Remedies

Fall 2014
Ch. 7 Damage Remedies
Prof. George W. Conk
gconk@law.fordham.edu
212-636-7446
Room 8-122
Adjunct Professor of Law
Senior Fellow, Stein Center for Law & Ethics
Ch. 7 Damages 1
Damages in tort
Compensatory damages
- Reasonable expectations honored
by making injured party whole
- unreasonable conduct deterred
Punitive damages
- punishment and deterrence of
conscious wrongdoers
Ch. 7 Damages 2

Damages in contract and quasi
contract - remedial purposes
Consensual expectations vindicated
Gains unjustly retained by another
restored to rightful possessor
Ch. 7 Damages 3
Contract Damages Restatement 2d
344 Purposes of Remedies
Judicial remedies serve to protect one or more
of the following interests of a promisee:
a) his "expectation interest," which is his
interest in having the benefit of his
bargain by being put in as good a position
as he would have been in had the contract
been performed
Ch. 7 Damages 4
Contract Damages Restatement 2d
(b) his "reliance interest," which is
his interest in being reimbursed for
loss caused by reliance on the
contract by being put in as good a
position as he would have been in
had the contract not been made
Ch. 7 Damages 5
Contract Damages Restatement 2d
(c) his "restitution interest," which is
his interest in having restored to him
any benefit that he has conferred on
the other party.
Ch. 7 Damages 6
The conventional measure of
damages
The amount necessary to make the
victim whole
The award should make the plaintiff
indifferent to the breach
Ch. 7 Damages 7
Efficient breach
Wasteful performance avoided
Expectation vindicated
Wealth maximized
Ch. 7 Damages 8
Taking Account of the time value of
money
Lump sum damages
Pre-judgment interest
Discounting to present value
Installment payment of future losses
Ch. 7 Damages 9
Ch. 7 Damages
For breach of warranty
Buyers damages
10
UCC 2-714
2-714. Buyer's Damages for Breach
in Regard to Accepted Goods.
(1) Where the buyer has
accepted goods and given notification
(subsection (3) of Section 2-607) he may
recover as damages for any non-
conformity of tender the loss resulting in
the ordinary course of events from
the seller's breach as determined in any
manner which is reasonable.
Ch. 7 Damages 11
UCC 2-714 Breach of warranty
(2) The measure of damages for breach of
warranty is the difference at the time and
place of acceptance between the value of
the goods accepted and the value they
would have had if they had been as
warranted, unless special circumstances
show proximate damages of a different
amount.
(3) In a proper case any incidental and
consequential damages may also be
recovered.

Ch. 7 Damages 12
UCC 2-715. Buyer's Incidental and
Consequential Damages.
(1) Incidental damages resulting from the
seller's breach include expenses
reasonably incurred in inspection, receipt,
transportation and care and custody of
goods rightfully rejected, any
commercially reasonable charges,
expenses or commissions in connection
with effecting cover and any other
reasonable expense incident to the delay
or other breach.

Ch. 7 Damages 13
UCC 2-715. (2) Consequential
damages resulting from the seller's
breach include
(a) any loss resulting from general or
particular requirements and needs of
which the seller at the time of
contracting had reason to know and
which could not reasonably be
prevented by cover or otherwise; and
Ch. 7 Damages 14
UCC 2-715. (2) Consequential
damages resulting from the seller's
breach include
(b) injury to person or property
proximately resulting from any
breach of warranty.
Ch. 7 Damages 15
Dealers Hobby v. Marie Ann Linn
Realty (IA 1977) p. 569
Plaintiff sought $193,082.23 - the
difference between the fair rental value of
the premises as warranted and the fair
rental value of the premises as they
actually existed for the entire duration of
the lease prior to the collapse.

Why shouldnt they get retroactive rent
reduction?
Ch. 7 Damages 16
Types of damages for breach of covenant to
keep building in good repair
1) Consequential damage to merchandise
and business
2) Difference between rental value as
promised and as they were during
occupancy
3) Punitive damages
Ch. 7 Damages 17
Dealers Hobby v. Marie Ann Linn
Realty (IA 1977) p. 569
No rule of the law of damages
permits the injured party to
receive more than he has lost.


