Contract Remedies

Question 1

Potential damage limitation issues

Answer 1

The concepts below have the potential to limit a damages award.

a. Foreseeability: Damages must be foreseeable by a reasonable person at the time of contracting, or if the damages are unusual the defendant needs actual notice of their possibility.
b. Duty to mitigate losses: This comes up most frequently in consequential damages for a sales contract where the buyer does not try to “cover” by obtaining goods from an alternate supplier.
c. Certainty: Damages must be able to be calculated with certainty, and not too speculative (e.g., lost profits for a new business).

Question 2

Expectation damages

Answer 2

Expectation damages compensate a plaintiff for the value of the benefit plaintiff expected to receive from the contract. Expectation damages put the plaintiff in the position he would have been in if the contract was performed. (Also called compensatory damages.)

Question 3

Buyer’s UCC Expectation Damages-Seller has goods and seller in breach:

Answer 3

1. If the buyer covered: Damages are the difference between the contract price and the cover price.
2. If the buyer did not cover: Damages are the difference between the contract price and the market price at the time the buyer learned of the breach.
3. In addition, with either method the buyer can also recover consequential damages and incidental damages.

Question 4

Seller’s UCC Expectation Damages-Seller has goods and buyer in breach:

Answer 4

1. If the seller resold the goods: Damages are the difference between the contract price and the resale price.
2. If the seller did not resell the goods: Damages are the difference between the contract price and the market price.
3. Seller is a “lost volume” seller: A “lost volume” seller can recover lost profits if seller: a. Has a big enough supply to make both the contracted sale and the resale; b. Would have likely made both sales; and c. Would have made a profit on both sales.
4. In addition, the seller may also recover for incidental damages, but not consequential damages.

Question 5

Buyer’s UCC damages— buyer has goods and seller in breach

Answer 5

Typically seller has tendered defective goods and the buyer has kept them. Damages are the difference between perfect goods and the value as tendered.

Question 6

Seller’s UCC damages— buyer has goods and buyer in breach

Answer 6

The measure of damages is the full contract price.

Question 7

Consequential

Answer 7

Consequential damages compensate for damages that are a direct and foreseeable consequence of the contract nonperformance and are unique to each plaintiff (e.g., lost profits).

Question 8

Reliance damages

Answer 8

Reliance damages put the plaintiff in the position he would have been in had the contract never been made. They are used primarily where there is a contract but the expectation damages are too uncertain to calculate.

Question 9

Liquidated damages

Answer 9

Liquidated damages are damages in an amount stipulated to in the contract. They are allowable when actual damages are difficult to calculate, and the amount agreed to is a reasonable approximation of the anticipated loss from a breach. The clause can’t appear punitive and, if proper, provides the only measure of damages recoverable for breach.

Question 10

Nominal damages

Answer 10

Nominal damages are awarded where the plaintiff’s rights have been violated but no financial loss has been sustained.

Question 11

Punitive damages

Answer 11

Punitive damages are not awarded for a standard breach of contract.

Question 12

Quasi-contract

Answer 12

Quasi-contract is not actually a “contract” at all; rather, it is a contract implied in law to prevent injustice where there is no enforceable contract but some relief is fair because the defendant has derived a benefit and it would be unfair to allow defendant to keep that benefit without paying money to the plaintiff in restitution. Typical situations are:

a. No attempt to contract, but defendant derived a benefit.
b. Unenforceable contract.
c. Plaintiff in material breach but defendant received a benefit.

Question 13

Replevin

Answer 13

Replevin applies when the plaintiff wants her personal property returned.

Question 14

Ejectment

Answer 14

Ejectment applies when the plaintiff wants her real property returned.

Question 15

Reformation

Answer 15

Reformation rewrites a contract to accurately reflect the agreement of the parties where the writing is in error, such as a scrivener’s error.

Question 16

Rescission

Answer 16

Rescission permits a party to undo a bargain.

Question 17

Grounds for rescission or reformation

Answer 17

Allowed where a contract has resulted from fraud, misrepresentation, duress, or mistake.

Question 18

Specific performance

Answer 18

Specific performance applies where a party is ordered by the court to render the promised performance under the contract (permanent injunction in contract).

1. Valid contract is required (including definite and certain terms).
2. Conditions imposed on the plaintiff must be satisfied.
3. Inadequate legal remedy
4. Mutuality of performance
5. Feasibility of enforcement
6. No applicable defenses (traditional)

Question 19

Inadequate legal remedy

Answer 19

Money damages can be inadequate because:

a. Certainty: The monetary value of the damages can’t be calculated with certainty. 1. Too speculative and uncertain to calculate. 2. Defendant insolvent so a damages award is worthless. 3. Multiplicity of lawsuits: because the breach gives rise to an ongoing problem or multiplicity of lawsuits.
b. Property in question is unique:
1. Real property: Real property is always unique.
2. Special personal property: Where the item is rare or has special personal significance, such as a family bible.

Question 20

Mutuality of performance

Answer 20

Both parties must be eligible to have their performance under the contract ordered by the court.

Question 21

Feasibility of enforcement

Answer 21

The order must be feasible for the court to enforce.

a. Jurisdiction issues: Present a problem where the actions to be supervised are out of the court’s jurisdiction and contempt power.
b. Court supervision issues: 1. Multiple series of events poses greater potential problems. 2. Act requiring skill, taste, or judgment. 3. Personal services (involuntary servitude concerns).