Expectation Damages
What does "Expectation Damages" mean in law?
Expectation damages, the default remedy for breach of contract, aim to put the non-breaching party in the position they would have been in had the contract been fully performed. The standard formula is the value of the promised performance minus the cost saved by not having to perform, plus any incidental and consequential damages. This measure protects the party's expectation interest, or their anticipated benefit of the bargain. Hawkins v. McGee is the canonical case, where the court held that the plaintiff was entitled to the difference between the value of a perfect hand (as promised) and the value of the hand post-surgery, rather than merely a refund of what was paid.
Definition
Expectation damages, the default remedy for breach of contract, aim to put the non-breaching party in the position they would have been in had the contract been fully performed. The standard formula is the value of the promised performance minus the cost saved by not having to perform, plus any incidental and consequential damages. This measure protects the party's expectation interest, or their anticipated benefit of the bargain. Hawkins v. McGee is the canonical case, where the court held that the plaintiff was entitled to the difference between the value of a perfect hand (as promised) and the value of the hand post-surgery, rather than merely a refund of what was paid.
Example
When a seller breached a contract to sell goods at $50 per unit, the buyer recovered expectation damages equal to the difference between the $70 market price and the $50 contract price for each unit not delivered.