In calculating expectation damages, which terms are combined before accounting for avoidance costs?

• A. A measure of punitive damages.
• B. In calculation of expectation damages, loss in value and other loss are combined before subtracting cost avoided and loss avoided.
• C. Direct damages are the only recoverable damages.
• D. Cost avoided and loss avoided are added to the award.

Answer: (B)

When calculating expectation damages, you first quantify the total harm from the breach by adding the loss in value to other losses. Then you offset that amount by the savings the non-breaching party enjoys from the breach—cost avoided and loss avoided. This sequencing—combine loss in value and other losses, then subtract avoidance costs—yields the net expectation damages.

Punitive damages aren’t part of standard expectation damages in contract law, which is why that option isn’t correct. Direct damages alone don’t capture all recoverable losses, since other losses may be foreseeable and recoverable. And avoidance costs aren’t added to the award; they reduce it.