Contract Law AMP - Remedies Flashcards
In a suit for restitution, the measure of recovery is __________.
A the amount necessary to buy a substitute performance
B nothing, if the plaintiff is the breaching party
C the value of the benefit conferred
D the difference between what the plaintiff would have received if the contract had been properly performed and the value of what the plaintiff actually received
C
In a suit for restitution, the measure of recovery is the value of the benefit conferred. Restitution is based on preventing unjust enrichment when one has conferred a benefit on another without gratuitous intent. The value of the benefit conferred is usually measured by the benefit received by the defendant, but it may also be measured by the reasonable value of the work performed by the plaintiff. The amount necessary to buy a substitute performance is an expression of the measure of expectation damages, not restitution. The measure of recovery is not necessarily nothing if the plaintiff is the breaching party. Under some circumstances, a plaintiff may seek restitution even though the plaintiff is the party who breached. For example, a buyer who has paid part of the purchase price may recover some payments even if he is in breach. The difference between what the plaintiff would have received if the contract had been properly performed and the value of what the plaintiff actually received is also a formulation of compensatory, expectation damages rather than restitution. This measure does not address unjust enrichment. QUESTION ID: K0125 Additional Learning
Which of the following is generally not required for an award of liquidated damages?
A The amount is reasonable in view of the actual or anticipated harm caused by the breach
B Difficulty in estimating or ascertaining damages at the time the contract was formed
C Actual money or pecuniary damages
D The amount agreed on is a reasonable forecast of compensatory damages in the case of breach
C
Actual money or pecuniary damages are generally not required to enforce a liquidated damages provision if the other requirements are met. Liquidated damages must be in an amount that is reasonable in view of the actual or anticipated harm caused by the breach. Therefore, courts have found liquidated damages clauses are enforceable if: Damages for contractual breach are difficult to estimate or ascertain at the time the contract was formed; and The amount agreed on was a reasonable forecast of compensatory damages in the case of a breach. QUESTION ID: K0118 Additional Learning
Under Article 2, when a seller breaches a contract by refusing to deliver identified goods to the buyer, the buyer may replevy the goods if:
A both parties are merchants.
B the goods were purchased for business purposes.
C the buyer, after reasonable effort, is unable to secure adequate substitute goods.
D the seller is solvent.
C
A buyer may replevy undelivered, identified goods from the seller if the buyer, after reasonable effort, is unable to secure adequate substitute goods. The fact that the goods were purchased for business purposes does not aid the buyer in an action for replevin. In fact, it may harm the buyer’s ability to replevy the goods, if the action is based on prepayment of the purchase price (rather than on inability to secure substitute goods). A buyer may replevy the goods if the buyer has made at least part payment of the purchase price and the goods were purchased for personal, family, or household purposes, not business purposes. There is no requirement for replevin that both parties be merchants. The fact that the seller is solvent does not aid the buyer in establishing a right to replevin. The seller’s solvency only comes into play with respect to replevin based on prepayment of the purchase price. If the buyer made at least part payment of the price, the buyer may replevy the goods if the seller becomes insolvent within 10 days of receiving the buyer’s first payment. QUESTION ID: K0113 Additional Learning
Which of the following statements is true regarding enforcement of a covenant not to compete?
