Contracts and Sales Multistate Bar Practice Exam

What is the measure of damages for breach of warranty?

1. Full price of goods paid

2. Difference between the value of accepted goods and warranted goods

3. Estimated loss of future profits

4. Cost of inspection and testing

The correct answer is: Difference between the value of accepted goods and warranted goods

The measure of damages for breach of warranty is determined by the difference between the value of the goods that were accepted and the value of the goods as warranted. This means that if the goods do not meet the specifications or quality that were promised, the injured party can recover the difference in value. This approach is grounded in the principle that the buyer should be compensated for the loss incurred due to reliance on the seller’s representations. For example, if a buyer purchases a product that was warranted to be of a certain quality but finds it to be of lesser value, the damages would reflect that discrepancy, ensuring that the buyer is made whole. In this context, recovering the full price of goods paid could be excessive if the buyer is still able to use the goods, albeit at a lower value than expected. Estimating the loss of future profits is generally not applicable in cases of breach of warranty, as this pertains more to consequential damages rather than the direct loss in value of the warranted goods. Lastly, costs associated with inspection and testing do not directly relate to the value of the breach itself and are typically considered as part of the buyer's general expenses rather than a direct measure of damages for the breach of warranty.