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169 Cards in this Set

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Void Contract
Void by lack of mutual consent
Both ways
Contract not enforceable because
Failure of others (Equitable effect)
1) Affirmative defense
2) Rescission
Two factors. Not my fault
Enforceability and claim of damages
Normally, lack of enforcement prevents ability of offending party's right to sue for breach of performance
What makes a void contract
1) physical duress -> not effective as manifestation of assent
2) manifestation of assent induced by either
a) fraud
b)material misrepresentation
174
What makes a voidable contract
1) induced assent by an improper threat by the other party that leaves the victim no reasonable alternative
2) if assent was induced by third party pressure
Exception to third party pressure and voidable
if other party in the transaction is not aware of duress of third party and in good faith either gives
a) value or
b) relies materially on the transaction
Voidable contract remedies
person with power to avoid may select either
a) avoid (rescind and restitution)
b) enforce through ratification (normative contract damages)
UCC (goods) inclusion key words
fraud, misrepresentation, duress, coercion, bankruptcy
Creation of most unenforceable contracts
created because of laws relating to remedies. Not merely voidable BUT unenforceable
Requirement of many unenforceable contracts
may not be ratified due to law such as SOL but require a NEW promise (difference from ratifying which can occur through silence - failure to disaffirm
UCC 2-302
unconscionability clause included at the time the contract is created
Unfair terms
Unenforceable type
1) by law (SOF, SOL): < 1 year, unwritten,
note: Waive SOF if deal is not fair

2) election of party
Set of two
Election of party
Dependent on definition of fairness
1) status of one of the parties: minor or mental incapacity (include intoxication)
2) behavior of one of the parties (duress, undue influence, misrepresentation and non disclosure)
3) Substantive unfairness of Bargain: Unconscionable (unfair terms)
4) Public policy : both parties to blame (void)
Set of four
DUIMN
Duress, undue influence, misrepresentation, and non-disclosure

= near miss on DUIM establishes procedural unconscionability, need unfairness as well
acronym
Avoidance: status
Capacity- no party bound by a contract who manifests assent to enter a contract unless having legal capacity -> makes at least a voidable contract
Full legal capacity exception
1) under guardianship
2) an infant
3) mentally ill/defective
4) intoxication
Avoidance: Infancy
Until age 18, person has only the capacity to incur a voidable contractual duty
Power to avoid in minor only
exercise power of avoidance (disaffirmance) must be made by or shortly after reaching 18
NOTE: Failure to do so cancels power to avoid leading to ratification by silence/inaction
Full restitution available for...
1) for neccessaries
2) age misrepresented
3) good deliberately destroyed
NOTE EXCEPTION: full restitution if paid in cash, not in a credit transaction
Three category
Minority and Recission
Minority does no negate recission, only impact restitution remedy
Vendor's risk and avoidance (infancy)
Risk of loss for damage not due to negligence and beyond use compensation
vendor out of pocket
Cognitive test
person is unable to understand in a in a reasonable manner the nature and consequence of the transaction
mental incompetancy
Exception to cognitive test
power to avoid terminates to the extent of performance if other party did not "know" and contract made on fair terms
I didn't know
Volitional test
1) party is unable to act in a reasonable manner
2) Other party has reason to know of the condition
woman and dance studio = not in control and manipulation
Effect of Disaffirmance- Based on mental incapacity (intoxication)
requires full restoration OR
Recission not available
all or nothing
Avoidance: Duress type: physical compulsion and type of contract
NO mutual assent/contracted obtained through physical compulsion
REQUIRES: actual or imminent threat of serious physical violence
R2K 174

Void contract
If you hit me, forget about it!
Avoidance: Duress type: Threat and type of contract
Assent induced by improper threat leaving victim no reasonable alternative
RTK 175 (1)

Voidable contract
no choice, then problems
Avoidance: Duress type: Threat and Third person
when duress from third person to the contract, contract remains VOIDABLE by victim UNLESS other party acted in either
a) value
b) relied materially on the contract

