Contractual Remedies Flashcards
Contractual Remedies
1) Damages
2) Quantum Meruit
What is the usual remedy for breach of contract?
Damages
General rule for damages
injured party should be put in the position they would have been in had the breach not occurred
What do you need to prove for damages in contractual remedies?
- Causation
- Martel: not being treated fairly didn’t cause them damages (no proof they would have got the contract)
When it comes to assessing damages
Courts have not come to a united front
2 general options for assessing damages
1) damages in the amount equal to the cost of repair and reinstatement
2) damages in the amount equal to the lower measure of diminution of value
damages in amount of repair and reinstatement includes
in extreme cases, the cost of demolition and rebuilding of a structure
damages in the amount equal to the lower measure of diminution of value
the value of the building project would be the value before the causal breach and value afterward, and the difference in those values would be the quantum of the damage award.
Ruxleigh Electronics and Construction Ltd v Forsyth
- Reasonableness is central
- Damages need to reflect the loss sustained
- Damages are compensatory and not designed to provide gratuitous benefit to injured party
- When claiming reinstatement value of damages intention to fix damage is extremely important
Extending Ruxleigh to project abandonment
1) Will need to look at actual damage suffered AND
2) The intention of the injured party with respect to demolishing the partially completed work and starting again, as this will go to the true value of the loss
Ruxleigh reasonableness analysis
In making that assessment, reasonableness will be of paramount importance
1) Is the damage award sought reasonable?
2) Is the intention to demolish and rebuild reasonable?
Owner generally entitled to
Amount to Rectify Defects
General approach to damages for breach of building contract
reinstatement of the work
When are courts critical to using the General approach to damages for breach of building contract
- When it is extremely disproportionate to do so
- Where cost of rectification is excessive compared to the nature of the defect
What is normally a good measure of reinstatement amount?
Cost of making good a defect (will not necessarily help though)
What is the ordinary measure of reinstatement amount?
difference between the value of contracted for premises and the value of what they got
What is the proper measure of damages where a contract is abandoned by the builder?
the reasonable cost of completion incurred over and above the contract price
Abandoned- why over and above the contract price?
If it was just cost of completion it would not be the total amount of their loss
Wasted expenditures
- Recoverable as damages
- the costs of unsuccessful but reasonable attempts to rectify the situation
Total cost claim
claim in which the causal connection between the actions or omissions by the owner alleged to have caused damages and their consequences are not fully proven
Availability of total cost claims
Only available for contractors/ subcontractors
How to calculate total cost claim
Contractor compares the total costs actually incurred against the contract price and claims the difference
Particular parts in total cost claims
No particular part of the claimed costs overrun is attributed is attributed to any particular compensable event
Total cost claim only available if
No other option (no other way to compute damages is feasible)
Not entitled to total cost claim if
you could identify and link the particular loss to a particular action
Condition for total cost claims
None of the additional costs can be caused by the contractor’s own acts or inefficiencies
Modified total cost approach
Contractor claims total cost actually incurred minus the contract price BUT claimed costs are adjusted to reflect the portion of total cost overrun that is attributable to the contractor
Quantum Meruit
Recovery based on an implied promise by the owner to pay for work performed for its benefit without legal contract
2 forms of Quantum Meruit
- Contractual Quantum meruit
2. Restitutionary Quantum Meruit
Contractual Quantum meruit
Payment of a reasonable price for contracted work
When is Contractual Quantum meruit available?
where parties have either not fixed a contract price or the contract price is deemed to have been replaced by another contract without a price
Example of deemed to be replaced (Contractual Quantum meruit)
unit price contracts where there is more than 20% than estimate by industry standard, but if you hadn’t repriced it
elements to be successful for Contractual Quantum meruit
P needs to prove:
- That there was a contractual relationship between the parties
- The parties agreed that certain work was to be done but without agreement on the price to be paid
- The defendant’s accepted the work
- Both parties had, or should have had, an expectation that the work was not being rendered gratuitously
- The payment sought is reasonable renumeration for the work done (AKA the merited quantum- what amount of $ is merited for the work done?)
Restitutionary Quantum Meruit
Applied where the defendant’s liability is quasi-contractual (in the absence of a consensual, express or implied agreement)
Where does Restitutionary Quantum Meruit come in?
Comes in where there is either no contract or the contract is either inapplicable or cannot be maintained (no contractual relationship)
Elements for Restitutionary Quantum Meruit
Plaintiff needs to demonstrate that they are entitled to payment for work performed for the benefit of the defendant
Examples of circumstances where RQM comes up?
