General rule for emotional distress damages in contract law

In Erlich v. Menezes the main question that arise is whether or not a plaintiff is allowed to recover damages for a breach of contract.

Facts:

Barry and Sandra Erlich contracted with John Menezes, a licensed general contractor, to build a "dream home" on their ocean-view lot. The Erlichs moved into their house in December 1990 but in February 1991 the rains came and the house leaked from everywhere.

Both Erlichs testified that they suffered emotional distress as a result of the defective condition of the house.

Issue:

Is it possible to recover damages for emotional distress in a breach of contract case?

Decision:

The jury first decide that Menezes breached his contract with the Erlichs by negligently constructing their home and awarded to the Erlichs $406,700 as the cost of repair; adding to that, each spouse was awarded $50,000 for emotional distress. Plus a $50,000 for Barry Erlich for the physical pain and suffreing and $15,000 for lost earnings.

But, the Court of Appeal affirmed the judgement, including the emotional distress award. Even if an action in tort was possible, in the case of a pure contract breach, the Erlich were not entitled to recover damages for their emotional distress.

Discussion:

It's important to distinguish between tort and contract law. For contracts, the purpose of a damage award is to restore the parties to their position before the breach occurred. In a tort claim, damages are usually awarded to compensate the victim for their loss.

As a general rule, in a case of breach of contract, the plaintiff is allowed to obtain "general damages" which are those that flow typically as a consequence of the breach. The injured party should receive those damages naturally arising from the breach, or those damages which might have been reasonably contemplated or foreseen by both parties at the time they made the contract, and as the probable result of the breach. A plaintiff in a breach of contract action is entitled to the benefits he or she would have obtained if both parties had fully performed, but no more.

In contract law, it might be possible to recover so called "special damages" which are those that result as a direct consequence of the breach but are peculiar or unique to the injured party's particular situation or circumstances. But it's only possible when the defendant knew or should have known of the special circumstances at the time when the defendant entered into the contract, and these type of damages must be reasonable.

As a general rule, damages will not be awarded to compensate for the mental distress or emotional trauma that may be caused by a breach of contract.

There are a few exceptions, where California courts have recognized the existence of extraordinary contracts "which so affect the vital concerns of the individual that severe mental distress is a foreseeable result of breach" (Allen v. Jones - 1980).

These type of contracts are "related to matters which concern directly the comfort, hapiness, or personal welfare of one of the parties, or the subject matter of which is such as directly to affect or move the affections, self-esteem, or tender feelings of that party..." (Wynn v. Monterey Club).

Example where such damages were allowed: Saari v. Jongordon Corp (1992)https://casetext.com/case/saari-v-jongordon-corp (case of mortuary and crematorium contract).

In conclusion, damages for emotional distress are rarely awarded in american contract law cases.

As a matter of comparison, damages for emotional distress in French contract law can be granted, and it's up to the judge to decide of its relevance but they're not easy to calculate.