A A court will grant an order of specific performance to enforce any agreed-upon covenant not to compete included in an employment contract
B A court will not grant an order of specific performance to enforce a covenant not to compete because specific enforcement is never available for service contracts
C A court will grant an order of specific performance to enforce a covenant not to compete if the services to be performed are unique and the covenant is reasonable
D A court will not grant an order of specific performance to enforce a covenant not to compete because money damages can easily be determined based on the terms of the employment contract
C
Most courts will grant an order of specific performance to enforce a covenant not to compete if the services to be performed are unique and the covenant is reasonable. To be reasonable, the covenant must be reasonably necessary to protect a legitimate interest of the person benefited by the covenant, it must be reasonable as to its geographic scope and duration, and it must not harm the public. Thus, a court will not necessarily enforce any covenant not to compete that the parties agreed to in the employment contract; the services in question must be unique and the covenant must be reasonable, as described above. While it is true that specific enforcement is never available for service contracts, a court will grant an order of specific performance to enforce a covenant not to compete. Specific performance is not available for breach of a contract to provide services, even if the services are rare or unique, because of problems of enforcement (it would be difficult for the court to supervise the performance) and because the courts feel it is tantamount to involuntary servitude. However, less court supervision is required for a covenant not to compete than for a specific performance decree for services, and the prohibition against working (as opposed to the requirement of working) does not run afoul of the Constitution. It is not always the case that money damages can be easily determined when there is breach of an employment contract, especially if the services contracted for are rare or unique. At times a court will grant an order of specific performance to enforce a covenant not to compete because of the unique nature of the services provided. QUESTION ID: K0111A Additional Learning
In a construction contract, if the property owner breaches the contract after construction has started but before it is completed, the builder is entitled to:
A The profits he would have derived from the contract, plus any costs he has incurred
B The contract price
C The contract price plus any costs he has incurred
D The profits he would have derived from the contract
A
If the property owner breaches a construction contract during construction, the builder is entitled to any profit he would have derived from the contract plus any costs he has incurred to date by starting construction. The formula is also stated as the contract price minus the cost of completion. Either formula will give the same result.The builder is not entitled to the contract price because the contract price includes costs that the builder has not yet incurred. The profits measure puts him where he would have been had the promise been performed. QUESTION ID: K0123B Additional Learning
Specific performance is generally available as a remedy for breach of a contract for ___________ but not for breach of a contract for ________.
A Rare goods; the sale of land
B Rare goods; unique services
C The sale of land; rare goods
D Unique services; rare goods
B
Specific performance is generally available to remedy a breach of contract for rare goods but not for breach of a contract for unique services. Specific performance is available when the legal remedy is inadequate. Damages are generally inadequate when the subject matter is rare or unique. Thus, specific performance is available for contracts involving the sale of land or unique or rare goods. Specific performance is not available for breach of service contracts, even if the services are rare or unique. This is because of the difficulty of enforcement and because it could be considered involuntary servitude. QUESTION ID: K0109A Additional Learning
A seller agrees to sell Blueacre to a buyer for $100,000. When the seller’s assistant types the contract, it states that it is for the sale of Blackacre, another of the seller’s properties. Neither the buyer nor the seller noticed the reference to the different parcel before signing.
If the seller refuses to convey Blueacre, the best remedy available to the buyer in this situation is:
A Restitution
B Rescission
C Reformation
C
Reformation is the best remedy available to the buyer in this situation. In reformation, the original contract is valid, but the subsequent writing does not conform to the original contract. In a reformation action, the writing setting forth the agreement between the parties is changed by the court so that it conforms to the original intent of the parties. Rescission is not the appropriate remedy. Rescission is a remedy whereby the original contract is considered voidable and rescinded. The parties are left as though the contract had never been made. It is available in cases of mistake, misrepresentation, duress, etc. Unlike the reformation situation, in a rescission action the original contract is voidable because of misrepresentation, duress, etc. Here, the only problem was a mistake in transcription. In addition, the buyer wishes to continue with the sale, so rescission is not the best remedy even if it were available. Restitution is a remedy based on preventing unjust enrichment in cases of breach of contract, unenforceable contracts, and sometimes when there is no contract at all (quasi-contract). Here, there is an enforceable contract for the purchase of Blueacre. The buyer is entitled to Blueacre, not the return of his money. QUESTION ID: K0126B Additional Learning
To recover full damages when an employer breaches an employment contract, the employee:
A Must make a reasonable effort to find a new position of the same kind in any locale
B Must make a reasonable effort to find a new position of any kind in the same locale
C Must make a reasonable effort to find a new position of the same kind in the same locale
C
A nonbreaching party cannot recover avoidable damages. To avoid incurring additional damages, a nonbreaching employee must try to find a comparable position in the same locale. If the breaching employer can prove that a comparable job in the same locale was available, then contract damages against that breaching employer for lost wages will be reduced by the wages that the plaintiff would have received from that comparable job. QUESTION ID: K0124A Additional Learning
__________ damages consist of losses resulting from the plaintiff’s particular circumstances that any reasonable person would have foreseen as a probable result of breach.
