(1) Remedies: Contracts Legal Remedies Flashcards
Definition/Rule/Formula:
Expectation Damages (Compensatory Damages)
Definition: Expectation damages are an attempt to put the non-breaching party in the same position it would have been in put for the breach.
Rule: The damages must be (1) Actual Cause; (2) Proximate Cause; (3) certain – the damages cannot be speculative; AND (4) unavoidable – the P must take reasonable steps to mitigate their loss.
*Actual Cause – but for D’s conduct
*Proximate cause – the result to P was foreseeable based on D’s conduct.
Formula: (market price) – (contract price) + any incidental and consequential damages – (expenses saved)
Definition/Rule:
Reliance Damages
Definition: Reliance damages are generally the expenses made by a party in reliance of a contract and are an attempt to put the non-breaching party in the position it would have been in had the contract never existed.
*Reliance damages cannot exceed the contract price.
Rule: Reliance damages are available when: (1) a plaintiff acted in reliance on the D’s agreement to perform under a contract; AND (2) the P’s reliance was foreseeable.
*If expectation damages are too speculative, the court may award reliance damages instead.
Definition/Rule:
Consequential Damages
Definition: Consequential damages arise indirectly from the breach and are awarded because of the injured party’s special circumstances (e.g., lost profits).
Rule: To recover the damages must be: (1) reasonably foreseeable at the time of the contract formation; (2) arise from the P’s special circumstances that the D knew or had reason to know of; AND (3) reasonably certain – the damages cannot be speculative.
*Consequential damages may be limited or excluded by agreement unless the limitation/exclusion is unconscionable.
Ex. A computer manufacturer delivers the wrong computers to a business and as such the computer manufacturer is liable for the businesses lost profits because at the time of creating the contract the manufacturer was aware of the businesses need for such computers in order to conduct business.
Definition/Rule:
Incidental Damages
Incidental damages are the reasonable costs incurred as a result of a breach of contract (i.e., costs of returning non-conforming goods or caring/storing non-conforming goods)
Definition/Rule:
Restitution Damages (Unjust Enrichment)
Definition: Restitution is awarded to prevent unjust enrichment and is available when one party confers a benefit onto another party (even if there is not an enforceable contract).
Rule: Damages will be awarded based on the value of the benefit conferred upon the D.
* A party cannot recover expectation/compensatory and restitution damages.
Definition/Rule:
Liquidated Damages
Definition: Liquidated damages are damages agreed upon by the parties to a contract during the formation of the contract.
Rule: Liquidated damages are enforced if the amount is reasonable to (1) the actual damages suffered OR (2) the anticipated loss at the time the contract was entered into.
*If a liquidated damages clause is invalid then actual damages are available.
Damages in Contracts for the Sale of Land
For a breach of contract concerning the sale of land, the buyer may recover: (1) any amount paid; (2) the difference between the fair market value of the land at the time of the breach and the contract price; (3) expenses incurred in investigating title and preparing necessary paperwork; (4) expenses incurred in preparing to occupy the land; (5) possible consequential damages; AND (6) interest.
*The seller normally recovers the “earnest money” deposit as liquidated damages for breach of a land sale contract.
UCC Buyer’s Remedies & Damages
Under the UCC, a buyer who (a)never received the goods – the seller repudiates or fails to make delivery; (b) rightfully rejected non-conforming goods; OR (c) justifiably revoked acceptance of the goods, MAY: (1) cancel the contract; (2) recover any amount paid (a refund) – even if buyer doesn’t cancel the contract; (3) recover either Cover Damages or Market Damages; AND (4) recover incidental and consequential damages.
Rule/Formula:
Loss in Value Damages
UCC Buyer’s Remedies & Damages
Rule: If the buyer keeps the non-conforming goods then the buyer is entitled to loss-in-value damages.
Formula: (value as promised) – (value of the non-conforming goods)
Rule/Formula:
Cover Damages
UCC Buyer’s Remedies & Damages
Rule: If the buyer covered in good faith then they are entitled to cover damages.
Formula: (contract price) – (price of substitute goods)
Rule/Formula:
Market Damages
UCC Buyer’s Remedies & Damages
Rule: Market damages are used if the buyer did not cover in good faith or did not cover at all.
Formula: (market price – at the time when the buyer learned of the breach) - (contract price)
*Market Price is determined as of (a) the place of tender, or (b) the place of arrival in cases of rejection after arrival or revocation of acceptance.
Incidental Damages
UCC Seller’s Remedies & Damages
A seller is also entitled to recover incidental damages, which include any commercially reasonable costs incurred resulting from the breach.
Rule/Exception:
Seller’s Right to Replevy Identified Goods
UCC Seller’s Remedies & Damages
Rule: Under Article 2 of the UCC, an unpaid seller generally has no right to replevy (repossess) goods that they sent a buyer.
Exception: However, a seller of goods may repossess the goods he sent to a buyer if: (1) the buyer was insolvent when it received the goods; AND (2) the seller makes a demand within 10 days after the buyer received the goods.
*However if a misrepresentation of solvency was made to the seller in writing within 3 months of the delivery, the 10 day limitation to make a demand no longer applies.
Rule:
UCC Contractual Modification or Limitation of Remedy
Rule: An agreement between the parties may provide for remedies in addition to or in substitution for those provided under the UCC. The additional/substituted remedies may limit or alter the measure of damages recoverable, such as limiting a buyer’s remedies to return of the goods, repayment of the purchase price, or to repair and replacement of non-conforming goods/parts.
Optional If Not Exclusive: A remedy provided under a contract is optional unless the remedy is expressly agreed to be exclusive, in which case it’s the sole remedy.
Remedy Fails to Achieve its Essential Purpose: If circumstances cause an exclusive/limited remedy to fail of its essential purpose, then a party may pursue any remedies available under the UCC.
Can consequential damages be limited or excluded?
UCC Contractual Modification or Limitation of Remedy
Consequential damages may be limited or excluded unless the limitation/exclusion is unconscionable. Its prima facie unconscionable to limit consequential damages for personal injury concerning consumer goods.
