Remedies Flashcards
If the legal remedy (i.e., money damages) is inadequate, the nonbreaching party may seek _______.
specific performance
What is specific performance?
an order from the court to the breaching party to perform or face contempt of court charges.
(1) Specific performance is _______ available for land sale contracts, because _______.
(2) Specific performance for is available for goods that are _______ or _______ at the time performance is due.
(1) always; all land is unique
(2) rare; unique
Specific performance is _______ available for breach of a contract to provide services, because of _______ and because _______.
(1) never
(2) problems of enforcement (it would be difficult for the court to supervise)
(3) the courts feel it is tantamount to involuntary servitude, which is unconstitutional
A court may _______ a breaching employee from working for a competitor throughout the duration of the contract if the services contracted for are _______ or _______.
(1) enjoin
(2) rare
(3) unique
Most courts will grant an order of specific performance to enforce a contract not to compete if:
(1) The services to be performed are unique (thus rendering money damages inadequate); AND
(2) The covenant is reasonable
For purposes of specific performance for services, to be reasonable:
(1) The covenant must be reasonably necessary to protect a legitimate interest of the person benefitted by the covenant (i.e., an employer or the purchaser of the covenantor’s business);
(2) The covenant must be reasonable as to its geographic scope and duration (i.e., it cannot be broader than the benefitted person’s customer base and typically cannot be longer than one or two years); AND
(3) The covenant must not harm the public
Name and define the 3 equitable defenses against specific performance.
(1) Laches - a claim that the plaintiff has delayed bringing the action and that the delay has prejudiced the defendant;
(2) Unclean hands - a claim that the party seeking specific performance is guilty of wrongdoing in the transaction being sued upon; AND
(3) Sale to a bona fide purchaser - a claim that the subject matter has been sold to a person who purchased for value and in good faith
What are the 3 nonmonetary remedies for buyers under the UCC?
(1) Cancellation
(2) Buyer’s right to replevy identified goods
(3) Buyer’s right to specific performance
What is a buyer’s remedy of cancellation?
If a buyer rightfully rejects goods because they do not conform to the contract, one of her options is simply to cancel the contract.
What is the right to replevy?
The right to seize goods
If a buyer has made at least partial payment of the purchase price of goods that have been identified under a contract, and the seller has not delivered the goods, the buyer may replevy the goods from the seller in two circumstances:
(1) The seller becomes insolvent within 10 days after receiving the buyer’s first payment; or
(2) The goods were purchased for personal, family, or household purposes
In either case, the buyer must tender any unpaid portion of the purchase price to the seller.
The buyer may replevy undelivered, identified goods from the seller if the buyer, after reasonable effort, is unable to secure _______.
adequate substitute goods
Under the UCC, if the goods contracted for are unique (or in other proper circumstances), the court may order _______ even where the goods have not yet been identified to the contract by the seller.
specific performance
What are the 4 nonmonetary remedies for sellers under the UCC?
(1) Right to withhold goods
(2) Right to recover goods
(3) Ability to force goods on buyer
(4) Right to demand assurances
Under the UCC, if the buyer fails to make a payment due on or before delivery, the seller may _______.
withhold delivery of the goods
Under the UCC, the seller may withhold goods when the goods are sold on credit and, before the goods are delivered, the seller discovers that the buyer is _______.
insolvent
Under the UCC, if a seller learns that a buyer has received delivery of goods on credit while insolvent, the seller may _______.
reclaim the goods upon demand made within 10 days after the buyer’s receipt of the goods
EXCEPTION: The 10-day limitation does not apply if a misrepresentation of solvency has been made in writing to the particular seller within 3 months before delivery.
Under the UCC, the seller’s ability to force goods on a buyer is limited to _______ when the seller is unable to resell the goods to others at a reasonable price.
an action for price
The usual goal of compensatory damages for breach of contract is to:
put the nonbreaching party in the position they would have been in had the promise been performed.
What are the main categories (and sub-categories) of monetary damages?
(1) Compensatory (i.e., expectation, reliance, incidental, and consequential)
(2) Punitive
(3) Nominal (token)
(4) Liquidated
What are expectation damages?
Sufficient damages for the nonbreaching party to buy a substitute performance
This is the standard measure for damages for breach of contract.
What are reliance damages? When are they awarded?
Reliance damages award the plaintiff the cost of their performance (i.e., they are designed to put the plaintiff in the position they would have been in had the contract never been formed).
If the plaintiff’s expectation damages are too speculative to measure, the plaintiff may elect to recover those damages they suffered based on their reasonable reliance on the contract.
What are incidental damages?
Incidental damages are most commonly associated with contracts for the sale of goods and typically include:
(1) expenses reasonably incurred by a buyer in inspection, receipt, transportation, care, and custody of goods rightfully rejected and other expenses reasonably incident to the seller’s breach, and
(2) by the seller in storing, shipping, returning, and reselling the goods as a result of the buyer’s breach
What are consequential damages? When are they awarded?
