Contract law-What are the remedies for a Breach (damages)

Question 1

Constructive condition of exchange

Answer 1

Constructive condition of exchange (CCE)
o Common law—failure to substantially perform means the CCE is not satisfied, so the other side may withhold their own performance

 Cannot withhold payment if the other side has substantially performed, but may be entitled to recover for the breach

       o UCC—perfect tender: Seller must strictly perform all obligations or be in breach.  The doctrine of material breach applies to installment sales.

Question 2

Anticipatory repudiation

Answer 2

Anticipatory repudiation is closely related to CCE.

Question 3

What are your remedies when the other side says they will not perform on the contract (repudiation) before performance is due?

Answer 3

• If a party clearly and unequivocally repudiates, the nonbreaching party has two options:
  1) Treat the repudiation as a breach and sue immediately for damages
• BUT, if you have completed the entire performance and are only waiting for payment, you cannot sue early.

2) Ignore the repudiation, demand performance, and see what happens

Question 4

• Can a party retract its repudiation?

Answer 4

Yes, as long as the other side has not:
o Commenced a lawsuit; or
o Acted in reliance on the repudiation (by materially
changing its position)

Question 5

What is the equivalent to anticipatory repudiation in the UCC world?

Answer 5

“reasonable grounds for insecurity about the other side’s performance allows you to demand “adequate assurance of performance”

Question 6

What are the consequences of demanding adequate assurance of performance?

Answer 6

If the other party does not offer those assurances in a reasonable time then you can treat it as a repudiation.

Question 7

money damages

Answer 7

they are what you tipically get when someone breaches contract

Question 8

What are expectation damages?

Answer 8

o This is the normal way to calculate damages in contracts.
o Goal—to put a party in the same economic position it would be in if the contract had been performed as promised.

o

Question 9

What is the formula for expectation damages?

Answer 9

Measured by comparing the value of the performance without the breach to the value of the performance with the breach.

If you had to pay someone else more money to complete the performance the other breach then your damages are calculated:
Cost to get the full performance- cost of the contract (what you promise to initially pay. the result is what you can recover.

But if getting the performance satisfied costed you less than what you originally contracted then you don’t get any damages

Question 10

Damages under UCC

Answer 10

Under UCC if the seller breaches. the seller is still entitled to the benefit of his bargain.

Question 11

What are the limits on expectation damages?

Answer 11

Must be proven with reasonable certainty.

Unforeseeable consequential damages

mitigation

Question 12

What are unforseeable consequential damages?

Answer 12

Not recoverable unless the breaching party had some reason to know about the possibility of these special damages at the time of contracting (the Hadley rule)

o Two categories of damages:
1) General damages—the type of loss that almost anyone would incur from a breach
* Includes incidental damages—the cost of storing rejected goods, or finding a new buyer, or finding a replacement vendor
2) Consequential damages—losses that are unique or special to this plaintiff

Question 13

What is required under mitigation?

Answer 13

A breached-against party must take reasonable steps to reduce damages from a breach.

If a party refuses to mitigate, the law will calculate damages as if the party did mitigate.
o The defendant bears the burden of proving a mitigation failure.
o Mitigation efforts must be reasonably similar to the original contract.

Question 14

Incomplete performance
If the paying party breaches in a partially completed building contract, can the builder continue to work on the job?

Answer 14

This runs counter to mitigation—it would be
“running up the damages.”
o Adjust the recovery to take account of the fact that the builder did not need to finish the job

Question 15

What are the expectation damages in a situation where there is incomplete performance>

Answer 15

expectation damages= contract price-amount already paid- amount that would be needed to finish the job.

Question 16

How to calculate diminution in market value?

Answer 16

Market value of what you asked-market value of what you got

Question 17

Besides expectation damages, what is another way to calculate damages for breach?

Answer 17

reliance damages:

Question 18

What is the goal of reliance damages?

Answer 18

to put a party in the same economic position that it would be in if the contract had never
been created in the first place.

Key question: Ask what loss has the plaintiff incurred that would never have taken place but for the breached
contract?

Question 19

What is the difference between expectation and reliance damages?

Answer 19

Expectation damages try to put the non-breaching party as if the contract has been performed. (give them the benefit of the bargain)

Reliance damages try to put the non-breaching party in a position as if the contract never happened.

Question 20

When to use reliance damages?

Answer 20

When expectation damages are uncertain, therefore difficult to calculate.

A party can’t recover both expectation and reliance damages; typically, the plaintiff must elect one or the other.

Question 21

What is the third way to recover damages and what is the goal?

Answer 21

Restitution damages.
* Goal—to give the plaintiff an amount equal to the economic benefit that the plaintiff conferred
on the defendant
* This can sometimes equal reliance damages, but it need not.

Question 22

What are liquidated damages and their requirements?

Answer 22

Is the fourth way to calculate damages:
These damages must:
be stated in the contract as an explicitly negotiated amount due upon breach

Question 23

When will courts award punitive liquidated damages>

Answer 23

1) The amount agreed was reasonable at the time of contracting
2) actual damages from breach would be uncertain in the amount and difficult to prove.

Question 24

What should you know about punitive damages?

Answer 24

• Punitive damages are almost never allowed in contract law.
• Don’t worry about these unless you see a breach that also seems like a tort (e.g., fraud or some other very extreme situation).

Question 25

Are all damages monetary?

Answer 25

No. There is a type of remedies called equitable relief. These are awarded when monetary damages are considered inadequate for some reason.
These are an exception in contract law.

Question 26

What kind of equitable relief are available?

Answer 26

Specific performance: presumptively available for real estate transactions. (because every parcel of land is unique).

Not available for contracts of personal services

Question 27

What is the Lumley doctrine?

Answer 27

Rarely, a court might grant an injunction prohibiting a breaching party from performing
similar services for a competitor for a reasonable period of time/place (the Lumley
doctrine).

Question 28

Can you get specific performace in the UCC world? (sale of goods)

Answer 28

Specific performance is available only for unique goods like art or custom-made items.

Question 29

What is the right of reclamation (UCC)

Answer 29

arises when an unpaid seller tries to reclaim goods that were sold on credit when the buyer is insolvent

Question 30

How are damages calculated in construction contracts?

Answer 30

In construction contracts the general measure of damages for a contractor’s failure to begin or to complete a building project is:
contract price and the cost of construction by another builder