Last Updated on December 13, 2022 by Anda Malescu
It is important to understand how to calculate damages in breach of contract cases in the United States because every breach of contract gives the injured party a right to damages against the party in breach.
The resulting claim may be one for damages for total breach or one for damages for only partial breach. Although a judgement awarding a sum of money as damages is the most common judicial remedy for breach of contract, other remedies, including equitable relief in the form of specific performance, rescission or reformation may also be available depending on the circumstances. However, this article discusses how to calculate damages in breach of contract cases in the United States.
Under the Uniform Commercial Code (UCC) contract damages are ordinarily based on the injured party’s expectation interest and are intended to give him the benefit of his bargain by awarding him a sum of money that will, to the extent possible, put him in as good a position as he would have been had there been no breach of contract. In other words, the remedy intends to place the non-breaching party in the position he would have been in, had the contract been performed in the normal course of business. When the injured party had to pay an additional amount to arrange a substitute transaction they can be adequately compensated by the awarded sum. In other situations, the sum awarded cannot adequately compensate the injured party, for example when a delay in performance has caused them to miss an invaluable opportunity. The measure of damages can be subject to the agreement of the parties, if they provide for liquidated damages in their contract. However, it is important to point out that the UCC measure of damages applies to all contracts involving the sale of goods. Under the UCC goods are defined as all things including manufactured goods which are movable at the time of identification to the contract for sale.
The first aspect that one has to take into consideration when attempting to establish a sum that would fairly represent the expectation interest is the loss in the value to the non-breaching party of the other’s party performance that is caused by the failure of that performance. If no performance is rendered, the loss in value caused by the breach is equal to the value that the performance would have had to the injured party. For instance, A contracts to publish a novel that B wrote. A repudiates the contract and B is unable to publish the novel somewhere else. B’s damages include here the loss of royalties that he would have received had the novel been published by A together with the value to him of the resulting enhancement of his repudiation.
Further, the non-breaching party is also entitled to recover all loss actually suffered, including incidental and consequential damages.
Sometimes, the breach of contract might result itself in saving some costs for the non-breaching party because they did not have to perform either. If this is the case, then the damages must be calculated differently. The cost avoided must be subtracted from the loss in value caused by the breach of contract when calculating the damages.
Calculating damages in case of breach of contract is a complex mechanism and it greatly depends on every circumstance.
Contact us or schedule a consultation with your business attorney in Miami, Florida USA to assist you with your breach of contract and help you understand how to calculate damages in breach of contract cases.
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