Causation, certainty, and foreseeability - Next Generation Bar Exam

1. At contracting, a seller learns that the buyer needs the goods to fill a specific resale contract. Which lost profits may the buyer recover if the seller fails to deliver?

   The profits on the resale contract that the seller had reason to foresee. Knowledge of the resale contract at formation makes those profits a foreseeable consequence of breach.

2. When are damages for emotional distress recoverable for breach of contract?

   When the breach also causes bodily harm or the contract makes serious emotional disturbance particularly likely. Contracts for funeral services or the delivery of news of a death are classic examples.

3. When are punitive damages available for a breach of contract?

   Only when the conduct constituting the breach is also an independent tort for which punitive damages are recoverable. Punitive damages are not awarded for breach alone, however willful.

4. What causal link must a plaintiff show to recover contract damages?

   That the breach caused the loss, meaning the loss would not have occurred but for the breach. Losses that would have occurred even with full performance are not attributable to the breach.

5. How does the modern approach treat a new business's claim for lost profits?

   They are recoverable if proved with reasonable certainty, for example by evidence from comparable businesses. Most courts have abandoned the older rule that lost profits of a new business are too speculative as a matter of law.

6. At what time is the foreseeability of contract damages measured?

   At the time the contract was made. Information the breaching party learns after formation does not expand its liability.

7. A carrier delays returning a mill's broken shaft, idling the mill. The carrier did not know the mill had no spare. Why are lost profits not recoverable?

   The carrier had no reason to foresee at contracting that delay would stop the mill. The loss did not arise naturally from late delivery, and the special circumstances were not communicated.

8. Under the Restatement (Second), how may a court limit foreseeable damages that are grossly disproportionate to the price?

   By excluding lost profits or otherwise limiting recovery to avoid disproportionate compensation. The limitation applies when justice requires it, for example where a small fee would expose the defendant to enormous losses.

9. How certain must proof of contract damages be?

   Reasonably certain; speculative losses are not recoverable. Once the fact of loss is established, the amount need not be proved with mathematical precision.

10. Which consequential damages are recoverable for breach of contract?

    Losses arising naturally from the breach, or losses the breaching party had reason to foresee as probable when contracting.

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