Business Law Civil Litigation Legal Topics

It’s All in the Recovery

Breach of contract actions are all about recovering money to put the aggrieved party in the same position that it would have been in had the other party fully performed. That’s the goal of filmmaker Michael Moore’s suit against the Weinstein brothers for breach of their Fahrenheit 9/11 contract. And, just a Moore’s attorneys will have to do, when you file a complaint alleging breach of contract, you need to carefully analyze and have proof of your client’s recoverable damages.  

Here are some tips for marshalling proof of recoverable damages:

  • Consider applicable law. Analyze recoverable damages in light of the laws applicable in your case and in breach of contract actions generally.
  • Determine actual damages. Although many cases deal with the measure of damages for breach of contract, there are no hard and fast rules because often the outcome depends on the particular factual situation. In addition, the measure of damages can differ significantly depending on the type of breach and the nature of the contract. Ask yourself: “What financial position would the innocent party be in if the breach had not occurred?” When you answer this question you may incidentally find that a breach of contract does not always result in recoverable damages because of changed market conditions or other circumstances.
  • Consider defendant’s ability to satisfy a judgment. Not only must you analyze the appropriate measure of damages, but you need to consider the defendant’s financial capability to satisfy a judgment.
  • Consider counterclaims and third party suits. Is there a strong possibility of counterclaims and/or third party actions against your client if a suit is filed? What would that mean for your recovery?
  • Take care in pleading damages. The burden of pleading and proving damages rests on the party claiming them. Take care in pleading all items of recovery sought. There are no clear rules as to what constitute items of general damages versus special damages in breach of contract cases; thus, the best practice is to spell out each item of recovery you are seeking. Be particularly careful when pleading the amounts for different types of damages in the event a default judgment is sought, because in such cases a plaintiff cannot recover more than what was demanded in the complaint. CCP §580(a). But note that service of a CCP §425.11 statement of damages can give a defendant the requisite notice of the amount of damages to be included in a default judgment if the defendant does not respond to the complaint. CCP §425.11(d)(1).
  • Prepare for proving damages at trial. Proof of contract damages can be enhanced by careful preparation and imaginative trial technique. It’s often helpful to use expert witnesses. For example, loss of market value is generally a matter of expert opinion, and appraisers may be essential to presenting persuasive proof. Likewise, accountants are often necessary to interpret and analyze accounting records that contain the best evidence of actual damages.

Keep in mind the provisions of Evid C §§1520-1523 in cases involving voluminous documentary evidence. For example, in cases involving extensive repair costs, collect items, such as timecards of laborers and invoices on materials, and prepare a summary of them in a presentable form for use at trial. At trial, have the originals of all documents used in making the summary. The summary itself, though, is admissible under Evid C §1521 and is often a graphic portrayal of the damages suffered.

For comprehensive analysis for contract damages issues, go to CEB’s California Attorney’s Guide to Damages, chap 1. Also, check out California Law of Contracts, chap 10.

© The Regents of the University of California, 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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