175 (2)
heard that before
Avoidance: Undue influence and type of contract
VOIDABLE Contract
177
Definition:
a) unfair persuasion (by other party) OR
b) undue susceptibility of victim (of victim)
older woman and dancing club
two definition. one for the tricker and for the tricked
Avoidance: Undue influence and third person
when duress from third person to the contract, contract remains VOIDABLE by victim UNLESS other party acted in either
a) value
b) relied materially on the contract
heard that before
Odorizzi Seven Factor Test of Overpersuasion
Balancing test: do not need to be all there
a) discussion of transaction at unusual or inappropriate time
b) consumnation of transaction in unusual place
c) insistent demand for contract to be finished immediately
d) extreme emphasis on untoward consequence of delay
e) use of multiple persuadors
f) absence of third party advisors to victim
g) statements that there is no time to consult an attorney
elements of overbugging, homosexual teacher case
unfair persuasion
Majority: conduct by person in confidential relationship, but this is NOT required
NOTE: NOT required when involving unfair advantage of a weakness or distress
trusted person being overly forceful
undue susceptibility
weakness of mind which render the person incapable of fully understanding or comprehending their circumstance
NOTE: Need NOT be a mental illiness/defect, and thus can be short term or circumstantial
insane in the member, ain't got no brain for a moment or two :-)
Avoidance type: Misrepresentation (execution fraud) and type of contract
Void contract
1) With misrepresentation by the other party, the defrauded party assumes a different contract than represented
Ex. Parkes Case
163
Parkes case
Misrepresentation (execution) void vs. voidable
No power of ratification available to defeat misrepresentation party's claim of affirmance.
NOTE: If performance with knowledge of the new contract -> may constitute a new contract
if tricked into it, how is it valid?
Avoidance type: Misrepresentation (fraud in inducement) and type of contract
Voidable contract
fraud= nature of the goods/services NOT the nature of what is signed
164
Fraud in inducement and assent induced by
1) fraudulent misrepresentation or
2) Negligent material misrepresentation
AND
Victim justified in relying on misrepresentation
Elements of the trick (victim and seller)
Fraud in inducement and third person
when duress from third person to the contract, contract remains VOIDABLE by victim UNLESS other party acted in either
a) value
b) relied materially on the contract
say it again
Fraudulent behavior/misrepresentation definition
1) maker intends assertion to induce assent of victim AND
2) Maker has requisite knowledge of falsehood
requisite knowledge of falsehood impact
1) knows/believe assertion is false
2) lacks confidence in truth (=reckless/negligent assertion) OR
3)know he does not have the basis to make the assertion
salesman's sweetening the pot
Negligent material misrepresentation
Material if
1) Like to induce a reasonable person to assent OR
2) Maker knew it would likely induce assent
gotta know the impact
Damages v. Avoidance
damage: higher bar, requires proof of scienter/knowledge of falsity by maker of statement
Avoidance: does NOT always requires scienter and thus broader in scope to include innocent material misrepresentation or lacks confidence in truth (unintentional)
Remedies summaries on Damages v. Avoidances
1) may assert rescission in cases not available for damages
2) election of remedies rule applies but may plead in alternative but may not recover in both action (duplicate)
IE. Can't do both!
Assertion of opinions vs facts
169
Opinion: not actionable, tolerance for puffing
opinion defined
168
1)Expression of a belief without certainty as to the existence of a fact OR
2)Expression of only a judgment as to quality or value of property
168
When Opinion IS actionable
168(2)
1) Maker does NOT know any facts that would make the opinion false AND
2)Does know facts to be able to render the opinion
know how to find out that the opinion expressed false by knowing where the fact is
When Opinion IS actionable (part II)
169
1) relationship of trust and confidence with victim
2) is an expert
3) Victim is particularly susceptible to misrepresentation (age)
fiduciary trust/professional
Nondisclosure as Assertion
161
General rule: mere nondisclosure of a fact does not constitute an assert of that fact
Exception to Nondisclosure as Assertion
1)maker KNOW disclosure NECCESSARY to CORRECT previous assertion of a fact (Duty to correct)
2)a) Most common: Maker knows disclosure neccessary to correct a mistake of the other party as to a basic assumption of the contract AND
b)Failure to disclose = a failure to act in good faith

3) Maker know disclosure is neccessary to correct a mistake of other party regarding the contents of a writing
4) other party has the right to disclosure because of a relationship of trust and confidence with maker (lawyer/client)
Trust and confidence
A person's reliance of other party's advice and counsel because of other party's "closeness" relationship (family, close friendship developed over time
Fiduciary Relationship
Act on behalf of another
Agency
Require that a Person (agent)
a) act on behalf of another AND
b) subject to that person's control
Avoidance- behavior: Disclosure rule
Creates obligation to disclose where disclosure would correct a mistake of the buyer as to a basic assumption provided the failure amounts to failure to act in good faith

