Contract - REMEDIES Flashcards
REMEDIES
This section discusses the remedies available if in fact a breach has occurred that was not excused
Non-Monetary Remedies
(1) Specific Performance
2) Unpaid Seller’s Right to Reclaim Goods (article 2
SPECIFIC PERFORMANCE
Specific Performance is an Equitable REmedy, available ONLY IF monetary damages are inadequate to compensate the injured party.
- – legal remedy of damages is generally inadequate if the subject matter of the contract is RARE or UNIQUE.
- – Availability of Specific Performance depends on the NATURE OF THE CONTRACT
-e.g. real property? sale of goods? service contract?
Is Specific Performance available in a contract for Real Property?
YES - Specific performance is the USUAL REMEDY because real property is considered unique(even if it’s not REALLY unique)
e.g. Thoreau contracts to sell Walden Pond to Proust. Later Thoreau has second thoughts and backs out. Proust wants Walden Pond, not money. HE CAN GET SPECIFIC PERFORMANCE bc real property is unique
Is Specific Performance available in a contract for Sale of Goods (art. 2) ?
Specific Performance is available ONLY IF the goods are UNIQUE or there are “other proper circumstances” (e.g. an inability to buy substitute goods in the market)
e.g. antique rug
Is Specific Performance available in a SERVICE CONTRACT?
NO, Specific Performance is NOT AVAILABLE in service contracts, But injunctive relief may be
- won’t order involuntary servitude, also problems with enforcement
- But can get an injunction maybe against that person working for someone else, ESPECIALLY if the service is RARE OR UNIQUE
(e.g. of rare or unique services - famous chef in manhattan, don’t want him going across the street and competing right after breaking his contract to you so ct may place in an injunction on him to refrain from working in area for duration of contract)
UNPAID SELLER’s RIGHT TO RECLAIM GOODS (Article 2)
General rule: right to reclaim goods not available under Art. 2
Exception: if Buyer was INSOLVENT when it received the goods AND Seller makes a demand WITHIN 10 DAYS after Buyer received them
BUT if Buyer had resold the goods to a third party, Seller has no right to reclaim the goods against that innocent third party
EXCEPTION: seller can reclaim the goods AT ANY TIME if buyer misrepresented its solvency to seller IN WRITING within 3 MONTHS BEFORE DELIVERY
MONETARY REMEDIES (DAMAGES)
Areas where issues arise
(1) Punitive Damages - not allowed
(2) Liquidated Damages
(3) Expectation Damages
(4) Incidental Damages
(5) Consequential Damages
(6) Avoidable Damages
Punitive Damages
Monetary Remedies
PUNITIVE DAMAGES NOT ALLOWED
Punitive Damages are not awarded for Breach of Contract because the purpose of the contract damages is TO COMPENSATE, NOT TO PUNISH
Liquidated Damages
Monetary Remedies
Liquidated damages provisions will be upheld IF
(1) damages were difficult to estimate and
(2) are a REASONABLE FORECAST OF PROBABLE DAMAGES,
(3) if not reasonable, courts construe as a PENALTY and refuse to enforce
NOTE:
under COMMON LAW, the liquidated damages provision needs to be a reasonable estimate at the time of contracting in light of probable damages
under UCC (art 2) - liquidated damages need to be reasonable either (1) at time of contracting or (2) turn out to be reasonable in light of actual damages
note: liquidated damages are recoverable even if no actual damages have been suffered
EXPECTATION DAMAGES
Monetary Remedies
Expectation Damages put the injured party in as a good a position as full performance. Expectation damages are the GENERAL RULE
e. g. I agree to paint Jim’s house for $10k. House has to pay another painter $13k when I breach. House can recover $3k from me.
e. g. same facts but Jim refuses to pay me after I have started painting and spent $5,000. I expected to make $1500 in profit. My damages are $6500, which covers my costs and gives me my expected profit
Buyer’s Damages (art. 2)
EXPECTATION DAMAGES under Sale of Goods (art. 2)
(Monetary Remedies)
Buyer’s Damages - 3 options
(1) COVER DAMAGES = cover price - contract price if buyer covers in GOOD FAITH
- -note, if covered in good faith, it is ok if buyer paid a little more than market price
(2) MARKET DAMAGES = market price - contract price, if buyer doesn’t cover in good faith, or doesn’t cover at all
(3) LOSS IN VALUE = Value as promised - value delivered….if buyer keeps non-conforming goods
Seller’s Damages (art. 2)
EXPECTATION DAMAGES under Sale of Goods (art. 2)
(Monetary Remedies)
Seller’s Damages - 4 options
(1) RESALE DAMAGES = contract price - resale price….if seller resells in GOOD FAITH
(2) MARKET DAMAGES = contract price - market price….if seller does not resell in good faith, or does not resell at all
(3) LOST PROFIT -if seller is a Lost volume dealer
situation where, But for the Buyer’s breach, seller would have made 2 sales instead of one
DAMAGES ARE USUALLY DEALER’s PROFIT it would have made on initial sale (ie contract price - cost to seller)
—watch out for this, look for **DEALER
(4) CONTRACT PRICE: If seller CAN’T RESELL THE GOODS (e.g. they are custom made and no one else would want them)
INCIDENTAL DAMAGES
Monetary Remedies
Incidental Damages - are costs to the injured buyer or seller of transporting, insuring, or caring for goods after a breach and arranging a substitute transaction
e.g. after breach for sale of custom dishes, Sam stores the dishes, and advertises them for sale in a newspaper in an attempt to find another buyer - Sam CAN RECOVER these expenses from me
CONSEQUENTIAL DAMAGES
Monetary Remedies
Consequential Damages are damages special to THIS plaintiff that were REASONABLY FORESEEABLE to the breaching party at the time of the contract
NOTE: consequential damages are NOT AVAILABLE to a seller under Article 2
e.g. Miller contracts with UPS to ship a broken mill shaft back to manufacturer. UPS delays in shipping the shaft and Miller has to shut down mill for 9 days. Miller CANNOT recover $20k in lost profit from the mill shut down bc this was not a foreseeable result of UPS’s breach
