298: Spotlight on Contracts (Part 2)

Alison also runs The Girl's Guide to Law School. If you enjoy the show, please leave a review on your favorite listening app, and check out our sister podcast, the Law School Toolbox podcast. If you have any questions, don't hesitate to reach out to us. You can reach us via the contact form on BarExamToolbox.com, and we'd love to hear from you. And with that, let's get started. Welcome back, contracts enthusiasts. I'm Lee Burgess, and this is Part 2 of our substantive spotlight on contracts.

Last time we talked about how contracts are formed and performed. Today, we're diving into everyone's favorite part - what happens when things go wrong and who gets to complain about it? Grab your calculators, because we're about to talk damages. Let's start with the big question. When someone breaks a contract, what can you get? Think of contract remedies like a menu at a very expensive restaurant. You've got options, but they all come at a price.

First up, expectation damages - the filet mignon of contract remedies. This is the classic "Put me where I would have been if you'd kept your promise" remedy. Let's make this real. Say I promise to sell you my car for $10,000, but then I sold it to someone else for $12,000. Your expectation damages would be the difference between what you've had to pay for a similar car now - let's say $13,000, and our agreed price of $10,000.

So, you'd get $3,000 - exactly what you need to get what you bargained for. But what if this just isn't any car? What if you needed it for your delivery business? Enter consequential damages - the truffle fries of the damages world. These are those extra losses that happen because of the breach. Let's say you lost $500 in business while scrambling to find another vehicle.

Those lost profits might be recoverable, but - and this is a big "but" - only if I knew you needed the car for your business when we made the deal. Remember that old case about the mill shaft from your 1L year - Hadley v. Baxendale? Those mill owners couldn't recover their lost profits, because the carrier didn't know how crucial that mill shaft was. It's like ordering food without mentioning your allergies - the restaurant can't be responsible for what they couldn't foresee.

Now let's talk about incidental damages. Think of these as your Uber ride to another restaurant when your reservation falls through. These are the reasonable costs you rack up trying to deal with the breach. In our car example, maybe you had to rent a temporary vehicle while looking for a replacement. Those rental costs? Incidental damages. But wait, there's more! Sometimes you don't want to be put where you would have been; you just want your money back.

And that's where reliance damages come in. These are like getting a refund for the cooking class you signed up for, because the chef never showed up. You get back what you spent believing in those broken promises. And for those "Let's pretend this never happened moments", we have restitution damages. These prevent unjust enrichment, because no one should profit from their broken promises. It's like when your roommate eats your leftovers and you make them buy you a new meal.

They don't just owe you for the ingredients; they owe you for the value of what they got. Now, for all you commercial law fans out there, the UCC has its own special set of rules for buying and selling goods. It's like damages with a business degree.

You've got: cover damages - when you have to buy replacement goods at a higher price; market price damages - when you don't actually buy replacement goods, but could have; lost profits for volume sellers, because sometimes one sale just isn't enough. Here's a practical example: Let's say you're a retailer who ordered 100 designer handbags at $100 each for the holiday season. The supplier breaches and you have to buy similar bags for $120 each.

Your cover damages would be $2,000 - the $20 difference times 100 bags. But what if you also lost customers who wanted those specific bags? That's where consequential damages might come in - if the supplier knew you were buying for holiday retail sales. Now, here's where things get really interesting. Sometimes the person trying to enforce the contract wasn't even part of it originally. Welcome to the world of third-party rights.

It's like a contract party, where unexpected guests keep showing up. Let's break down our party guests. We have assignees - folks who got invited to the party after it started; delegatees - people who got handed someone else's party responsibilities; and third-party beneficiaries - the people who get party favors without actually attending.

That grandchild - they're a third-party beneficiary who could enforce the contract, even though they never signed anything. But remember they need to be an intended beneficiary, not just someone who accidentally benefits. It's like the difference between being invited to a wedding and catching the bouquet - only one gives you actual rights. Want to master all this law? Here's your "Listen and Learn" playlist.

Start with "Listen and Learn - Expectation and Consequential Damages" for the basics of recovery. Move on to "Listen and Learn - Incidental, Reliance, and Restitution Damages" for the full damages buffet. Check out "Listen and Learn - UCC Expectation Damages" if you're dealing with goods. And finish with our two-part series on "Listen and Learn - Third-Party Rights" to master assignments, delegations, and third-party beneficiaries.

And don't worry, we've linked to all these episodes in the show notes. When thinking about an exam and looking for facts to trigger law, keep some of these best practices in mind: 1. Always start with expectation damages - it's the default remedy. 2. Look for special circumstances that might lead to consequential damages. 3. Don't forget about mitigation - no sitting around watching the damages pile up! 4. With third-party rights, always check if the right and duty was transferable.

5. Remember that some rights are too personal to assign - like singing at someone's wedding. Here's the bottom line: Contract remedies are like a toolkit. The more you understand what each tool does, the better equipped you are to fix the problem. Any third party rights - they're like the fine print that everyone should read, but nobody does until it matters. Until next time, this is Lee Burgess signing off from substantive spotlight on contracts, where every broken promise has its price.

If you missed it, please check out Part 1 of substantive spotlight, where we focus on formation and performance. If you enjoyed this episode of the Bar Exam Toolbox podcast, please take a second to leave a review and rating on your favorite listening app. We'd really appreciate it. And be sure to subscribe so you don't miss anything. If you have any questions or comments, please don't hesitate to reach out to myself or Alison at lee@bar examtoolbox.com or alison@barexamtoolbox.com.

Or you can always contact us via our website contact form at BarExamToolbox.com. Thanks for listening, and we'll talk soon!