Contracts--Legal Remedies

Question 1

The following legal remedies are available for contract breaches:

Answer 1

(1) expectation damages (compensatory damages);
(2) reliance damages;
(3) consequential damages;
(4) incidental damages; AND
(5) restitution damages.

Question 2

Punitive Damages in Breach of Contract Claims

Answer 2

Punitive damages are generally NOT available in a breach of contract action, but may be awarded in a contract action involving corresponding tort claims that allow such damages

Question 3

Expectation Damages

Answer 3

The general measure of damages for a breach of contract are expectation damages. Expectation damages arise directly from the breach, and are an attempt to put the non-breaching party in the same position it would have been in but for the breach.

To recover, the damages must be:

(1) caused by the defendant (actual cause);
(2) foreseeable (proximate cause);
(3) certain (damages cannot be speculative); AND
(4) unavoidable (the plaintiff must take reasonable steps to mitigate his losses).

An award of damages must account
and deduct for any costs the injured party avoided because of the breach.

Question 4

Reliance Damages–In General

Answer 4

Reliance damages are generally the expenditures made by a party in reliance of a contract, and are an attempt to put the non-breaching party in the position it would have been if the contract never existed.

Question 5

Reliance Damages–Requirements for Availability

Answer 5

Reliance damages are available when:

(1) a plaintiff acted in reliance on the defendant’s agreement to perform under a contract; AND
(2) the plaintiff’s reliance was foreseeable. I

f expectation damages are too speculative, the court may award reliance damages instead.

Question 6

Consequential Damages

Answer 6

Consequential damages arise indirectly from the breach, and are awarded because of the injured party’s special circumstances.

To recover, the damages MUST be:
(1) reasonably foreseeable at the time of contract formation;
(2) arise from the plaintiff’s special circumstances that the defendant knew or had reason to know of; AND
(3) certain (the damages cannot be speculative).
An award of damages must account for and deduct for any costs the injured party avoided because of the breach.

Question 7

May Consequential damages may be limited or excluded by agreement?

Answer 7

Yes, unless the limitation/exclusion is unconscionable.

Question 8

Incidental Damages

Answer 8

Incidental damages are the reasonable costs incurred as a result of a breach of contract (i.e. costs of returning non- conforming goods or caring/storing non-conforming goods).

Question 9

Restitution Damages

Answer 9

Restitution (also referred to as unjust enrichment or quantum meruit) is awarded to prevent unjust enrichment, and is available when one party confers a benefit onto another party (even if there is no enforceable contract). Damages will be awarded based on the value of the benefit conferred upon the defendant.

A party CANNOT recover both expectation and restitution damages.

Question 10

Can a party recover both expectation and restitution damages?

Answer 10

No

Question 11

Liquidated Damages–Enforcing a Liquidated Damages Clause

Answer 11

Liquidated damages will be enforced if:

(1) the amount of damages is difficult to estimate at the time the contract was formed; AND
(2) the amount is reasonable to the actual damages suffered.

Note: Cannot be a penalty

Question 12

If the liquidated damages clause is valid, then:

Answer 12

only that amount is valid.

Question 13

If the liquidated damages clause is invalid, then:

Answer 13

actual damages are available.

Question 14

For a breach of contract concerning the SALE OF LAND, the BUYER may recover:

Answer 14

(1) any amount paid;
(2) the difference between the fair market value of the land at the time of the breach and the contract price;
(3) expenses incurred in investigating title and preparing necessary paperwork;
(4) expenses incurred in preparing to occupy the land;
(5) possible consequential damages; AND
(6) interest.

Question 15

For a breach of contract concerning the SALE OF LAND, the SELLER may recover:

Answer 15

The seller normally recovers the “earnest money” deposit as liquidated damages for breach of a land sale contract.

Question 16

Under the UCC, when a SELLER breaches a contract, the BUYER is entitled to:

Answer 16

either:
(1) Cover Damages;
(2) Market Damages; OR
(3) Loss-in-Value Damages.

In addition, the buyer may recover incidental and consequential damages.

Question 17

UCC Buyer’s Remedies–Cover Damages

Answer 17

Cover Damages are the difference between the contract price and the price of substitute goods. This is used as the measure of damages if the buyer covered in good faith.

Question 18

UCC Buyer’s Remedies–Market Damages

Answer 18

Market Damages are used if the buyer did not cover in good faith or did not cover at all, and are the difference between the market price and the contract price.

Question 19

UCC Buyer’s Remedies: Loss-in-Value Damages

Answer 19

Loss-in-Value Damages are used if the buyer keeps the non- conforming goods, and is the difference between the value as promised and the value of the non-conforming goods.

Question 20

Under Article 2 of the UCC, when a BUYER breaches a contract for the sale of goods, the SELLER has the following remedies:

Answer 20

(a) withhold delivery of the goods;
(b) cancel;
(c) recover cover damages (the difference between the resale price and the contract price of the goods), which is used if the resale was made in good faith and in a commercially reasonable manner.;
(d) recover market damages (the difference between the market price at the time and place for tender);
(e) recover lost profits if the seller is a lost volume seller (a seller who regularly engages in the sale of the goods at issue and has unlimited inventory);
(f) stop delivery of goods in the possession of a carrier or bailee when he discovers the buyer to be insolvent;
(g) stop delivery of carload, truckload, planeload, or larger shipments of goods when the buyer breaches; OR
(h) replevy identified goods in certain instances when the buyer is insolvent.

Seller is also entitled to recover incidental damages.

Question 21

UCC Seller’s Remedies–Incidental Damages

Answer 21

A seller is also entitled to recover incidental damages, which include any commercially reasonable costs incurred resulting from the breach.

Question 22

UCC Seller’s Remedies–Right to Replevy (Repossess) Identified Goods

Answer 22

Under Article 2 of the UCC, an unpaid seller generally has no right to repossess (replevy) goods that he sent to a buyer.

However, a seller of goods may repossess the goods he sent to a buyer if:

(1) the buyer was insolvent when it received the goods; AND
(2) the seller makes a demand within 10 days after the buyer received the goods.

HOWEVER, if a misrepresentation of solvency had been made to the seller in writing within three months prior to the delivery of the goods, the 10-day limitation to make a demand no longer applies.

Question 23

Unjust Enrichment (Quasi-Contract)–In General

Answer 23

A quasi-contract is a contract implied by LAW and is used to prevent the unjust enrichment of the defendant.

Only restitution or reliance damages may be awarded under a quasi-contract.

Question 24

Unjust Enrichment (Quasi-Contract)–Requirements

Answer 24

A quasi- contract will be created if:

(1) the plaintiff confers a benefit upon the defendant;
(2) the plaintiff had a reasonable expectation he would be compensated for the benefit;
(3) the defendant requested the benefit (express or implied); AND
(4) the defendant would be unjustly enriched if not forced to compensate the plaintiff.