Ch. 7 Damages 18
Dealers Hobby v. Marie Ann Linn
Realty (IA 1977)
Specific rules are subordinate to the
general rule that compensatory damages
are designed to put the injured party in as
good a position as he would have had if
performance had been rendered as
promised
A given formula is improvidently invoked if
it defeats a common sense solution

Ch. 7 Damages 19
Dealers Hobby v. Marie Ann Linn
Realty (IA 1977)
Action for damages after a partial collapse
of the roof of the leased warehouse
Proper measure of damages for the
landlord's breach of an express warranty
to maintain and repair the roof of a
commercial warehouse was the tenant's
actual loss

Ch. 7 Damages 20
Dealers Hobby v. Marie Ann Linn
Realty (IA 1977)
Consequential Damages
Damages to merchandise and inventory
together with incidental damages which
totaled $16,037.94
Ch. 7 Damages 21
Basiliko v. Pargo Corp., (D.C. 1987) p. 576
The trial judge applied the `English Rule:
the purchaser at a void foreclosure sale,
"relieved as he is of paying the purchase price . .
. also loses what would otherwise be his own
correlative position as an innocent purchaser for
fair value,
Basiliko therefore "loses any right to sue the
[sellers] for breach of contract to recover in
damages the benefit of his bargain."

Doesnt this correctly restore Buyer to
status quo ante with no loss?

Ch. 7 Damages 22
Expectancy measure of damages
Majority rule
"American rule" on breach of contract
allows the frustrated purchaser of real
property the benefit of the bargain he
has negotiated.

Ch. 7 Damages 23
Basiliko v. Pargo Corp., (D.C. 1987)

A seller who breaches an executory contract
for sale of realty is liable for damages
measured by
Difference between the sales price and the
fair market value at the time the property
should have been conveyed
Ch. 7 Damages 24
Basiliko v. Pargo Corp., (D.C. 1987)
On remand, the trial court must
determine what that fair market
value would have been,
"the price that an owner willing but not
compelled to sell ought to receive from
one willing but not compelled to buy."
Ch. 7 Damages 25
Net actual loss is measure
Offset expenses saved:
closing costs
brokerage commissions
incidental expenses
Ch. 7 Damages 26
Basiliko v. Pargo Corp., (D.C. 1987)

The trial court may consider as
evidence the price at which Basiliko
had agreed to resell the property to
Pargo Corporation.

A resale contract provides sufficient
evidence of fair market value on which to
base an award of damages for breach of
the initial sales contract
Ch. 7 Damages 27
ChatlosSystems v. NCR (3
rd
Cir) 1982,
p. 580
Warranty exceeded capability of machine
Damages:
Contract price: $46k
FMV $207,826
Value as delivered: $6k
Net: $201,826 Plus interest
Is UCC 2-714 correctly applied?
Ch. 7 Damages 28
N.J. Stat. 12A:2-714
(2) The measure of damages for breach of
warranty is the difference at the time and
place of acceptance between the value of
the goods accepted and the value they
would have had if they had been as
warranted, unless special circumstances
show proximate damages of a different
amount.
Ch. 7 Damages 29
Chatlos Systems
Is the dissent correct? Isnt the result a
windfall?
There is no probative evidence to support
the district court's award of damages for
the breach of warranty in a sum
amounting to almost five times the
purchase price of the goods.
Ch. 7 Damages 30
9 elements of fraud cause of action
(1) a representation of an existing fact,
(2) materiality (3) falsity (4) speaker's
knowledge of falsity or ignorance of truth,
(5) intent that representation be acted on
by the person to whom it is made (6)
ignorance of falsity by the person to
whom it is made (7) reliance on the truth
of the representation 8) right to rely upon
it, and (9) consequent damage.
Was Sanders defrauded? What was her
loss?
Ch. 7 Damages 31
Liberty National (ALA 2000) p. 584
Fraud cause of action
Knowing material misrepresentation of
fact
Justifiable reliance
Loss
Measure of damages: value as
represented vs. value in reality
Ch. 7 Damages 32
TERRA-PRODUCTS v. KRAFT GEN. FOODS,
INC., (Ind. Ct. App. 1995), p. 588
Terra demands:
Lost land value: Appraised value
absent contamination minus auction
price
Cost of two week shutdown during
relocation
$3M stigma damages

Ch. 7 Damages 33
TERRA-PRODUCTS v. KRAFT GEN. FOODS,
INC., (Ind. Ct. App. 1995), p. 588
Hybrid measure of recovery
The fundamental measure of Terra's
damages is any reduction in the fair
market value of Terra Site caused by
Kraft.
Ch. 7 Damages 34
TERRA-PRODUCTS v. KRAFT GEN. FOODS,
INC., (Ind. Ct. App. 1995)
Temporary vs. Permanent Injury

The measure of damages in a case of
injury to real property depends first upon a
determination of whether the injury is
"permanent" or "temporary."