1) Contractor performed work without formal contract where the contract has been abandoned or fundamentally changed by the owner such that the original contract is no longer applicable
2) Work performed pursuant to a contract but not sufficient to satisfy performance obligations under that contract (where performance is a condition precedent to payment)
For RQM to be available need
needs to have been a request by the owner or an agent of them for the work (needs to have asked for it)
Request by owner or agent (RQM)
Either express or implied
Ways to get around requirement request (RQM)
- Owner accepts the work
- Silence in light of performance can be consent to have value added in certain circumstances
Reasonable amount (QM)
The amount awarded is a reasonable amount the work is worth
What can and cannot factor into Reasonable amount (QM)
- Lost profit doesn’t factor into this analysis
- A fair Profit margin can
Repudiation
common law doctrine that allows a party to treat the contract as terminated, due to breach egregious enough to deny the substance of what was contracted for
Quantum Meruit upon Repudiation?
When the contract has been repudiated the innocent party (ex: contractor) can advance a claim of quantum meruit
What basis can the claim be on for Quantum Meruit upon Repudiation?
- on the basis of work actually performed and equal to a reasonable payment for that work
- Any deficiencies in work at time of repudiation are deducted
- No account needs to be taken for owners cost to complete the work
What about contractor who completes in the face of repudiation?
A contractor who elects to complete a contract in the face of repudiation will not be able to collect in quantum meruit basis
Other heads of damages
1) Lost profit
2) Mental distress damages
3) Punitive damages
Lost profit
Awarded where the injured party can show that a specific contract was lost as a result of breach of contract
Lost profit needs to be proven
on a balance of probabilities
Cases with less complete information that still can get lost profit
- needs to be shown that it is possible that contracts have been lost because of the breach and that it is probable that it would have materialized had the breach not occurred
- Don’t need to show 100%
Plaintiff needs to show for lost profits
reasonable chance of profits rather than speculative chance of economic gain (again certainty not required)
Damages for mental distress available where
Damages for mental distress are available for breach of contract where there is a “wanton or reckless breach” of such character that “the promisor had reason to know when the contract was made that a breach would cause such suffering, for reasons other than pecuniary loss”
Mental Distress Damages breach must cause
damage to injured party more than just financially
Mental Distress Damages only available…
Only available for breach of contract where peace of mind is the very matter contracted for
Ex of contract where peace of mind is the very matter contracted for
Holiday or insurance
Application of Mental Distress Damages to home renovation
- Won’t apply to home renovation
- Might be different if what you are contracting for is security measures in your home
Hadley v Braxendale
- Mental distress damages
- Reasonably foreseeable
- If they knew or ought to have known one contracting party had a mental disorder for which breach would cause mental distress such damages may be recoverable
Thin skull doctrine application
- Not applicable in contracts cases
- In torts you take them how you find them
- In contracts the parties bargain with each other and are made aware of and agree on obligations and risks they are undertaking
Basis for Mental Distress Damages is
what was in the reasonable contemplation of the parties
Cost of preparing claim
- Not a head of damage
- Would be accounted for in request for cost if you win
Punitive Damages
awarded against a defendant in exceptional cases for malicious, oppressive or high-handed misconduct that offends the court’s sense of decency
Punitive Damages bear no relation to…
what the plaintiff should receive by way of compensation
Punitive damages designed to
punish the offender
Public element to punitive damages
deterring others from acting in an alike manner
When are punitive damages available in breach of contract?
where conduct complained of is an actionable wrong
Punitive damages only awarded when…
general and aggravated damages are still insufficient to achieve the goal of punishment/deterrence
Aggravated damages
- Compensatory
- Take into account intangible injuries
- Frequently covers the same conduct as punitive
Circumstances Aggravated damages awarded in
circumstances of high-handedness or wilful or reckless indifference to the plaintiff’s rights
Difference between aggravated and punitive
Aggravated are not necessarily malicious or high-handed (similar conduct as punitive but are usually with respect to intangible injury such as mental distress and hurt feelings)
Duty to mitigate
The plaintiff cannot reasonably recover damages that could have been avoided by their own mitigation efforts
Standard of mitigation
Mitigation is not a standard of perfection but reasonable steps to mitigate need to be taken
What about when mitigation efforts go wrong?
If they take reasonable steps they can recover the cost of steps even if their efforts made it worse
Why cover when mitigation goes wrong?
we want to encourage people to at least try to mitigate and if we insist on a duty to mitigate we cannot hold people to a standard of perfection
Application of Ruxleigh to mitigation in abandonment
- Where a contractor or design pro abandons work after having done a substantial part of it, the owner cannot recover the costs of having all the work entirely redone by a different contractor
- Have to be reasonably
Mitigating workforce in abandonment
- Hiring new workforce not always contrary to mitigation
- Owner does not fail to mitigate if it hires a new GC instead of acting as GC itself if there is no evidence the owner has sufficient experience to be GC
- Completing owner doesn’t have to use former GC’s subs
