Expectation interest - Next Generation Bar Exam

1. What is the usual measure of a buyer's damages when a seller of land fails to convey?

   The difference between the market value and the contract price at the time set for performance. Incidental damages, such as costs of examining title, may also be recovered.

2. What are incidental damages?

   Costs reasonably incurred in responding to the breach, such as inspecting, storing, or arranging substitutes. They are recoverable in addition to the loss in value of the promised performance.

3. What position do expectation damages seek to place the nonbreaching party in?

   The position it would have occupied had the contract been performed. Expectation is the default measure of contract damages.

4. When are nominal damages awarded for breach of contract?

   When a breach is proved but the plaintiff shows no actual loss. Nominal damages vindicate the right that was violated.

5. What does 'cost avoided' mean in calculating expectation damages?

   Expenses the injured party saves because it no longer has to perform. Those savings are subtracted so the injured party is not overcompensated.

6. What is the measure of a builder's damages when the owner repudiates midway through construction?

   Lost profit plus costs already incurred, less any payments received. Equivalently, the contract price minus the cost the builder saves by not completing.

7. A seller repudiates a contract to sell land for $300,000 when the land is worth $340,000 on the closing date. What is the buyer's expectation recovery?

   $40,000, plus any incidental damages. The buyer loses the $40,000 benefit of the bargain measured at the time for performance.

8. What is the general formula for expectation damages?

   Loss in value plus other loss, minus cost avoided and loss avoided. Other loss includes incidental and consequential damages; cost and loss avoided reflect savings from not performing.

9. What is the usual measure of an owner's damages when a builder's performance is defective or incomplete?

   The reasonable cost of completion or repair. Courts substitute diminution in value when the cost of repair is clearly disproportionate to the benefit.

10. A builder installs pipe of equal quality but a different brand than specified, and replacing it would require demolishing finished walls. What is the owner's measure of damages?

    The diminution in value, which is likely nominal. Where the deviation is trivial and repair would be economically wasteful, courts use diminution in value rather than cost of repair.

Study these flashcards