Chapter 12 - Contractual Remedies

Question 1

Damages

Answer 1

Compensation payable to the plaintiff after wrongdoing: but damages can be awarded for different purposes and these different damages are calculated in different ways

Question 2

Expectation

Answer 2

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

Question 3

Reliance

Answer 3

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

Question 4

Account of Profits

Answer 4

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

Question 5

Nominal

Answer 5

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

Question 6

Liquidated

Answer 6

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

Question 7

Punitive

Answer 7

Intended to punish outrageous conduct
• Awarded in addition to compensatory damages

Eg.) Give me enough money to “hurt” defendant

Question 8

Complications or issues that may arise in calculation of damages: (6)

Answer 8

1. Difficulty of calculation
2. “Cost of cure” or “loss of value”
3. Alternative performance
4. Intangible losses and emotional distress
5. Remoteness
6. Mitigation of damages

Question 9

1. Difficulty of Calculation

General Rule and Exception:

Answer 9

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

Question 10

Cost of Cure

Answer 10

Cost to Cure means the cost that the Plaintiff must pay, in order to rectify or repair, the defective performance of the Defendant.

Question 11

Loss of Value

Answer 11

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).

Question 12

2. Cost of Cure or Loss of Value

General Rule

Answer 12

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.

Question 13

3. Alternative Performance

General Rule

Answer 13

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

Question 14

Intangible loss:

Answer 14

A loss of no apparent economic value such as disappointment, anger, frustration, sadness.

Question 15

4. Intangible Losses & Emotional Distress

Traditional Approach:

Answer 15

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”

Question 16

4. Intangible Losses & Emotional Distress

Modern Approach:

Answer 16

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.

Question 17

5. Remoteness

In order for the Plaintiff to recover monies for a loss from a breach of contract, the Plaintiff must prove:

Answer 17

1. The Defendant’s breach of contract caused the Plaintiff’s loss; and
2. The loss must not be remote from breach.

Question 18

5. Remoteness

A Loss is not remote if either:

Answer 18

1. The Defendant actually knew that if he breached his contract, the Plaintiff would suffer the particular loss; or
2. 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)

Question 19

5. Remoteness

Risk management:

Answer 19

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

Question 20

6. Mitigation of Damages

General Rule:

Answer 20

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

Question 21

Penalty Clause

Answer 21

• “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.

Question 22

General requirements for an award of punitive damages in a breach of contract case: The Plaintiff must prove:

Answer 22

1. Defendant acted in harsh, vindictive, reprehensible or malicious manner; and
2. In addition to the breach of contract already committed, the defendant also committed either a tort or another breach of contract.

Question 23

Specific Performance

Answer 23

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.

Question 24

Requirements for Specific Performance

• The Plaintiff must prove:

Answer 24

1. Monetary damages are inadequate: uniqueness, rarity
2. Mutuality: Specific performance can only be awarded to a party if it can be awarded against that same party.
3. 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.
4. Personal services: A Court will not order specific performance of a contractual promise to perform a personal service.

Question 25

Equitable Remedies: Injunction

Answer 25

An Injunction in the context of contract law, is a Court order to the defendant to refrain from doing something that is prohibited by Contract

• i,.e. “Stop what you’re doing! You signed a contract, agreeing that you would not do this.”.

Question 26

Injunction vs. Specific Performance

Answer 26

• Generally the Court is much more likely to award an injunction than specific performance because it considers an injunction to be a lessor infringement on freedom than an order for specific performance.
o With an Injunction, the Defendant can do anything other than prohibited act.
o Court will not grant injunction if it would compel the defendant to choose between working for the plaintiff and not working at all. Reference Page One Records Ltd. v. Britton

Question 27

Exclusion Clauses

Answer 27

• Exclusion clauses exclude or limits liability for breach of contract. Ie. “I promise to transport your merchandise from A to B safely, but if the merchandise arrives in damaged shape, you agree that I am only liable up to $1000”.

Allows free market society and protection for consumers in contracts

Question 28

Exclusion Clauses

Requirements:

Answer 28

1. The Courts require exclusion clauses to be clear (not ambiguous).
2. A party should ensure that the exclusion clause is reasonably drawn to consumer’s attention, particularly if it is unusual or onerous.
3. The party relying upon the exclusion clause must prove other party agreed to exclusion clause

Question 29

1. The Courts require exclusion clauses to be clear (not ambiguous).

What if they are ambiguous?

Answer 29

If they are ambiguous, the Courts will apply the concept of contra proferentem meaning that the Court will use the interpretation which is least favorable to the drafter of the contract. For example, assume a sign in area of the restaurant where diners leave their coats. The sign states “we are not responsible for lost coats”. If a diner’s briefcase is stolen, the diner may be successful in suing the restaurant; the exclusion clause will not protect the restaurant

Question 30

Unjust Enrichment

Answer 30

Unjust Enrichment is a cause of action that one can sue for, like breach of contract or negligence.

• This cause of action is only available to a Plaintiff if the transaction of the parties is not governed by an enforceable contract* (If there is an enforceable contract, the provisions of that contract will dictate the obligations of the parties and this cause of action will not be relevant).

Question 31

Unjust Enrichment

Remedy

Answer 31

The remedy for unjust enrichment is restitution. This requires the defendant to give back the enrichment that he wrongfully took from the plaintiff.

Question 32

Unjust Enrichment

Cause of action is applicable when:

Answer 32

There never was a contract, or there was a contract, but it was declared void or not enforceable, or a valid contract has been discharged on the basis of breach.

Question 33

To prove Unjust enrichment, the plaintiff must prove:

Answer 33

1. There has been an enrichment to defendant;
2. There is a corresponding deprivation to plaintiff;
3. There is an absence of juristic reason for the enrichment;

• I mistakenly pay you $1200, thinking that you are my landlord. However, I subsequently discover the error and ask you for the money back but you won’t give it back. I can sue you for Unjust Enrichment. When I win, you have to give me back the $1200 (there was no lawful reason that you should be able to keep the monies). The $1200 is the restitution, or remedy, that I’m entitled to.