Consequential damages are special damages and reflect losses over and above standard expectation damages, typically arising because of the nonbreaching party’s particular circumstances, and most often consisting of lost profits.
Consequential damages may be recovered only if, at the time the contract was made, a reasonable person would have foreseen the damages as a probable result.
To recover consequential damages:
(1) The breaching party must have:
(2) The plaintiff must prove that:
(1) known or had reason to know of the special circumstances giving rise to the damages
(2) the losses suffered were certain in their nature and not speculative
True or false: Punitive damages are regularly awarded in contract cases.
False. Punitive damages are generally NOT awarded in contract cases.
What are nominal damages?
Nominal (token) damages (e.g., $1) may be awarded when a breach is shown but no actual loss is proven.
What are liquidated damages?
Damages agreed upon by parties to a contract before breach occurs stipulating what damages are to be paid in the event of a breach.
Liquidated damages must be in an amount that is reasonable in view of the actual or anticipated harm caused by the breach.
What are the requirements for enforcement of a liquidated damages clause?
(1) Damages for contractual breach are difficult to estimate or ascertain at the time the contract is formed; AND
(2) The amount agreed on is a reasonable forecast of compensatory damages in the case of breach
What is the test for reasonableness in the context of liquidated damages?
Comparison between the amount of damages prospectively probable at the time of contract formation and the liquidated damages figure.
What happens if a liquidated damages amount is unreasonable?
The courts will construe this as a penalty and will not enforce the provision
True or false: Even if no actual money or pecuniary damages have been suffered, courts will a liquidated damages clause so long as it passes the test for reasonableness.
True
Under the UCC, if the seller doesn’t deliver, or the buyer properly rejects the goods or revokes acceptance of the goods, the buyer’s basic damages consist of the difference between the contract price and either:
(1) the market price OR
(2) the cost of buying replacement goods, PLUS incidental and consequential damages, if any, LESS expenses saved as a result of the seller’s breach
Under the UCC, if the buyer chooses the cover measure (difference between contract price and cost of buying replacement goods), the buyer must:
make a reasonable contract for substitute goods in good faith and without unreasonable delay
Under the UCC, if the buyer measures damages by the difference between contract price and market price, market price usually is determined:
as of the time the buyer learns of the breach and at the place of tender
Under the UCC, if the buyer accepts goods that breach one of the seller’s warranties, the buyer may recover as damages:
“loss resulting in the normal course of events from the breach”
The basic measure of damages in such a case is the difference between the value of the goods as delivered and the value they would have had if they had been according to the contract, PLUS incidental and consequential damages
Under the UCC, to recover damages for any defect as to accepted goods, the buyer must:
notify the seller within a reasonable time after they discover or should have discovered the defect
Under the UCC, the measure of damages when the seller anticipatorily breaches the contract is:
the difference between the market price at the time the buyer learned of the breach and the contract price
Under the UCC, a seller is liable for consequential damages arising from their breach if:
(1) they had reason to know of the buyer’s general or particular requirements, and
(2) the subsequent loss resulting from those needs could not reasonably be prevented by cover
The UCC provides 3 measures for damages for when the buyer wrongfully repudiates or refuses to accept conforming goods. In addition to incidental damages, the seller can:
(1) Resell the goods and recover the difference between the contract price and the resale price
(2) Recover the difference between the market price as of the time and at the place of delivery and the contract price, or
(3) If the above are inadequate because the seller could have made an additional sale, recover under a “lost profits” measure and the difference between the contract price and the cost to the seller
Under the UCC, the seller may maintain an action against the buyer for the full contract price if:
(1) the buyer has accepted the goods and has not paid
(2) the buyer has not accepted the goods, and the seller is unable to resell them at a reasonable price, or
(3) the goods have been lost or damaged at a time the risk of loss was on the buyer
The standard measure of damages for breach of land sale contracts is:
the difference between the contract price and the fair market value of the land
Regardless of when the breach occurs—before performance, after part performance, or after full performance—the standard measure of an employee’s damages in a breach of employment contract case is:
the full contract price (though such damages may be reduced if the employee fails to mitigate by seeking other employment)
If an employee materially breaches an employment contract, the employer is entitled to recover:
the cost of replacing the employee (i.e., the wages the employer must pay to a replacement employee minus the breaching employee’s wages).
The breaching employee may offset money owed for work done to date.
When employment is at will, it may be:
terminated at any time, by either party, for any reason or no reason
Thus, termination of at-will employment does not result in breach.
If a construction contract is breached by the owner, the builder will be entitled to:
profits that would have resulted from the contract, plus any costs expended.
If the contract is breached after construction is completed, the measure is the full contract price plus interest.
If a construction contract is breached by the builder, the owner is entitled to:
the cost of completion plus reasonable compensation for the delay.
Most courts allow the builder to offset or recover for work performed to date to avoid unjust enrichment of the owner.
If a contract calls for payments in installments and a payment is not made, there is only a _______.
partial breach
Under the common law, what are avoidable damages (mitigation)? What is their legal effect?
