Chapter 18: Contracts — Breach of Contract and Remedies

1. Chapter 18:Contracts — Breach of Contract and Remedies

2. Introduction • Damages. • Rescission and Restitution. • Specific Performance. • Reformation. • Recovery Based on Quasi Contract.

3. §1: Damages Types of Damages: • Consequential Damages. • Breaching party is aware or should be aware, cause the injury party additional loss. • Case 18.1: Hadley v. Baxendale (1854). • Punitive Damages. • Available when tort is also involved. • Nominal Damages. • No financial loss.

4. §2: Mitigation of Damages • When breach of contract occurs, the innocent injured party is held to a duty to reduce the damages that he or she suffered. • Duty owed depends on the nature of the contract. • Case 18.2: Parker v. Twentieth Century Fox Film Corp (1970).

5. Liquidated Damages Versus Penalties • Liquidated Damages. • A contract provides a specific amount to be paid as damages in the event of future default or breach of contract. • Penalties. • Specify a certain amount to be paid in the event of a default or breach of contract and are designed to penalize the breaching party.

6. §2: Rescission and Restitution • Rescission. • A remedy whereby a contract is canceled and the parties are restored to the original positions that they occupied prior to the transactions. • Restitution. • Both parties must return goods, property, or money previously conveyed. • Note: Rescission does not always call for restitution. Restitution called for in some cases not involving rescission.

7. §3: Specific Performance • Equitable remedy calling for the performance of the act promised in the contract. • Remedy in cases where the consideration is: • Unique; • Scarce; or • Not available remedy in contracts for personal services.

8. §4: Reformation • Equitable remedy allowing a contract to be reformed, or rewritten to reflect the parties true intentions. • Available when an agreement is imperfectly expressed in writing.

9. §5: Recovery Based on Quasi Contract • Equitable theory imposed by courts to obtain justice and prevent unjust enrichment. • Quantum meruit.Case 18.3: Maglica v. Maglica (1998). Party seeking recovery must show the following: • A benefit was conferred to the other party. • Party conferring did so with the reasonable expectation of being paid. • The benefit was not volunteered. • Retaining benefit without paying for it would result in unjust enrichment of the party receiving the benefit.

10. §6: Election of Remedies • Doctrine created to prevent double recovery. • Nonbreaching party must choose which remedy to pursue. • UCC rejects election of remedies. • Cumulative in nature and include all the available remedies for breach of contract.

11. §7: Waiver of Breach • A pattern of conduct that waives a number of successive breaches will operate as a continued waiver. • Nonbreaching party can still recover damages, but contract is not terminated. • Nonbreaching party should give notice to the breaching party that full performance will be required in the future.

12. §8: Contract Provisions Limiting Remedies • Exculpatory clauses. • Provisions stating that no damages can be recovered. • Limitation of liability clauses. • Provisions that affect the availability of certain remedies.

13. The Ethics of Contracts • Freedom of Contract and Freedom from Contract. • Impossibility of Performance. • Unconscionability. • Exculpatory Clauses. • Problems with Oral Contracts. • Promissory Estoppel. • Statute of Frauds.

14. Law on the Web • Website describing how contracts can be breach. • Nolo.com on contracts. • Cornell U on contracts. Legal Research Exercises on the Web.