could recover the price, less damages, and that the measure was “not the cost of replacement, which would be great, but the difference in value, which would be either nominal or nothing.”

Specific performance and other remedies

Courts may order specific performance when money is inadequate, most often for land, because each parcel is unique. In addition, rescission undoes a contract, restitution returns benefits conferred, and liquidated damages clauses set damages in advance if they are a reasonable estimate. For sales of goods, UCC § 2-725(1) requires suit “within four years after the cause of action has accrued.”

Researching breach of contract in your state

First, find the statute or rule that governs breach of contract where you live. State law controls most of these questions, so the answer can change from one state to the next. Next, read recent decisions from the appellate courts in your state. They show how judges apply the law today. Also, check the local rules of the court that would hear your case. Our state procedures guide links to each state’s official rules. In addition, the Research Center explains how to confirm a source is still good law.

Sources and further reading

Official sources used on this page:

• opencasebook.org
• static.case.law
• law.cornell.edu

Related reading on Lawtopolis:

• Contract Defenses: Capacity, Mistake, Fraud, Duress and Unconscionability
• Sales of Goods Under UCC Article 2: Warranties and the Perfect Tender Rule
• Specific performance