Quick Damages Question Forum

[rsox5000]

Suppose A, the "seller," and B, the "buyer," enter into a contract. B needs software and hands A, the software company, the specifications for said software—the contract price is $80,000. After B has paid A $60,000, A informs B that it is not capable of finishing the software so B goes out and finds another software company that can complete the work for a cost of $65,000. Without looking at any sort of defense on A's behalf (impracticability, etc.) just imagine that the court found that A breached the contract and we're now at the damages phase. What would B's damages be here (suppose that it was not an intentional breach)?
A question like this one was on a previous exam a few of us just looked at, and the student's response just does not seem correct to any of us. I'm just curious as to what other people think the damages should be here. Thank you.

[rsox5000]

Wouldn't the expectancy measure of damages by $45,000? B expected to pay $80,000 had the contract not been breached but, due to the breach, it will not have to pay $125,000 (65,000 to the new company and the 60,000 it already paid to A). As long as the $65,000 price was a reasonable mitigation on B's behalf (it does seem very high, but that was the price in the problem), isn't A liable to be B for the $45,000?

[SomewhatLearnedHand]

B is expecting to pay $80K and ends up paying $125K. Damages could be the difference between -> $45K. A might argue that they were expecting $80K worth of work and got $60K already, so damages should only be $20k, but that argument sucks. Court probably settles on the $45K. Note that your answer should discuss these competing counterarguments, as thats where the points lie.

[rsox5000]

Yeah, 45k was what I came up with but the "best answer" didn't have that. This was the last part of the exam—his exams are incredibly difficult to finish in time—so I imagine the student was just trying to write something down and get points. The exam was phenomenal everywhere else, however, which is why I wanted to confirm that I'm not missing something here.

[SomewhatLearnedHand]

Yeah, 45k was what I came up with but the "best answer" didn't have that. This was the last part of the exam—his exams are incredibly difficult to finish in time—so I imagine the student was just trying to write something down and get points. The exam was phenomenal everywhere else, however, which is why I wanted to confirm that I'm not missing something here.

Out of curiosity, how'd the model calculate?

[rsox5000]

It was your counterargument basically—they came up with 20k. I would have mentioned that argument—it does seem unfair to A that B's mitigation involved costs almost as expensive as the original contract—but, as long as B's mitigation was reasonable, 45k seems to be the correct answer.

[SomewhatLearnedHand]

It was your counterargument basically—they came up with 20k. I would have mentioned that argument—it does seem unfair to A that B's mitigation involved costs almost as expensive as the original contract—but, as long as B's mitigation was reasonable, 45k seems to be the correct answer.

I think you're right about the $45k. However, for your exam, dispel all concerns for fairness and the notion there is necessarily a "correct answer." Everything should be argued from both sides for maximum points.

(edit: idk why both sides is all caps- i didn't do that and edit isn't working?)