Avoidable damages (mitigation) are damages that could have been avoided with reasonable effort, and may not be recovered in an action for breach of contract. Thus, the nonbreaching party must refrain from piling up losses after they receive notice of breach. They must not incur further expenditures and costs, and they must make reasonable efforts to cut down their losses by procuring a substitute performance at a fair price. Should they not do so, they will not be allowed to recover those damages that might have been avoided by such mitigation after the breach. Generally, a party may recover the expenses of mitigation.
In an action for breach of an employment contract, if the breaching employer can prove that a comparable job in the same locale was available, then contract damages against the breaching employer for lost wages will be:
reduced by the wages that the employee would have received from that comparable job
Generally, in a contract to manufacture goods, if the person for whom the goods are being manufactured breaches, the manufacturer is under a duty to mitigate by:
not continuing work after the breach, unless the facts are such that completion of the manufacturing project will decrease rather than increase damages
A builder does not owe a duty to avoid consequences of an owner’s breach by securing other work, but does have a duty to mitigate by:
not continuing work after the breach, unless completion will decrease damages
What is restitution?
Restitution is not really part of contract law, but rather is a distinct concept. Restitution is based on prevent unjust enrichment when one has conferred a benefit on another without gratuitous intent. Restitution can provide a remedy not only when a contract exists and has been breached, but also when a contract is unenforceable, and in some cases when no contractual relationship exists at all between the parties.
When a contract is unenforceable or no contract between the parties exists, an action to recover restitutionary damages is often referred to as an action for:
(1) an implied in law contract,
(2) an action in quasi-contract, or
(3) an action for quantum meruit
Generally, the measure of restitution is:
the value of the benefit conferred
When a contract has been breached and the nonbreaching party hasn’t fully performed, they may choose to cancel the contract and sue for:
restitution to prevent unjust enrichment
True or false: If the plaintiff has fully performed, they are limited to their damages under the contract and may not pursue restitution as a remedy.
True
True or false: A restitutionary remedy is limited to the contract price.
False
Restitution may be available in a quasi-contract action when a contract was made but is:
unenforceable and unjust enrichment otherwise would result
Restitution may be available in a quasi-contract action when there is no contractual relationship between the parties if:
(1) The plaintiff has conferred a benefit on the defendant by rendering services or expending properties;
(2) The plaintiff conferred the benefit with the reasonable expectation of being compensated for its value;
(3) The defendant knew or had reason to know of the plaintiff’s expectation; AND
(4) The defendant would be unjustly enriched if they were allowed to retain the benefit without compensating the plaintiff
Rescission is a remedy whereby the original contract is considered:
voidable and rescinded
The grounds for rescission must have occurred either:
before or at the time the contract was formed
The grounds for rescission are: (5 things)
(1) Mutual mistake of a material fact
(2) Unilateral mistake if the other party knew or should have know of the mistake
(3) Unilateral mistake if hardship by the mistaken party is so extreme it outweighs the other party’s expectations under the contract
(4) Misrepresentation of fact or law by either party as to a material factor in the negotiations that was relied upon, and
(5) Other grounds, such as duress, undue influence, illegality, lack of capacity, and failure of consideration
What is reformation?
the remedy whereby the writing setting forth the agreement between the parties is changed so that it conforms to the original intent of the parties
To reform a contract because of mistake, there must be:
(1) an agreement between the parties,
(2) an agreement to put the agreement in writing, and
(3) a variance between the original agreement and the writing
If a writing is inaccurate because of a misrepresentation, the plaintiff can choose between:
reformation and avoidance
To reform a contract because of misrepresentation, the misrepresentation must relate to:
the content or the legal effect of the record
Misrepresentations as to the subject matter of the agreement aren’t grounds for reformation; rescission and damages are the proper remedy for that.
True or false: Failure to read the record of the agreement precludes a party from obtaining reformation.
False
In cases of reformation, the variance between the antecedent agreement and the writing must be established by:
clear and convincing evidence
Is the parol evidence rule applied in reformation actions? The Statute of Frauds?
No, but many courts will deny reformation if it would add land to the contract without complying with the Statute of Frauds
True or false: reformation is not permitted if the rights of third parties will be unfairly affected.
True
For sales contracts, the UCC provides for a ______ statute of limitations.
4-year
Under the UCC, parties may shorten the period by agreement to _______, but they may not lengthen it.
no less than one year
When does the statutory period begin to run under the UCC?
When breach occurs, regardless of whether the aggrieved party knows about the breach
When does the statutory period begin for breach of warranty actions?
upon delivery of the goods, even if the buyer doesn’t discover the breach until much later
When does the statutory period begin in the event of an express warrant that explicitly extends to future performance of the goods?
when the buyer should have discovered the breach
What is a lost-volume seller? What is the legal effect of being deemed a lost-volume seller?
A lost-volume seller is one who has “unlimited” supply.
For purposes of damages for breach of contract, other damages measures will never be adequate for lost-volume sellers, because they lost the opportunity to make an additional sale, not just the sale which was breached.
Damages for lost-volume sellers is lost profits.
