Chapter 1: Reckoning contract damages: valuation of the contract as an asset
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This chapter argues that when assessing direct damages for breach, the contract is an asset and the problem is one of valuation of the change in value of that asset at the time of the breach. This provides a framework that will help clear up some conceptual problems in damage assessment. some commentators argue that there is a conflict between UCC §2-706 (cover) and 2-708(1) (contract/market differential). The conflict is resolved if, instead of viewing the two as alternatives, we view cover as evidence of the value at the time of the breach. Long-term contracts present two different issues, the breach of a single installment and the anticipatory repudiation of a contract with many years yet to run. The value of the contract at the time of the repudiation would reflect both the expected future stream of income (lost profits) and the efforts of the nonbreacher to adapt if performance ceased (mitigation).