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For whatever reason, I'm royally confused by this expectation damages hypo, which can be found in several places online. First, does the answer look correct to you (it doesn't to me). Second, if it is correct, could someone please explain why? Thanks!

A contracts to build B a home for $100,000, payable as work progresses. A’s cost would be $60,000. A does half the work ($50,000 due) incurring $30,000 in expenses. B refuses to pay. A uses the unused lumber and materials, worth $10,000, on another job. A’s loss in value is $100,000 (what is due to him overall less what he has actually received). He has incurred no other loss. By stopping work midway, A avoids spending an additional $30,000. Therefore, A’s expectation damages award is $100,000 – 30,000 -10,000 = $60,000.

I could be reading this wrong, but at the time of the breach he is only owed $50,000 and his total cost to date is $30,000 so his damages would be $20,000 (Where he would be if the K had not been breached at the time the K was breach - Where he is now) and then you would subtract $10,000 (The total value of the materials that could have been recovered if he had chosen to sell them; mitigate the losses). So, I think the total amount of damages awarded to him would be $10,000.

Do you have the answer? I am curious

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LetsGoLAW wrote:I just did this case. Tomkins v. Dudley?

It's not Tompkins v. Dudley. Tompkins deals with a partially built barn that burns down (by no one's fault) and the builder refuses to rebuild it. The other party pays someone else a greater sum to do the building and sues the original builder.

swimmer11 wrote:I could be reading this wrong, but at the time of the breach he is only owed $50,000 and his total cost to date is $30,000 so his damages would be $20,000 (Where he would be if the K had not been breached at the time the K was breach - Where he is now) and then you would subtract $10,000 (The total value of the materials that could have been recovered if he had chosen to sell them; mitigate the losses). So, I think the total amount of damages awarded to him would be $10,000.

Do you have the answer? I am curious

Well, the only answer I have is the one that's in my original post (expectation award of $60,000). I think this supposed to be a simple hypo but, for some reason, it's tripping me up. I think I'm just not approaching it the right way.

Now I am confused

I could be completely wrong on this but I think:

Contract price - 100k
Costs - 60k
Profit - 40k

Under expectancy we want to give the non-breaching party what they would have gotten had the transaction gone through. Here, we want to give A their expected profit plus the costs incurred up until the breach minus any mitigation.

So here, A would have gotten a profit of 40k plus costs incurred up to the breach 30k minus any mitigation 10k.

40 + 30 - 10 = 60k damages owed to A.

Cricha11 wrote:I could be completely wrong on this but I think:

Contract price - 100k
Costs - 60k
Profit - 40k

Under expectancy we want to give the non-breaching party what they would have gotten had the transaction gone through. Here, we want to give A their expected profit plus the costs incurred up until the breach minus any mitigation.

So here, A would have gotten a profit of 40k plus costs incurred up to the breach 30k minus any mitigation 10k.

40 + 30 - 10 = 60k damages owed to A.

Yeah, I do now think this is correct.

i) §347. Measure of Damages in General
(1) Subject to the limitations stated in §§350-353, the injured party has a right to damages based on his expectation interest as measured by…
(a) The loss in the value to him or the other party’s performance caused by its failure or deficiency, plus…
(b) any other loss, including incidental or consequential loss, caused by the beach, less…
(c) any cost or other loss that he has avoided by not having to perform

100,000 total - expected costs avoided (30,000) = 70,000 - materials he used on another job, cant reimburse him for lumber bought, and allow him to save money on other job by using lumber (10,000) = 60,000

60,000 owed to contractor (30k of which will be profit + 10k in lumber = expected profits of 40,000 + 20,000 reimbursement for materials bought)

Thanks! Yeah, I was using the Restatement §347 formula. My problem was that I was thinking of "loss in value" as being the lost profit rather than the full contract amount.

Oh, that makes sense. I am an idiot and was including the 30K he incurred to date in the expectation measure. *Facepalm*.

K Price - Expenses Saved - Proper Mitigation = 60K.

This is what I have

If K Performed
100K Price
- 60K Cost of Performance
= 40K Profit


at Breach
- 30K Spent
+ 30K Saved not having to perform
+ 10 Mitigation
= 10 K ahead

40k - 10 = 30k

We don't really do loss of value, so why is my calculation incorrect?

The 30K already spent was pre-figured into the 40K profit. If you deduct it again, then you're double-deducting. So, all of the expenses incurred and saved come out to zero. Make sense?

musicfor18 wrote:The 30K already spent was pre-figured into the 40K profit. If you deduct it again, then you're double-deducting. So, all of the expenses incurred and saved come out to zero. Make sense?

Actually that does, I just worked through some hypos and your comment made me realize I was double counting shit. Thanks so much!