Remedies Flashcards
Off the contract
Quasi-contract (vague, illegal, impossibility or frustration of purpose, π breached)
On the contract
breach
Specific performance
Order the parties perform the contract
Injunction
requiring a party to refrain from acting
Equitable remedies
specific performance & injunctions
Limitations on equitable remedies
Damages must be inadequate to protect and remedy the injured party
Loveless v. Diehl
land is sufficiently unique to compel specific performance
Cannot get specific performance for
personal services, but can get
injunctions where the loss will cause a large detriment and the skills
are unique or extraordinary
Courts will not generally allow an injunction where the person
will not have reasonable means of making a living
Reliance
Compensate the injured party for all damages incurred while relying on the contract
Restitution
Plaintiff can recover any benefit conferred to the other party
Expectation damages
Full enforcement of the contract – seek to put the injured party in the position they would have been in had the contract been performed
Limitations on Recoverable Damages
Foreseeability, Certainty, Avoidability
Foreseeability
(Hadley v. Baxendale)
Damages must either
1. Arise as the natural consequences of a breach or
2. Where the defendant knew or had reason to know of remote consequences that would occur from breach
a. Minority of courts hold the Tacit Agreement test which requires assent to the extra consequences
§351
1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made.
(2) Loss may be foreseeable as a probable result of a breach because it follows from the breach
(a) in the ordinary course of events, or
(b) as a result of special circumstances . . . that the party in breach had reason to know.
(3) A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that . . . justice so requires . . . .
Neri v. Retail Marine Corp.
Can recover lost profits where there was the capability to perform multiple contracts and one customer breached
1. Can apply to services and goods contracts
Rockingham County v. Luten Bridge Co.
Mitigation
Damages must be calculable with
reasonable certainty (Dempsey)
Assign v Delegate
Assign → assign all rights to another party
Delegation → someone has been given the duty to perform the contract
(Original contract still poses liability if breached)
Where there is a breach of contract, and no defense prevails, the most common remedy is
to award legal damages in the form of expectation damages.
Expectation damages award a plaintiff
the difference in the value that was expected under a contract less what they have receive
Hawkins v. McGee
holding a botched surgical procedure entitled the plaintiff to the difference in value between the promised outcome and what they received
§ 347
Measure of Damages in General
the injured party has a right to damages based on his expectation interest as measured by
the loss in the value to him of the other party’s performance caused by its failure or deficiency,
plus any other loss, including incidental or consequential loss, caused by the breach,
less
any cost or other loss that he has avoided by not having to perform.
Sullivan v. O’Connor
Where expectation damages are not available, a non-breaching party may recover for expenditures spent in reliance and as a result of a contract
Nurse v. Barns
Damages are not limited to the value of the consideration.
J.O. Hooker v. Roberts.
Breaching parties are generally not liable for costs that would have been incurred anyway had the contract been performed
- No storage costs when party did not incur additional expenses for storage
- Administrative costs when paying an employee to work on the contract
- Lost profits (including reasonable profit margin)
KGM Harvesting v. Fresh Network
Buyer may recover the difference between the cost of cover and the K price
Is KGM universally followed
Mostly (e.g. confirmed by Texpar Energy v Murphy Oil) BUT
Others limit plaintiffs to actual lost profits (e.g. Allied Canners v. Victor)
UCC §2-712
Gives an aggrieved buyer the right to cover
(reasonable purchase of goods in substitution)
Why did common law & UCC use “fair market value” / “market prices” to measure damages?
Administrative ease
Using market values can be a problematic way to measure damages when
There isn’t a replacement market (Hawkins)
The thing can’t be priced in a market (unique; non-fungible) & too many markets
Efficient Breach
The breaching party intentionally decides not to uphold their end of the contract (voluntarily breaches the contract) because it is cheaper to pay damages
than to perform under the contract
Groves v. John Wunder Co.
Damages for willful breach of a construction contract, even where there has been substantial performance are awarded as the cost of completing the failed performance
Groves dissent
- Cost of completion is grossly disproportionate (500%
more than the actual value of the property) - Nothing to suggest here that the plaintiff really
wanted this done (i.e., no subjective value)
Peevyhouse v. Garland Coal Mining Co.
Regardless of any agreement of the parties, damages awarded for breach of an agreement to perform remedial work on property should normally be measured by the reasonable cost of performance of the work; but, when the contract provision breached is merely incidental to the main purpose in view and where the economic benefit which would result to the owner from full performance is grossly disproportionate to the cost of performance, damages should instead be limited to the diminution in value resulting to the premises because of the non-performance
§ 348
Economic Waste Doctrine. If a breach results in defective or unfinished construction . . . [the non-breacher] may recover damages based on
(a) the diminution in the market price of the
property caused by the breach, or
(b) the reasonable cost of completing performance
or of remedying the defects if that cost is not clearly
disproportionate to the probable loss in value to him.
Expectation damages can be measured either by
the cost of completion (“CoC”) or the diminution of market value (“DMV”)
Usually, DMV > CoC. In that case, court awards
Cost of Completion
If CoC > DMV, consider factors like
- Is CoC grossly disproportionate?
- Subjective vs. objective value?
- Major breach (purpose of K)?
Martinez v. Southern Pacific Transport
Damages from the loss of a machine’s use are a reasonably foreseeable result of delayed transport.
Tacit Agreement Test
Requires that the defendant was given notice of special circumstances and assented to bearing the risk of those damages.
Minority Rule is rejected almost everywhere
Default Rule on Attorney’s Fees
Not Recoverable
* But statutes and contracts
can provide otherwise!
§352.
