Contracts Remedies Part 1

Question 1

2 Points about Breach

Answer 1

1. It’s easier to breach a sale of goods than under CL because under UCC performance requires perfect tender. Anything else is a breach. Perfect performance not required for other Ks.
2. Warranties are often made in goods contracts. If goods don’t live up to warranties, that’s a breach. Can seek remedies for those breaches even if you keep the goods.

Question 2

Preferred Remedy in K Law

Answer 2

Put the nonbreaching party in the position they would have been in if there had been no breach.

Write this on an essay:
“The goal of contractual remedies is to put the nonbreaching party in the position they would have been in had there been no breach.”

If that doesn’t work, restore them to the “status quo ante” like reliance or restitution, restoring them to their situation before entering the K.

Question 3

Expectation Damages

Answer 3

The first remedy is money. This would allow them to buy substitute performance or otherwise carry out the goal of the K.

Compensatory Damages = compensate party for what’s missing under the K. Several types
1. Expectation Damages = Damages based on what nonbreaching party expected to get out of the K. Example: you pay me 20k to buy my boat. Substitute performance would be let’s say you have to buy a similar boat for 25k. It would be a boat like the one in the original K. You expected to only pay 20k though. So you need money to compensate you, that’s 5k. Because if there had been no breach you would have still paid 20k. So 25k - 20k = 5k.

Question 4

Incidental and Consequential Damages

Answer 4

Incidental Damages = costs reasonably incurred as natural consequence of any breach. Recoverable IN ADDITION to expectation damages. Things like storage fees, return fees, inspection fees, etc.

Consequential Damages = the breacher may or may not owe damages for the consequences of the breach. These depend on the circumstances. Only reasonably foreseeable damages are recoverable. To recover, the nonbreaching party must show that the breaching party knew or should have known about the special circumstances that gave rise to the damages at a time that would impact the K price/the time the K was made.

Example: if I knew you were buying my boat to sign up for a fishing tourney then I would know that if I breached you would lose your entry fee, so if I knew that, you could recover consequential damages

Question 5

Reliance Damages

Answer 5

Reliance damages restore the plaintiff to his pre-K position. Losses suffered in reasonable reliance on the K. Put him in starting position.

What if the expectation damages are too speculative? Often occurs with opening a new business. Someone breaches a K and prevents the business from opening. If there’s no track record, then reliance damages are more appropriate than expectation damages.

Example: builder is late and the entrepreneur misses Black Friday and the rest of the holiday season. The entrepreneur is entitled to damages, but too hard to calculate expectation damages (what the entrepreneur actually would have made). Many brand new businesses fail. Hard to prove a figure with reasonable certainty. Therefore, apply reliance damages to reimburse entrepreneur for his change in position. Give him back the monetary value of any detriment he incurred. Maybe 1k in advertising and 2k in employee salaries that got shifts cancelled. 1.5k in food for opening day. That was all made IN RELIANCE on the K and therefore collectible.

Question 6

Damages Priority

Answer 6

Expectation Damages, then Reliance Damages

Question 7

Liquidated Damages

Answer 7

This is when the parties agree to damages in advance.

These must conform to 2 reqs:
1) actual damages must be difficult to predict
2) amount must have been reasonable forecast of actual damages that result

The rationale is that we don’t allow punitive damages in contracts. Don’t want these to be PENALTIES. NO PENALTIES. How do you spot them? You know it when you see it. Something way out of line. A liquidated damages clause that’s like 4x as high as you would reasonably expect. The amount would have to be obviously a penalty or even say “penalty clause”. If the court refuses to enforce LD clause, what’s the reason? Usually because it’s a penalty.