A Incidental
B Expectation
C Reliance
D Consequential
D
Compensatory damages attempt to put the nonbreaching party where she would have been had the promise been performed, so far as money can do this. Expectation, consequential, incidental, and reliance damages are all forms of compensatory damages. Consequential damages are special damages over and above standard expectation damages. These damages result from the nonbreaching party’s particular circumstances and are recoverable only if a reasonable person would have foreseen them as a probable result of breach. Note that in contracts for the sale of goods, only a buyer may recover consequential damages. Expectation damages are the standard measure of compensatory damages. Expectation damages are based on an “expectation” measure or what is sufficient for the nonbreaching party to buy a substitute performance. This type of damages is also known as “benefit of the bargain” damages. Reliance damages award the plaintiff the cost of her performance. They are designed to put the plaintiff in the position she would have been in had the contract never been formed. A plaintiff may elect to recover damages based on a reliance measure rather than an expectation measure when expectation damages will be too speculative to measure. Incidental damages include expenses reasonably incurred by the buyer in inspection, receipt, transportation, care, and custody of goods rightfully rejected and other expenses reasonably incident to the seller’s breach, and by the seller in storing, shipping, returning, and reselling the goods as a result of the buyer’s breach. QUESTION ID: K0116A Additional Learning
If a plaintiff’s expectation damages will be too speculative to measure, the plaintiff may elect to recover __________ instead, to put the plaintiff in the position she would have been in had the contract never been formed.
A reliance damages
B liquidated damages
C punitive damages
D consequential damages
A
Reliance damages put the plaintiff in the position she would have been in had the contract never been formed. If the plaintiff’s expectation damages will be too speculative to measure, the plaintiff may elect to recover reliance damages instead. Liquidated damages are the damages stipulated to by the parties to a contract. Parties to a contract may stipulate what damages are to be paid in the event of a breach, provided the amount is reasonable in view of the actual or anticipated harm caused by a breach. Consequential damages are special damages and reflect losses over and above standard expectation damages. These damages result from the nonbreaching party’s particular circumstances. Usually, consequential damages are lost profits resulting from the breach. Punitive damages, the purpose of which is to punish a defendant for wrongful conduct, are generally not awarded in contract cases. QUESTION ID: K0115 Additional Learning
Which of the following statements is true regarding a specific performance remedy for breach of a contract to provide services?
A Specific performance can be granted for a breach of a contract to provide services only if the services are shown to be rare or unique
B Specific performance can be granted for a breach of a contract to provide services only if a legal remedy would be inadequate
C Specific performance can always be granted for a breach of a contract to provide services because services are personal and thus always considered to be rare or unique
D Specific performance is not available as a remedy for a breach of a contract to provide services
D
Specific performance is not available for breach of a contract to provide services, even if the services are rare or unique and a legal remedy would be inadequate. This is because of problems of enforcement (it would be difficult for the court to supervise the performance) and because the courts feel it is tantamount to involuntary servitude, which is prohibited by the Constitution. Generally a court may grant specific performance, which is essentially an order from the court to the breaching party to perform or face contempt of court charges, if the legal remedy is inadequate. The legal remedy (damages) generally is inadequate when the subject matter of the contract is rare or unique. The rationale is that if the subject matter is rare or unique, damages will not put the nonbreaching party in as good a position as performance would have, because even with the damages the nonbreaching party would not be able to purchase substitute performance. A contract to provide services is an exception to this general rule for the reasons stated above. QUESTION ID: K0109B Additional Learning
When will a court order specific performance for breach of a service contract?