Any facts materially affecting the value of property not known or within reasonable reach of a diligent buyer
Failed to disclose termite problem
Avoidance- Unfair bargain: Unconscionable
At time contract is made, may be held unconscionable
Elements of Unconscionability
1) Procedural: Lack of meaningful choice (adhesion contract) OR Defect in bargaining system (quasi fraud, duress, undue influence)

2) Substantive: Objectively unfair terms (shocks conscience of ordinary person)

BOTH NEEDED
Procedural unconscionability
1) Absence of a meaningful choice to one party AND
unequal bargaining power, manner in which contract entered into, education/sophistication of party, reasonable opportunity to understand transaction, important term in maze of fine print
Promise is unenforceable if
1) legislation provides it is unenforceable
2) Balancing test in favor of public policy against enforcement over interest in enforcement
Non-Ancillary restraints
Not Enforcable
Reason: Ancillary requirement assures that a covenant will serve a valid purpose other than simple restraint
187
Ancillary restraints
May also be not enforceable if
a) restraint > neccessary to protect the promisee's legitimate interest or
b) Promisee's need is outweighed by the hardship to the promisor
188
Custody and unenforceable promise
Promise impacting rights of custody of a minor child is UNENFORCEABLE
Reason: public interest
Exception: disposition as to the custody is consistent with the best interests of child
191
mistake definition
error of fact about something/event that actually occured or existed and can be ascertained by objective evidence
mutual mistake and what type of contract is that?
Elements
1) At time of contracting, party must have shared an erroneous belief concerning a fact
2) erroneous fact was a basic assumption on which contract is made
3) mistake must have a material effect on the agree exchange of performances
4) adversely affected party must not have borne the risk of the mistake
Type: voidable
154
Messerly case: as clause, ap't building complex
Exception to mutual mistake
the party bears the risk of the risk
example: as is clause
unilateral mistake
Same as mutual mistake elements with 1 addition
A) Equities must favor relief for the mistake
1) Mistake of fact by one party when the contract was made as to a basic assumption of the contract AND EITHER
a) mistake such that enforcement = unconscionable (only substantive)
b) other party had reason to know of the mistake (fault)
NOTE: mistaken party must make a stronger case for relief by demonstrating the unfairness of enforcement > need to protect the reasonable reliance of the other party
unilateral mistake and justice limitation
unconscionable=catastrophic economic results to the economic party
Negated by reliance of the other party without knowledge of the mistake
need to reasonable compensate non-mistaken party's reliance
Risk of mistake
Adversely impacted party would not obtain relief if following elements of risk are met
1) agreement allocates the risk of mistake to that party
2) mistaken party is aware of limited knowledge but fails to learn more
3) reasonable to allocate risk under such circumstances
Defeat Risk
No reason to know
Mistake v. Change compared
Mistake doctrine: facts existing at the time of contract was made
Frustration/impracticability: events that occur after the contract is formed and compares those developments to the basic assumption about such future events
Common law trend and nonperformance on the basis of events after the making of the K
much less disposed to grant excuse for non-performance. Events were naturally regarded as natural risk associated with making of the contract
Equitable justification for nonperformance by a supervising event must be serious and beyond clear anticipation of the parities for all contract present a risk
supervening impracticability
261
duty to perform is discharged when made impracticable without fault by a subsequent event whose non-occurrence was a basic assumption of the contract
supervening frustration
duty to perform is discharged when that party's principal purpose for entering the contract is substantially frustrated without fault by a subsequent event whose non-occurrence was a basic assumption of the contract
Impracticability v. Frustration
Impracticality= impossibility or extremely high cost of performance to the obligor -> no unjust enrichment
Frustration=loss of the value of the other party's performance
NOTE: Not inclusive to make a profit
changed circumstances
seller's obligation to sell good = discharged if supervening event makes the sale impracticable
NOTE: Include both impracticability and frustration