Permanent injury to unimproved land
occurs where "the cost of restoration
exceeds the market value . . . prior to
injury."
Ch. 7 Damages 35
TERRA-PRODUCTS v. KRAFT GEN. FOODS
total loss
If the injury is permanent, the measure of
damages is limited to the difference
between the fair market value of the
property before and after the injury
Rationale: "economic waste" results when
restoration costs exceed the economic
benefit.
Ch. 7 Damages 36
TERRA-PRODUCTS v. KRAFT GEN. FOODS,
INC., (Ind. Ct. App. 1995) p. 514
Temporary injury
Cost of repair is less than value of
damaged property

For a temporary injury the proper measure
of damages is the cost of restoration.
Ch. 7 Damages 37
TERRA-PRODUCTS v. KRAFT GEN. FOODS,
If ... the value of Terra Site after
remediation was less than its value
before discovery of PCB contamination,
the property was permanently
damaged.
Ch. 7 Damages 38
TERRA-PRODUCTS v. KRAFT GEN. FOODS,
Hybrid theory:
Prove reduction in fair market value by
a combination of cost of repair and
evidence of FMV before the causative
event and FMV after repair
If repair will not restore value P is
entitled to the reduction in value
Ch. 7 Damages 39
TERRA-PRODUCTS v. KRAFT GEN. FOODS,
Stigma?
Terra would be entitled to
compensation for any "remaining loss"
in the property's fair market value after
remediation in that, under such
circumstances, remediation would be
inadequate to compensate Terra fully
for its loss.
Ch. 7 Damages 40
Ch. 7 Damages
the market value of chattels
Actual Cash Value
41
O'Brien Bros., Inc. v. The Helen B. Moran, 160
F.2d 502, 505 (2d Cir. 1947) p. 595
Pound, Ch. J., in the New York Court
of Appeals, discussed the principles
involved where an automobile was
injured in a collision and the repairs
were found to cost more than the
vehicle was worth:
Ch. 7 Damages 42
O'Brien Bros., Inc. v. The Helen B. Moran
'The damages sustained by an automobile
in a collision may be established by
showing the reasonable cost of the repairs
necessary to restore it to its former
condition, although the general rule is that
the measure of damages to personal
property is the difference between its
market value immediately before and
immediately after the injury.
Ch. 7 Damages 43
O'Brien Bros., Inc. v. The Helen B. Moran
Windfalls not permitted
This rule is subject to the limitation,
first, that the cost of repairs must be
less than the diminution in market
value due to the injury, and secondly,
that the repairs must never exceed
the value of the automobile itself as
it was before the injury.
Ch. 7 Damages 44
O'Brien Bros., Inc. v. The Helen B. Moran
Total loss
Where the automobile is totally
destroyed, the measure of damages
is its reasonable market value
immediately before destruction.
Ch. 7 Damages 45
Semenza v. Bowman (MT 1994) p. 599
Damage to crops by improper spraying
Date for measuring loss:
1) Date of injury
2) Date of harvest
3) Date of sale
Why does the court pick the date of sale?

Ch. 7 Damages 46
Fukida v. Hon/Hawaii (2001) p. 609
Where a person is deprived of the use of
his or her property due to the tortious
conduct of another, he or she may recover
loss of use damagesfor the period of
time reasonably necessary to
- effect repairs
- obtain a replacement
- recover possession

The value itself is not determinative
Ch. 7 Damages 47
Fukida v. Hon/Hawaii (2001) p. 609
Why doesnt Fukida need to show he
actually rented a substitute vehicle?
Should damages be capped at the value of
the chattel?
What is a reasonable period of loss of
use? Suppose owner has bad credit and
no cash?
Ch. 7 Damages 48
UCC 2-715. Buyer's Incidental
Damages.
(1) Incidental damages resulting from the
seller's breach include expenses
reasonably incurred in inspection, receipt,
transportation and care and custody of
goods rightfully rejected, any
commercially reasonable charges,
expenses or commissions in connection
with effecting cover and any other
reasonable expense incident to the delay
or other breach.