A Always, because all services are considered unique to the specific service provider
B Never, because to do so would be tantamount to involuntary servitude
C Sometimes, if the services contracted for are rare or unique
D Rarely, only if it is shown that the breaching party acted with malice
B
Specific performance is never available for breach of a contract to provide services. This is because of problems of enforcement (it would be difficult for the court to supervise the performance) and because the courts feel it is tantamount to involuntary servitude, which is prohibited by the Constitution. In other cases, a court may grant specific performance, which is essentially an order from the court to the breaching party to perform or face contempt of court charges, if the legal remedy is inadequate. The legal remedy (damages) generally is inadequate when the subject matter of the contract is rare or unique. The rationale is that if the subject matter is rare or unique, damages will not put the nonbreaching party in as good a position as performance would have, because even with the damages the nonbreaching party would not be able to purchase substitute performance. Nonetheless, for the reasons stated above, courts will not apply specific performance in a service contract, even if the service is unique to the specific service provider. In determining whether to grant specific performance for the breach of a service contract, it is irrelevent whether the breaching party acted with malice. QUESTION ID: K0110B Additional Learning
As a general rule, if the property owner in a construction contract breaches, the builder has a duty to:
A Secure other work
B Cease work after the breach
C Complete the project
B
The nonbreaching party cannot recover avoidable damages. Thus, to avoid incurring further losses when a property owner breaches a construction contract, the builder has a duty to cease work on the project after the breach. Completion of the project will be allowed only in the rare instance that it decreases the damages. The builder does not have a duty to seek or secure other work. QUESTION ID: K0124B Additional Learning
In the case of breach by the seller in a sale of goods contract, if the buyer ____________, the appropriate measure of damages is the difference in value of the goods as delivered and the value they would have had if they had been according to contract, plus incidental and consequential damages.
A Rejects nonconforming goods
B Accepts nonconforming goods
C Revokes acceptance of nonconforming goods
B
In the case of breach by the seller in a sale of goods contract, if the buyer accepts nonconforming goods, the appropriate measure of damages is the difference in value of the goods as delivered and the value they would have had if they had been according to contract, plus incidental and consequential damages. If the buyer rejects or revokes acceptance of nonconforming goods (which has the effect of a rejection), the buyer is entitled to the difference between the contract price and either the market price or the cost of buying replacement goods, plus incidental and consequential damages. QUESTION ID: K0122B Additional Learning
What are consequential damages?
A Damages designed to buy a substitute performance for the nonbreaching party
B Losses resulting from the nonbreaching party’s particular circumstances that are a foreseeable result of breach
C Damages designed to put the nonbreaching party in the position she would have been in had the breached contract never been formed
D Expenses reasonably incurred by a buyer in inspection, receipt, transportation, care, and custody of goods rightfully rejected and other expenses reasonably incident to the seller’s breach, and by the seller in storing, shipping, returning, and reselling the goods as a result of the buyer’s breach
B
Compensatory damages attempt to put the nonbreaching party where she would have been had the promise been performed, so far as money can do this. Expectation, consequential, incidental, and reliance damages are all forms of compensatory damages. Consequential damages consist of foreseeable losses resulting from the nonbreaching party’s particular circumstances. Note that in contracts for the sale of goods, only a buyer may recover consequential damages. Expectation damages are the standard measure of compensatory damages. Expectation damages are based on an “expectation” measure or what is sufficient for the nonbreaching party to buy a substitute performance. This type of damages is also known as “benefit of the bargain” damages. Reliance damages award the plaintiff the cost of her performance. They are designed to put the nonbreaching party in the position she would have been in had the contract never been formed. A plaintiff may elect to recover damages based on a reliance measure rather than an expectation measure when expectation damages will be too speculative to measure. Incidental damages include those expenses reasonably incurred by the buyer in inspection, receipt, transportation, care, and custody of goods rightfully rejected and other expenses reasonably incident to the seller’s breach, and by the seller in storing, shipping, returning, and reselling the goods as a result of the buyer’s breach. QUESTION ID: K0116B Additional Learning