2-615
Force Majeure clause
specific clause which excuses a party's performance where a supervening event beyond the control of obligor to prevent performance
ex. acts of God, war
Discharge v. Reformation
Release of obligor's duty results in allocation of risk for non-performance entirely to the obligee
Reformance: attempt to balance risk, conforming the contract to the parties actual intent
mutually agreed rescission
not a modification, but a mutually voluntary ending of the contract itself
Modification not enforceable primary defenses
Lack of consideration - pre-existing legal duty rule
lack of reliance - no promissory estoppel
economic duress: argue that the modified contract should be rescinded and the original agreement enforced
Pre-existing legal duty rule
performance of a legal duty under a valid contract is not consideration for another promise based on that duty
R2K 73
Exception of Pre-Existing Legal duty
Modification promise will be enforceable within a valid contract where
1) the promise is fair and equitable in view of circumstances not anticipated by the parties when the contract was made
2) extent provided by statute or
3) extent that justice requires enforcement in view of material change in reliance of the promise
Pre existing legal duty rule and goods
Does NOT apply to a contract involving the sale goods
Such a promise does NOT lack consideration
UCC - 209
Modification + SOF + Goods
If original K required to be in writing in order to be enforceable, modification also needs to be in writing
2-209 (3)
NOM clause
No Oral modification. Even if SOF does not require written contact, contract itself may be in writing and specifically require any amendment be in writing to be in writing with a NOM clause
NOM enforcement and UCC
NOM clause - enforceable, written contract cannot be modified/rescinded except in writing, unless waived
NOM enforcement and Common Law
1)SOF does not prevent enforcement of an oral modification if reentering of the original terms would be unjust in view of the detrimental reliance of other party
2)even when SOF does not apply and NOM exists, will not be enforced when here has been adequate reliance on the oral promise to trigger PE.
NOW
No oral waiver= attempt to negate waiver of any provision of the contract by future behavior unless in writing
NOW purpose: increase level of conduct necessary to constitute waiver in the first instance
declaratory judgement and breach
procedure that the parties to argue the case before a breach occurs which would cause additional damages
assignment
transfer of a contractual rights
sometime used more loosely to include rights and duties under a contract
delegation
transfer of contractual duties
NOTE: Not based on any concept of ownership, cannot own a duty
assignor
the party who assigns rights under a contract
assignee
recipient of ownership of the passing of those rights
incidental beneficiaries
anticipated benefits are purely fortuitous and incidental result of a transaction between others
third party beneficiary
contract entered into for the deliberate purpose of bestowing a benefit AND power to enforce that benefit on a third party (304)
3rd party beneficiary and promise/promisee relationship
promisor: contracting party who is to render the performance to the beneficiary

promisee: contracting party whose right to performance has been transferred
promisor and duty delegation
duty of performance of the promise
promisor and right assignment
right to return performance received in exchange for the promise
Effect of third party beneficiary
R2K 303
contractual promise creates a duty of performance by the promisor to any "intended" third party beneficiary who may then enforce that duty
Intended beneficiary key points
1) such status mirrors the intention of the parties AND EITHER
2) performance with satisfy an obligation of the promisee to pay money to the beneficiary (creditor beneficiary) OR
3) circumstances indicate the promisee INTENDS to give the beneficiary benefits of the performance (donee beneficiary)
Intention to benefit test
1) intention of the parties (promisor/promisee)
2) intent of the promisee
beneficiary need
Does not NEED to be identified in the contract to become an intended third party but it is helpful
R2k 309
Overlapping duty and third party beneficiary
Promise creates a duty of performance to both the promisee and third party.
NOTE: performance to EITHER fully discharges duty to both.
THEREFORE, no double recovery regardless of who sues
promisor defenses against third party beneficiary
1) Promise creates no duty unless a contract is formed between the promisor and promisee
2) promisor who makes contract voidable or unenforceable at time of formation of contract, any beneficiary is subject to same infirmity
3) promisor's duty to perform to a beneficiary may be discharged OR modified (subject to vesting) in the same manner as to the promisee
4) beneficiary's right against the promise is also subject to any defenses based upon the conduct of the beneficiary
Vesting and Third party beneficiary
benefits becomes irrevocably settled for the third party beneficiary
Vests when?
1) when beneficiary manifests assent to the benefit at the request of one of the parties OR
2) sues on the benefit
3) materially changes position in justifiable reliance of original agreement
changes prior to assent, sue, justifiable reliance
contractual amendments are valid and enforceable against the beneficiary
surety
if promisor fails to perform, promisee remains liable for the outstanding amount to the beneficiary.
promisee may then sue the promisor
government contracts and liability
promisor contracting with gov't to do an act or render a service to public is NOT liable for consequential damage for any breach of any promise to a member of the public unless
1) terms of contract provide such liability (very rare) OR
2) promisee is liable to the public for damages AND direction against the promisor is consistent w/ contract terms and gov't policy
assignor (Non 3B)
person who assigned a contractual right = obligee
assignee
person who the contractual right is assigned to
obligor
whose duty is transferred to the assignee by the assignment
delegate
person who assumes the duty
obligor (transfer of duty)
person who delegates one's contractual duty to become the DELEGATOR of the duty
when can transfer of contractual rights and obligation occur?
may only arise subsequent to the formation of the contract
assignment
1) assignor must voluntarily manifest intent to assign the right
2) right must be in existence at the time of assignment and transfer must occur immediately

