Chapter 17 Contracts: Breach of Contract and Remedies

1. Chapter 17 Contracts: Breach of Contract and Remedies

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

3. §1: Damages • Compensatory Damages—direct losses. • Sale of Goods: difference between contract and market price. • Sale of Land: specific performance. • Construction Contracts: varies. • Consequential (Special) Damages—foreseeable losses. • Breaching party is aware or should be aware, cause the injury party additional loss. • Case 17.1:Hadley v. Baxendale (1854).

4. Damages • Punitive Damages—punish or deter future conduct. • Generally not available for mere breach of contract. • Usually tort (e.g., fraud) is also involved. • Nominal Damages—no financial loss. • Defendant is liable but only a technical injury.

5. 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 17.2:Fujitsu Ltd. v. Federal Express Corp. (2001).

6. Liquidated Damages • 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. • Case 17.3:Green Park Inn v. Moore (2002).

7. §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 is called for in some cases not involving rescission.

8. §3: Specific Performance • Equitable remedy calling for the performance of the act promised in the contract. • Remedy in cases where the consideration is: • Unique (land); • Scarce; or • Not available remedy in contracts for personal services.

9. §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.

10. §5: Recovery Based on Quasi Contract • Equitable theory imposed by courts to obtain justice and prevent unjust enrichment. • Party seeking quantum meruit 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.

11. §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.

12. §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.

13. §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.

14. Law on the Web • Lawyers.com website describing how contracts can be breached. • Cornell U on contracts. • Nolo.com on Contracts. • Legal Research Exercises on the Web.