Chapter 19

Question 1

Types of Damages

Answer 1

1. Compensatory
2. Consequential
3. Punitive
4. Nominal

Question 2

Compensatory Damage

Answer 2

to cover direct losses and costs

Question 3

Consequential Damage

Answer 3

to cover indirect and foreseeable losses

Question 4

Punitive Damage

Answer 4

to punish and deter wrongdoing

Question 5

Nominal Damage

Answer 5

to recognize wrongdoing when no monetary loss is shown

Question 6

Standard Measure

Answer 6

• difference between the value of the breaching party’s promised performance under the contract and the value of her or his actual performance.
• This amount is reduced by any loss that the injured party has avoided.

Question 7

Sale of Land

Answer 7

Specific Performance is REQUIRED

Question 8

Mitigation of Damages

Answer 8

When a breach of contract occurs, the innocent injured party is held to a duty to mitigate, or reduce, the damages that he or she has suffered. Under this doctrine, the duty owed depends on the nature of the contract.
* Rental Agreements
* Employment Contracts

Question 9

Liquidated Damages vs. Penalties

Answer 9

To determine if a particular provision is for liquidated damages or for a penalty, a court must answer two questions:
* When the contract was entered into, was it apparent that damages would be difficult to estimate in the event of a breach?
* Was the amount set as damages a reasonable estimate and not excessive?

Question 10

Equitable Remedies

Answer 10

Rescission and Restitution

Question 11

Rescissionq

Answer 11

essentially an action to undo, or terminate, a contract—to return the contracting parties to the positions they occupied prior to the transaction

Question 12

Restitution

Answer 12

equitable remedy under which a person is restored to his or her original position prior to loss or injury, or placed in the position he or she would have been in had the breach not occurred

Question 13

Specific Performance

Answer 13

The equitable remedy of specific performance calls for the performance of the act promised in the contract.

This remedy is attractive to a nonbreaching party because it provides the exact bargain promised in the contract.
* Sale of Land and Contract for Personal Services is common for this

Question 14

Reformation

Answer 14

equitable remedy used when the parties have imperfectly expressed their agreement in writing. It allows a court to rewrite the contract to reflect the parties’ true intentions.

Question 15

Fraud or Mutual Mistake Is Present

Answer 15

when fraud or mutual mistake (for example, a clerical error) is present. Typically, a party seeks reformation so that some other remedy may then be pursued.

Question 16

Written Contract Incorrectly States the Parties’ Oral Agreement

Answer 16

when two parties enter into a binding oral contract but later make an error when they attempt to put the terms into writing.

Question 17

Covenants Not to Compete

Answer 17

often included in contracts for the sale of ongoing businesses and in employment contracts.
Restricts the area and time in which one party can directly compete with the other party

Question 18

Waiver of Breach

Answer 18

1. Consequences of Wavier of Breach
2. Reasons for Waiving a Breach
3. Waiver of Breach and Subsequent Breaches

Question 19

Contract Provisions Limiting Remedies

Answer 19

o UCC Allows Sales Contracts to Limit Remedies

o Enforceability of Limitation-of-Liability Clauses