Example: selling of a mortgage from one lender to another
Result of assignment transfer
1) assignor retain no control over it
2) no power to revoke

NOTE: Right comes into existence upon creation of contract. Right may be conditional or not not yet due at the time of assignment
upon assignment, what is needed for the assignee?
obligor must receive notification of the new the assignor to whom the performance is now due
Delegation limit
obligor is entitled to delegate contractual duties unless delegation violate the contact or public policy
Delegation =sub-contract
limits of delegation
unless obligee has a substantial interest in having the obligor perform/control duty such as special, unique skill relevant to performance

Does not result in a complete substitution of the delegate for the delegator, cannot unilaterally be relieved of responsibility to the obligee
Condition
an uncertain event, that must occur BEFORE performance of a legal duty to perform a promise under a contract becomes due
conditional performance
when the parties agree that a particular performance under the contract (or entire contract) is to be contingent on the happening of a future event
express condition
specifically articulated in the agreement
implied-in-fact condition
inferable from interpreting the agreement in context
construed condition
deemed as a matter of legal implication to be what the parties must have reasonable have intended

Implied in every contract as a justice rule - fairness
all promises subject to what?
to either an express or constructive condition of substantial performance
simultaneous
both performance can be rendered simultaneously
Tender
Ready, willing, able to perform
non performance and no tender
if due simultaneously and no one tenders, NO breach
R2K and breach stage
designed to encourage the parties to continue with performance and correct defects. Therefore R2K discourages and limit the right of the non-breaching party to use less than perfect performance as a reason to terminate the contract
partial breach
substantial performance with not perfect performance, non-breaching party's duty is NOT discharged and it must perform
NOTE: Entitle to damage for partial damages

UCC-717 grants the right to deduct any damages from payment. R2K silent
material breach
performance= materially defective
Option for non-breaching party
1) Non breaching party may suspend performance until breaching party either
a) cures the breach
b) unwilling/unable to cure (total breach)
NOTE: choice up to non-breaching party to suspend. May continue to perform an sue for partial performance
disproptionate loss
total breach
1) Performance is materially defective AND
2) breaching party has not or cannot cure

Result: Non-breaching party may terminate performance and sue for damages
Effect of substantial performance
satisfied constructive condition on the other party's duty
Now must perform perfect performance.
Anything less, open to damages
Effect of material breach
when substantial performance does not exist, performance has either not begun or otherwise seriously deficient.
Other party's performance=suspended to give time to upgrade effort to at least substantial performance to commit other party to complete performance.
Can still seek damages for non-perfect performance
Effect of total breach
when substantial performance is not made perfect by the cure opportunity, the other party's duty to perform = suspended
material breach v. total breach
material breach temporarily suspends injured party's duty to perform until offending party has an opportunity to cure the effort to level of substantial effort.
If after effort failed, becomes total breach
material breach and impact on parties
Injured party: loss of reasonably expected benefit and extent to be reasonably compensation for such a deprivation