(2) Consequential damages resulting from
the seller's breach include
Ch. 7 Damages 49
United Truck Rental v. Kleenco (HW
1996) p. 602 Two kinds of loss
Loss of chattel - ACV
Loss of use
1) Rental value
reasonable period of time
- must deduct costs saved
2) Cost of renting a substitute
3) Net profits that could have been made
from use

Ch. 7 Damages 50
Heirlooms and Unique Objects
Ch. 7 Damages 51
Three approaches to value (OBrien)
1) Market value of similar property
2) Replacement cost
3) Capitalization of earnings
Less depreciation of the damaged chattel

Which is most appropriate for
Amorita?
Ch. 7 Damages 52
Capitalization of net earnings
To produce a 1 year income stream of
$15,000 @ 6% discount rate how much
do you need today?

Year 1 $15,000 x 1/1.06 = PV
$14,150.94

Ch. 7 Damages 53
Restat 2d of Torts, 911 Value
(1) As used in this Chapter, value
means exchange value or the value
to the owner if this is greater than
the exchange value.
Since Amorita is an undying love should
the owner recover the rebuilding cost
which exceeds the price of another boat of
the same type?
Ch. 7 Damages 54
Restat 2d of Torts, 911 Value
(2) The exchange value of property
or services is the amount of money
for which the subject matter could be
exchanged or procured if there is a
market continually resorted to by
traders, or if no market exists, the
amount that could be obtained in the
usual course of finding a purchaser
or hirer of similar property or
services.
Ch. 7 Damages 55
Duty to mitigate damages
Claimant must take reasonable
measures to limit its losses
A matter of proximate cause, not
duty
Burden may be on breaching
party e.g. lessee in NY
Ch. 7 Damages 56
Ch. 7 Damages
Hadley v. Baxendale lives
Consequential damages under the UCC
57
Miss. Chem. Corp. v. Dresser-Rand Co. (5th
Cir. Miss. 2002) p. 618
In the event of a breach of warranty, a
buyer may seek direct, incidental, and
consequential damages.

MISS. CODE ANN. 75-2-714.
Ch. 7 Damages 58
Miss. Chem. Corp. v. Dresser-Rand Co. (5th
Cir. Miss. 2002)
Under the Mississippi UCC 2-715,
"consequential damages" include:
(a) Any loss resulting from general or
particular requirements and needs of which
the seller at the time of contracting had
reason to know and which could not
reasonably be prevented by cover or
otherwise; and
(b) Injury to person or property proximately
resulting from any breach of warranty.
Ch. 7 Damages 59
Miss. Chem. Corp. v. Dresser-Rand Co. (5th
Cir. Miss. 2002)
Lost profits are recoverable as consequential
damages if :
(1) the seller had reason to know at the time
of contracting that if he breached the
contract, the buyer would be deprived of
those profits -- i.e., the lost profits were
foreseeable;
(2) the lost profits are reasonably
ascertainable; and
(3) the lost profits could not have been
reasonably prevented.
Ch. 7 Damages 60
Miss. Chem. Corp. v. Dresser-Rand Co. (5th
Cir. Miss. 2002)
MCC's damage :
1) MCC computed the profit per unit of
ammonia during each of the three
malfunctioning periods.
2) It estimated the quantity of ammonia lost
in each malfunctioning period because of the
reduction in the speed of the compressor
train.
3) It multiplied the profit per unit by the
number of units lost to come up with the total
amount of damages (i.e., lost profits) caused
by the malfunctioning compressor train.

