California First-Year Law Students' Exam (Baby Bar) — MCContractsMedium
A homeowner contracts with a roofing company to replace their entire roof for $15,000. The contract specifies that the homeowner must pay a deposit of $5,000 upon signing, with the remaining $10,000 due upon completion. The homeowner pays the deposit. Before any work begins, the roofing company informs the homeowner that they will not be able to perform the job due to staffing shortages. The homeowner then hires another company for $17,000. What is the homeowner's likely remedy, assuming no other damages?
- AExpectation damages of $2,000.
- BReliance damages for any costs incurred in finding the new company.
- CRestitution of the $5,000 deposit only.
- DSpecific performance, forcing the original company to do the work.
Show answer & explanationAnswer & explanation
Correct answer: A. Expectation damages of $2,000.
The homeowner's expectation damages are calculated to put them in the position they would have been in had the contract been performed. This means the additional cost incurred to get the roof done by another company, minus any savings. Here, the homeowner had to pay $17,000 instead of the original $15,000, so the damages are $2,000.
Why the other options are wrong
- B. Reliance damages cover out-of-pocket expenses, but expectation damages are generally preferred if they can be calculated with reasonable certainty, as they are here.
- C. Restitution only returns the deposit; it doesn't compensate for the breach of the original contract.
- D. Specific performance is not typically available for service contracts like roofing, where monetary damages are adequate.
Expectation Damages
The most common form of damages for breach of contract, awarded to put the non-breaching party in the position they would have been in had the contract been fully performed.
- Calculated to cover the benefit of the bargain.
- Often measured as the difference between the contract price and the cost of cover/market price.
- Must be foreseeable, ascertainable with reasonable certainty, and unavoidable.
Memory trick: To make them whole, the money goal, is to give them back their soul.