Remedies

Question 1

What are the types of compensatory damages for breach of contract claims?

Answer 1

1. Expectation damages - Intended to place the plaintiff in the same economical position as if the contract were fully performed.
2. Consequential damages - Reasonably foreseeable damages related to the contract that are not expectation damages. Plaintiff must establish (1) foreseeability; (2) causation; (3) reasonable certainty as to the amount of damages.
3. Incidental damages - Damages that arise when the non-breaching party is attempting to remedy a breach (e.g. cost of finding a replacement seller in a commercial contract)

Question 2

What are reliance damages in contracts?

Answer 2

Damages that are non-breaching party incurs in reasonable reliance upon the breaching party’s promise to perform. A party cannot recover both expectation damages and reliance damages.

Question 3

What are punitive damages?

Answer 3

Damages meant to punish a defendant who engages in serious misconduct with an improper state of mind, such as malice. Can sometimes be awarded in contract claims for tortious behavior (e.g. fraud).

Question 4

What is restitution?

Answer 4

Damages that are measured by the benefit conferred on the defendant by the plaintiff and awarded on an unjust enrichment theory. A party cannot recover restitution and compensatory damages. Whether there was a tort or breach of contract is irrelevant in a court’s decision to award restitution.

Question 5

What is specific performance?

Answer 5

Where the non-breaching party asks a court to order the breaching party to perform the contract. The following elements must be met:

1. There must definite and certain terms in a valid contract.
2. The non-breaching party has satisfied any conditions precedent.
3. Money damages are inadequate (e.g. unique items such as land, pieces of art, antique cars)
4. It is feasible for the court to enforce and supervise the breaching party’s performance.
5. No defenses exist (laches, unclean hands).

Question 6

What are the grounds for rescission?

Answer 6

1. Mutual Mistake - Occurs when both parties are mistaken as to an essential element of the contract. The contract may be voidable by the adversely affected party if: (1) the mistake existed at the time of contract formation; (2) it relates to a basic assumption of the contract; (3) it causes a material impact on the transaction; and (4) the adversely affected party did not assume the risk of mistake.
2. Unilateral Mistake - Occurs when one of the parties is mistaken as to an essential element of the contract. The mistaken party may seek to void the contract if: (1) he did not bear the risk of the mistake; (2) either (a) enforcement of the contract would be unconscionable or (b) the non-mistaken party caused the mistake, had a duty to disclose or failed to disclose it, and knew or should have known that the other party was mistaken; and (3) there must be an absence of serious prejudice to the other part is rescission is granted.
3. Fraudulent Representation - Requires: (1) a false assertion of fact made knowingly or recklessly without knowledge of its truth; (2) with intent to mislead the other party; (3) that induced assent to the contract; and (4) the adversely affected party justifiably relied on the representation.

Question 7

Besides showing grounds for rescission, what are the other requirements for rescission?

Answer 7

1. Plaintiff must give notice of rescission to defendant as soon as the grounds are discovered
2. Plaintiff must return or deliver any of the benefits of the contract it has received from the defendant.

Question 8

What are the requirements for reformation?

Answer 8

1. The showing of a valid contract
2. A proper ground to request it.
   a. Mutual mistake - Requires that: (1) both parties were unaware of the mistake; and (2) it resulted from the omission of an agreed-to- term, the inclusion of a term not agreed upon, or the altercation of an agreed-to term.
   b. Unilateral mistake - Reformation will be allowed if the party is aware of the mistake and either: (1) fraudulently induced the mistake or (2) does nothing to correct the mistake. If the other party is unaware of the mistake, reformation will not be allowed.
3. No defenses exist (laches and unclean hands)