Remedies

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CHAPTER 18
Remedies
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Quote of the Day

• Everyone complains of his memory, none of his
  judgment.
• Francois, duc de la Rochefoucauld,
• French writer

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Breaching the Contract

• Someone breaches a contract when he fails to
  perform a duty without a valid excuse.
• A remedy is the method a court uses to compensate
  an injured party.
• An order forcing someone to do something, or
  refrain from doing something, is an injunction.

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Identifying the Interest

• Expectation Interest
• Designed to put the injured party in the position
  she would have been in had both sides fully
  performed their obligations.
• Reliance Interest
• Designed to put the injured party in the position
  he would have been in had the parties never
  entered into a contract.

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Identifying the Interest (contd)

• Restitution Interest
• Designed to return to the injured party a benefit
  that he has conferred on the other party, which
  it would be unjust to leave with that person.
• Equitable Interest
• When money is not sufficient to help the injured
  party, a court may order a transfer of property
  or may issue an injunction to prevent a
  particular action from continuing.

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Compensatory Damages

• Compensatory damages are the most common monetary
  awards.
• They generally flow directly from the contract,
  such as an order to pay what was promised or to
  pay for expenses caused by the breach.
• The injured party must prove the breach caused
  damages that can be quantified with reasonable
  certainty.

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Consequential Damages

• Consequential damages are those resulting from
  the unique circumstances of this injured party.
• Because damage calculation can be complex, there
  are companies that specialize in doing the work
  on behalf of litigants or other interested
  parties.

Click here for the web page of a damage
calculation company.
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Incidental Damages

• Incidental damages are the relatively minor costs
  incurred when the injured party responds to the
  breach (obtaining cover), such as the extra cost
  of buying replacement goods.

Acme agrees to sell 1000 widgets to Big Bobs for
1 each, but fails to deliver.
Big Bob has to buy 1000 widgets from ConCo for
1.25 each.
Big Bob can recover incidental damages of the
extra 250 from Acme.
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Sellers Remedies

• If she acts in good faith, she will be awarded
  the difference between the original contract
  price and the price she was able to obtain in the
  open market.
• Most courts hold that the seller of goods is not
  entitled to consequential damages.

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Buyers Remedies

• She will be awarded the difference between the
  original contract and her cover (replacement)
  price.
• Under the UCC, the buyer is entitled to
  consequential damages provided that the seller
  could reasonably have foreseen them.

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Law and Equity

• Restitution in Cases of a Valid Contract
• Restitution is a common remedy in contracts
  involving fraud, misrepresentation, mistake, and
  duress.
• Restitution in Cases of Quasi-Contract
• A court may award restitution, even in the
  absence of a contract, where one party has
  conferred a benefit on another and it would be
  unjust for the other party to retain the benefit.

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Other Equitable Interests

• Specific Performance
• A court will order the parties to perform the
  contract only in cases involving the sale of land
  or some other asset that is unique.
• Injunction
• An injunction is a court order that requires
  someone to do something or refrain from doing
  something.
• Reformation
• Reformation is a process in which a court will
  partially re-write a contract.

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Special Issues of Damages

• Mitigation of Damages
• A party may not recover for damages that could be
  avoided with reasonable efforts.
• Nominal Damages
• Nominal damages are a token sum, such as 1,
  given to a plaintiff who demonstrates that the
  defendant breached the contract but cannot prove
  damages.

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Liquid Damages

• A liquid damages clause, is a provision stating
  in advance how much a party must pay it if it
  breaches.
• A court will generally enforce a liquidated
  damages clause if
• (1) at the time of creating the contract it was
  very difficult to estimate actual damages, and
• (2) the liquidated amount is reasonable.

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Punitive Damages

• Designed not to compensate the injured party, but
  to punish the breaching party.
• In awarding punitive damages, a court must
  consider three guideposts
• The reprehensibility of the conduct,
• The ratio between the harm suffered and the
  award and
• The difference between the punitive award and any
  civil or criminal penalties used in similar cases.

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The flexible powers of a court should enable it
to craft a just remedy for almost any breach of
contract.
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Link to the Internet
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