Offending party: extent will suffer forfeiture, likelihood to cure through substantial performance through reasonable assurance, extent to which behavior comports with good faith and fair dealing
anticipatory repudiation
breach in advance of performance through clear words or action that there will be a breach when performance is due
Response to a repudiation
Two choices
1) accept repudiation, refusal to perform one's own duty, terminate contract and sue for total breach
2) Delay responding to the repudiation to see if the repudiating party repent
May offer time to recant after which repudiation will formally occur.
Elements of repudiation
1) Prospective action or inaction indicated by the promisor must be serious enough to qualify as a material and total breach of the contract
2) Promisor's statement/conduct must CLEARLY indicate the reasonable promisee that the promisor intends to breach materially when time of performance arrives
3) Promisor's statement/conduct in repudiating must be voluntary. Must be deliberate and purposeful
Prospective non-performance and assurance of performance
if promisee has reasonable ground of insecurity of other person's performance, may ask for a written demand for an adequate assurance.
May suspend performance until receipt of assurance
Mitigation: Effect
injured party through words/action make a promise to not insist on compliance of breach to discharge its duty to perform
Depends on:
1) injured party making a promise
2) if made, whether retracted prior to reliance or other consideration
Waiver of Technical or immaterial conditions
Promise to perform not withstanding non-occurrence of an immaterial condition is enforceable whether waiver was made prior or after expected period
Exception of Waiver of Technical or immaterial conditions
1) if occurrence of condition was a material part of the contract
2) uncertainty of condition to occur was a risk assumed by promisor
Waiver of material conditions
if waiver was made before time for condition to occur AND
material condition is within control of promisee
promise to waive may be retracted if made before time due provided time for performance-=adequate and not unjust given a change in position by promisee
estoppel
if the advantaged party let the other party know that the condition need not be satisfied, and other party RELIES on this representation, the advantaged party cannot then insist upon satisfaction of the condition
express condition
language of the contract, on its face
effect of express condition
same effect as satisfaction. Condition disappears and the obligor's promise becomes unconditional
excused and express condition
condition will be excused when its effect would cause disproportionate forfeiture to the party failing to perform
Exception and excuse and express condition
if the forfeiture was material to the contract
general rule and satisfaction of performance in commercial setting
objective standard: whether the owner as a "reasonable" person should be satisfied
Subjective standard: whether the owner was personally satisfied
Objective v. subjective standard
Unless otherwise clearly stated, use objective test
Reason: most parties would not will not subject their work to a possibly unreasonable but good faith personal dissatisfaction
For aesthetic: use objective test unless written specifically to use subjective test
Monetary damages: expectation interest
benefits of bargain: put injured party in as good a position (no better, no worse) as would have been had the contract been performed as promised
if performed
monetary damages: reliance interest
reimbursement for loss: To put injured party in as good a position as was before the promise was made
before promise
monetary damages:restitution
restore value: prevent unjust enrichment of breaching party as a result of injured party reliance on promise
cheaper to repudiate than to move forward
Reversible error
risk of overcompensation (breaching party appeal)

undercompensation (injured party appeal)
breaching and injured party appeal
judicial remedies
monetary award (damages)
specific performance & injunction
res restoration or monetary award (unjust enrichment)
enforcement of arbitration award
5 available damages
Rule of monetary damage
injured party has a right to monetary damages for any breach by a party with whom the contract is enforceable.
NOTE: not enforceable if claim for damages has been suspended or discharged (SOF)
enforceable doctrine
Nominal damage
a small sum fixed without regard to the amount of loss will be awarded as nominal damages when
1) breached caused NO loss OR
2) amount of loss is not adequately proved (forseeable and certainty)

NOTE: award of nominal damage is NOT reviewable unless significant right is involved
Damage calculation depend on
whether the injured party performs and seeks damages for partial breach
OR
Seek damages for total breach
partial breach
no contract termination, no choice (substantial performance)

choice (no substantial performance, material breach
Partial breach
No contract termination
no choice (substantial performance)
breaching party substantially performs

choice (no substantial performance, material breach)
breaching party commits a material breach by failing to substantially perform and injured party chooses to continue to perform either because
a) did not suspend OR
b) suspended and no cure but does not terminate (for total breach)
two choice (choice or no choice)
Total breach
Contract termination
injured party terminates contract because of an uncured material breach and seeks damage for total breach
partial v. total damage
partial: Injured party is continuing its own performance. Result: difficulty in predicting estimation of costs avoided or losses does not exist. Performance occurred not withstanding breach

Total damage: estimation of costs and losses saved from not having to perform must be estimated to reduce damages in order to prevent overestimating the injured party
avoid overestimation
Expectation Measure: General Rule- Total Breach
Loss in Value/Diminution of value
+ Other losses - Costs avoided (by not performing) - other losses (consequential & incidental) - losses avoided (by not performing)
Loss in value/diminution of value (LIV/DIV) (general)
(value of promised good - value of actual performance (promised goods, property, service, buyer=injured party, use to calculate defective performance)
Other losses (Consequential & Incidental) (specific)
Incidental (UCC): reasonable additional costs incurred to avoid loss even if unsuccessful.

Consequential (R2K)- injury to person/property caused by the defective goods, property, or services
Costs avoided
By not performing: Cost savings as a result of terminating contract

NOTE: only in total breach
Losses avoided
By not performing- salvage value of goods or use value of leftover items or service (re-employment)

NOTE: only in total breach
Expectation measure- Exception
Construction cases (substantial performances) that are either incomplete or defective.
Value looked at: Cost to complete or Cost to Repair (CTC) (CTR)
NOTE: potential impact of overcompensation to injured party who may sell defective product for profit and not keep product
Alternative to LIV/DIV
CTC may NOT be recovered if it is clearly disproportionate to LIV (economic waste through undoing or destruction)