Chapter 12 - Contractual Remedies Flashcards
Damages
Compensation payable to the plaintiff after wrongdoing: but damages can be awarded for different purposes and these different damages are calculated in different ways
Expectation
Victim placed in same position as if the contract had been performed.
Expectation damages represent the monetary value of the benefit that the Plaintiff expected to receive under the contract, so they are “forward-looking damages”
Eg.) Give me what I expected to get
Reliance
Victim placed in the same position as if they never entered into the contract. Reliance damages represent the monetary value of resources wasted under contract
Plaintiff must elect between expectation or reliance damages: can’t choose both
Eg.) Give me back what I lost
Account of Profits
Plaintiff entitled to gain defendant wrongfully made from breach of contract
• This remedy is applicable when the defendant wrongfully makes a profit from his breach of contract. The Plaintiff is, in effect, advising the Court that he is entitled to damages equivalent to the amount that the Defendant wrongfully made, from his breach of contract.
Eg.) Give me what defendant never should have received
Nominal
Symbolizes wrongdoing despite plaintiff’s absence of monetary loss
Damages awarded for nominal damages are fairly small (ie $100- $5000)
Eg.) Give me a small token to recognize the defendant’s wrong
Liquidated
Contract sets the quantum of damages
• A Liquidated damages clause in a contract is a genuine attempt by the parties at estimating the quantum of loss that would occur as a result of breach of contract: The rationale: avoid litigation and provide incentive to perform.
Eg.) Give me what was agreed, in the contract, I’d get on breach
Punitive
Intended to punish outrageous conduct
• Awarded in addition to compensatory damages
Eg.) Give me enough money to “hurt” defendant
Complications or issues that may arise in calculation of damages: (6)
- Difficulty of calculation
- “Cost of cure” or “loss of value”
- Alternative performance
- Intangible losses and emotional distress
- Remoteness
- Mitigation of damages
- Difficulty of Calculation
General Rule and Exception:
The General Rule is that the Court will award damages, even if the calculation of those damages is difficult.
Exception to General Rule: If the calculation is not merely difficult but entirely speculative, damages will not be awarded.
Eg.) Court will not award damages for lost treasure
Cost of Cure
Cost to Cure means the cost that the Plaintiff must pay, in order to rectify or repair, the defective performance of the Defendant.
Loss of Value
Loss of value is, essentially, the market value of the subject matter at the end of the contract (as a result of the Defendant’s mis-performance of his obligations pursuant to the contract).
- Cost of Cure or Loss of Value
General Rule
The General Rule is that Courts will award damages = cost of cure when the plaintiff has a legitimate interest in having the work done or if the plaintiff has actually already spent money rectifying the defendant’s defective performance.
• Judges usually refuse to award damages on a cost to cure basis if the difference between the cost of cure and the benefits of that cure is unreasonably large. In other words, if the sum to repair the defective performance is very high, and the benefit of the repair is very minimal, the court will award damages = loss of value.
- Alternative Performance
General Rule
The general rule is that damages will be calculated on the basis of the least onerous option: “the minimum acceptable performance”.
Court pays minimum amount
Intangible loss:
A loss of no apparent economic value such as disappointment, anger, frustration, sadness.
- Intangible Losses & Emotional Distress
Traditional Approach:
Courts would not award damages for emotional distress because:
o It was difficult to assess a value for emotional distress; and
o Contracts were regarded as commercial arrangements “…for money not feelings”
- Intangible Losses & Emotional Distress
Modern Approach:
Courts recognize that “peace of mind” is something a plaintiff expects to receive under a contract. Therefore, if the defendant, in breaching a contract, caused the plaintiff mental distress, he may be liable to the plaintiff.
Eg.) Family wants to take their dog on a family vacation, so signs a contract with airplane carrier, that they will ensure safe delivery of dog; however, the airplane carrier doesn’t take proper safety precautions/ breaches their contract, and the dog dies. Family can sue for grief.
- Remoteness
In order for the Plaintiff to recover monies for a loss from a breach of contract, the Plaintiff must prove:
- The Defendant’s breach of contract caused the Plaintiff’s loss; and
- The loss must not be remote from breach.
- Remoteness
A Loss is not remote if either:
- The Defendant actually knew that if he breached his contract, the Plaintiff would suffer the particular loss; or
- A reasonable person would have known that the Plaintiff’s loss might result from the breach. In other words, ask: would a reasonable person have known that if the Defendant breached the contract, the Plaintiff would have suffered the loss that actually occurred?
o This Test applied at time contract is created (not in hindsight)
- Remoteness
Risk management:
Before entering contract, ensure other party is aware of any unusual losses you may suffer as a result of their contractual breach.
Eg.) Courier and 1 million dollar failure example
- Mitigation of Damages
General Rule:
The Rule: Plaintiff must take steps to minimize economic losses flowing from the defendant’s breach of contract. If they do not, then their damages are reduced to the extent that losses could have been reasonably avoided.
• Employer fires employee. Employee sues Employer for 2 years lost wages. But employer is able to prove that if the employee mitigated (ie. Actively looked for another job, ie. Sent out resumes, went on job interviews, etc.) then he would have found a job within 1 year. So, the plaintiff is not entitled to 2 years lost wages, only 1 year
Penalty Clause
- “If you don’t deliver me the goods by Jan. 1st, you will owe me 3 million dollars”.
- A penalty clause is not enforceable in Court.
- If a contract contains a penalty clause, and goes to Court over a breach of contract, the Court will just ignore the penalty clause and calculate damages in the usual way.
General requirements for an award of punitive damages in a breach of contract case: The Plaintiff must prove:
- Defendant acted in harsh, vindictive, reprehensible or malicious manner; and
- In addition to the breach of contract already committed, the defendant also committed either a tort or another breach of contract.
Specific Performance
Occurs when the court orders the defendant to fulfill a contractual obligation to do something
• The Plaintiff receives actual performance of defendant’s contractual obligations.
Requirements for Specific Performance
• The Plaintiff must prove:
- Monetary damages are inadequate: uniqueness, rarity
- Mutuality: Specific performance can only be awarded to a party if it can be awarded against that same party.
- Judicial supervision: A court will not award Specific Performance if it would require ongoing judicial supervision; it must be a “once-and-for-all” order.
- Personal services: A Court will not order specific performance of a contractual promise to perform a personal service.