Ch. 7 Damages 61
Mississippi Chemical v. Dresser
Cover

Duty to mitigate damages

Causal relationship between breach and
loss
Ch. 7 Damages 62
Ch. 7 Damages
The time value of money
Interest & Discounting
63
Lump sum damages
The norm in tort and breach of contract
Statutory exceptions: Oil Pollution
Act, workers compensation
Past damages - interest
Future damages - discounted

Ch. 7 Damages 64
Interest as Consequential damages for loss of
use of money or to vindicate contractual
expectations
Prejudgment interest from day of filing
complaint to verdict is commonly allowed
May be discretionary with judge or other
fact-finder
Contractual rate of interest in event of
breach often the measure
Or courts may employ the legal or
prevailing rate of interest

Ch. 7 Damages 65
Prejudgment interest
Semenza v. Bowman (Mont. 1994)p. 599
Section 27-1-212, MCA:
"in an action for the breach of an
obligation not arising from contract and in
every case of oppression, fraud, or malice,
interest may be given, in the discretion of
the jury.

This also applies where the judge is the fact
finder
Ch. 7 Damages 66
Interest Wrongful death - NY
Interest Is Recoverable In Wrongful Death
Actions


EPTL 5-4.3 provides that ''[i]nterest
upon the principal sum recovered by the
plaintiff from the date of the decedent's
death shall be added to and be a part of
the total sum awarded.''

4-242 Warren's Negligence in the New York
Courts 242.03
Ch. 7 Damages 67
Ch. 7 Damages
Incommensurability and
estimation
Personal Injury
Damages
68
The cardinal principle
"The cardinal principle of damages in
Anglo-American law is that of
compensation for the injury caused to the
plaintiff by defendant's breach of duty"
where compensation consists of
"repairing plaintiff's injury or ...
making him whole as nearly as that
may be done by an award of money."

Harper & James, The Law of Torts
Ch. 7 Damages 69
Compensatory damages
irrelevant considerations?

- punishment
- deterrence
- spreading the wealth
- helping those less fortunate than we
Ch. 7 Damages 70
Limits on damages
Caps on damages
- constitutional vulnerability*
Charitable immunity (partial/whole)
Limits on governmental liability
- no prejudgment interest
- credit for payments by collateral sources
The American Rule on counsel fees
Litigation costs
Ch. 7 Damages 71
Special problems in PI damages
Full compensation or fair
compensation?
Measurement of non-economic loss
damages
Incommensurability of money with
personal injury losses and death
Evidence of collateral sources
excluded
Lump sum damages
Ch. 7 Damages 72
Elements of damage
Special Damages

Property damage (actual cash value)

Lost income - past and future

Medical bills and other repair costs
(including job training)

Ch. 7 Damages 73
Elements of damage
Non-economic damages
- pain, suffering, disability and
impairment
- (including hedonic damages)

Ch. 7 Damages 74
Elements of damage

Spousal damages

per quod - spouses medical expenses,
gratuitous care rendered to the
spouse, the impact on the marital
relationship, loss of companionship,
loss or diminishment in quality of
sexual relationship

Ch. 7 Damages 75
Seffert v. Los Angeles Transit Lines p. 556 (CA
1961)
Non-economic: $134,000
Special damages:
Medicals: $10,330
Drugs: $2,273
Future medicals $25,800
Lost earnings
to time of trial $5,500

Possible future
lost earnings $ 10,000
Total pecuniary loss $53,903


Ch. 7 Damages 76
Medical expenses reasonable and
necessary
charges for medical expenses must be
reasonable and recovery is limited to
necessary (medically warranted, etc.)
expenses.

statutory or regulatory controls on charges
may define the outer limit of reasonableness.
E.G.:

In New York service charges for the health
services listed are limited to the amounts
permissible under Workers' Compensation
Law schedules for industrial accidents.
Ch. 7 Damages 77
The collateral source rule
Bryant v. New York City Health & Hosps.
Corp., (N.Y. 1999):

Evidence of compensation received from a
source other than the tortfeasor is
inadmissible
Ch. 7 Damages 78
Tort `reform NY CLS CPLR 4545 Admissibility of
collateral source of payment

If any such cost or expense was or
will be replaced or indemnified from
any collateral source, it shall reduce the
amount of the award by such finding,
minus an amount equal to the premiums
paid by the plaintiff for the two-year period
immediately preceding the accrual of such
action and minus an amount equal to the
projected future cost to the plaintiff of
maintaining such benefits.
Ch. 7 Damages 79
Exceptions to tort-reform limit on collateral
source exclusionary rule
Union/Mgt welfare funds
Workers comp benefits
FELA health insurance payments
FTCA US does not repay liens
Medicare - 42 USC 1395y
Medicaid
Ch. 7 Damages 80