347. Measure Of Damages In General

 

Subject to the limitations stated in 350-53, the injured party has a right to damages based on his expectation interest as measured by

(a) the loss in the value to him of the other party's performance caused by its failure or deficiency, plus

(b) any other loss, including incidental or consequential loss, caused by the breach, less

(c) any cost or other loss that he has avoided by not having to perform.


Comment:

a. Expectation interest. Contract damages are ordinarily based on the injured party's expectation interest and are intended to give him the benefit of his bargain by awarding him a sum of money that will, to the extent possible, put him in as good a position as he would have been in had the contract been performed. See 344(1)(a). In some situations the sum awarded will do this adequately as, for example, where the injured party has simply had to pay an additional amount to arrange a substitute transaction and can be adequately compensated by damages based on that amount. In other situations the sum awarded cannot adequately compensate the injured party for his disappointed expectation as, for example, where a delay in performance has caused him to miss an invaluable opportunity. The measure of damages stated in this Section is subject to the agreement of the parties, as where they provide for liquidated damages ( 356) or exclude liability for consequential damages.

b. Loss in value. The first element that must be estimated in attempting to fix a sum that will fairly represent the expectation interest is the loss in the value to the injured party of the other party's performance that is caused by the failure of, or deficiency in, that performance. If no performance is rendered, the loss in value caused by the breach is equal to the value that the performance would have had to the injured party. See Illustrations 1 and 2. If defective or partial performance is rendered, the loss in value caused by the breach is equal to the difference between the value that the performance would have had if there had been no breach and the value of such performance as was actually rendered. In principle, this requires a determination of the values of those performances to the injured party himself and not their values to some hypothetical reasonable person or on some market. See Restatement, Second, Torts 911. They therefore depend on his own particular circumstances or those of his enterprise, unless consideration of these circumstances is precluded by the limitation of foreseeability ( 351). Where the injured party's expected advantage consists largely or exclusively of the realization of profit, it may be possible to express this loss in value in terms of money with some assurance. In other situations, however, this is not possible and compensation for lost value may be precluded by the limitation of certainty. See 352. In order to facilitate the estimation of loss with sufficient certainty to award damages, the injured party is sometimes given a choice between alternative bases of calculating his loss in value. The most important of these are stated in 348. See also 349 and 373.