Expectation Damages

Definition

Expectation damages are a type of contract remedy that aims to put the non-breaching party in the position they would have been in had the contract been fully performed. This measure of damages seeks to compensate the injured party for their lost benefits and expected gains from the contract.

5 Must Know Facts For Your Next Test

1. Expectation damages are the most common and widely used remedy for breach of contract, as they aim to put the non-breaching party in the position they would have been in had the contract been fully performed.
2. To recover expectation damages, the non-breaching party must prove the amount of their lost profits or benefits with reasonable certainty.
3. Expectation damages can include both direct and consequential damages, such as lost profits, additional expenses incurred, and the difference in value between what was promised and what was received.
4. The non-breaching party has a duty to mitigate their damages, meaning they must take reasonable steps to minimize the losses resulting from the breach.
5. Expectation damages are distinct from reliance damages, which compensate the non-breaching party for expenses incurred in reliance on the contract, and restitution damages, which restore the benefits conferred on the breaching party.

Review Questions

• Explain the purpose and key features of expectation damages as a contract remedy.
  • The primary purpose of expectation damages is to put the non-breaching party in the position they would have been in had the contract been fully performed. This measure of damages seeks to compensate the injured party for their lost benefits and expected gains from the contract. To recover expectation damages, the non-breaching party must prove the amount of their lost profits or benefits with reasonable certainty. Expectation damages can include both direct and consequential losses, such as lost profits, additional expenses incurred, and the difference in value between what was promised and what was received.
• Describe the relationship between expectation damages and the duty to mitigate damages.
  • The non-breaching party has a duty to mitigate their damages, which means they must take reasonable steps to minimize the losses resulting from the breach of contract. This duty to mitigate is closely tied to the concept of expectation damages, as the non-breaching party's recovery of expectation damages can be reduced if they fail to take reasonable steps to mitigate their losses. The non-breaching party cannot recover damages for losses that could have been avoided through reasonable efforts, as this would put them in a better position than they would have been in had the contract been properly performed.
• Analyze the differences between expectation damages, reliance damages, and restitution damages, and explain the unique role of each in contract law.
  • Expectation damages, reliance damages, and restitution damages are the three primary categories of contract remedies, each serving a distinct purpose. Expectation damages aim to put the non-breaching party in the position they would have been in had the contract been fully performed, compensating them for their lost benefits and expected gains. Reliance damages, on the other hand, compensate the non-breaching party for expenses incurred in reliance on the contract, regardless of whether the contract would have been profitable. Restitution damages, in contrast, restore the benefits conferred on the breaching party, focusing on preventing unjust enrichment rather than compensating the non-breaching party's losses. The choice of remedy depends on the specific circumstances of the breach and the goals of contract law, which include protecting the expectations of the parties, preventing unjust enrichment, and encouraging reliance on contractual promises.

Related terms

Breach of Contract: A breach of contract occurs when one party fails to fulfill their contractual obligations, either by not performing as promised or by preventing the other party from performing.

Compensatory Damages: Compensatory damages are intended to restore the non-breaching party to the position they would have been in had the contract been properly performed.

Mitigation of Damages: The duty to mitigate damages requires the non-breaching party to take reasonable steps to minimize the losses resulting from the breach of contract.