Damages are not recoverable for loss beyond an amount that the evidence permits to be established with reasonable certainty.
Why should the “uncertainty” of claimed damages provide a limitation on the recovery for breach of K?
Winston Cigarette
The consequence of giving unlimited discretion to a jury
would “bring ruin upon the party in default,” even though no such loss was contemplated.
* Parties can specify otherwise if they disagree (e.g. liquidated damages clause)
Anglia Television v. Reed
A nonbreaching party may recover expenditures in lieu of lost profits, including those expenditures incurred both before and after the agreement was made.
Security Stove v American Railway Express
When a defendant carrier has notice of peculiar circumstances surrounding a shipment that will result in unusual loss to the shipper in case of delay in delivery, the carrier is responsible for the actual damages sustained by the shipper from the carrier’s delay.
§349
Consequences. Because doctrine is (§352.) usually affects lost profits/revenues per expectation, plaintiffs may switch their theory of remedy, opting instead to seek reliance-based damage
§ 350. AVOIDABILITY DOCTRINE
(1) Except as stated in Subsection (2), damages are not
recoverable for loss that the injured party could have
avoided without undue risk, burden, or humiliation.
(2) The injured party is not precluded from recovery by the
rule stated in Subsection (1) to the extent that he has
made reasonable but unsuccessful efforts to avoid loss.
Rockingham County v. Luten Bridge Co.
When a non-breaching party in a contract for services receives notice of another party’s breach, the non-breaching party must treat the contract as broken when notice is received, cease performance, and sue for any losses sustained from the breach as well as profits that would have been realized upon performance.
Parker v. Twentieth Century Fox
While there is a general duty to mitigate losses, those efforts need only be reasonable
under the circumstances.
Neri v. Retail Marine.
Can recover lost profits where there was the capability to perform
multiple contracts and one customer breached
1. Can apply to services and goods contracts
A seller of goods or services can recover lost profits from a breaching buyer
if they are a lost volume vendor
lost volume vendor
can supply the same goods or services to others simultaneously.
Where the seller is forced to find another buyer, the original buyer’s breach could have
awarded the seller two contracts. As a result, the buyer is liable for the lost profits from their breach.
§346
RIGHT TO NOMINAL DAMAGES.
1) The injured party has a right to damages for any breach by a party against whom the contract is enforceable unless the claim for damages has been suspended or discharged.
(2) If the breach caused no loss or if the amount of the loss is not proved under the rules stated in this Chapter, a small sum fixed without regard to amt. of loss will be awarded as nominal damages.
Liquidated damages
specify a set amount of money as damages in the event of breach.
(LDC) Courts will not enforce a provision that is
merely a penalty to the breaching party.
However, they must be either (1) reasonable as a prospective view of future losses or (2)
reasonable in light of actual damages sustained. Where neither prong is met, a liquidated damages provision will generally not be enforced. Kemble v. Farren.
To determine whether a liquidated damages clause is valid, a court will
use a three-part test:
(1) was there intent for the clause to be a penalty,
(2) are actual or forecasted damages difficult to calculate, and
(3) is the provision a reasonable estimate of damages?
Wassenaar v. Towne Hotel.
UCC § 2-718
(1) Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty.
Lake River Co v. Carborundum Co.
A contract provision that specifies a single unmodifiable sum to be paid as damages for all breaches of the contract, regardless of seriousness, is an unenforceable penalty clause.
§ 356
Damages for breach . . . may be liquidated in the agreement but only at an amount that is reasonable in light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss.
A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty.
Default Rule for Contracts for Land
Specific Performance
Default Rule for Sale of Goods
Monetary Damages
UCC § 2-716
Specific performance may be ordered where the goods are unique or in other proper circumstances
In cases involving equity, courts may
either compel action through specific performance, or prevent action through an injunction.
Courts refrain from ordering specific performance unless
the subject of the contract is sufficiently unique (inc. unique goods, cases in which a legal remedy will not adequately compensate the plaintiff, or where the subject is rare and not easily obtainable)
Presumptive form of relief for breach of contract
Monetary damages
BUT can be rebutted by showing damages would be inadequate, for example when the subject of the contract is unique
Problems w/ Specific Performance of Personal Service Contracts
- Moral (court-enforced slavery)
- Practical (administration issues)
- Consent Theory of Contract
-How often would people agree to be jailed for breach?
-If they did, isn’t that a penalty clause?
The Case of Mary Clark
Moral problems w/ specific performance (court-enforced slavery)
Lumley v. Wagner
injunction serves as an indirect method of coercing a person to perform a
personal services contract
Dallas Cowboys Football Club v. Harris
an injunction is generally not available in personal services unless the person performing has unique and special characteristics and attributes that makes their talent rare and difficult to replace
No specific performance if
K is for personal services (may be possible to get a negative injunction if
unique or exceptional)
Restitution can be
a remedy (compensation for damages) or a cause of action (type of legal claim)
Plaintiffs often rely on restitution
in quasi-contracts because courts will almost never award expectation damages.
Restitution is available when
(1) There is a contract that has been “totally” breached or
repudiated; or
(2) There is no actual contract, but plaintiff deserves some type of
recovery (e.g. quasi-contracts)
> E.g., no attempt to ever form a contract, contract is unenforceable
because of duress, etc
RESTATEMENT § 373(1)
If there is either: “a breach by nonperformance that gives rise to a claim for damages for total breach” or “a repudiation”
Then: “ . . . the injured party is entitled to restitution for any benefit that he has conferred on the other party by way of part performance or reliance. . .
RESTATEMENT § 373(2)
The injured party has no right to restitution if he has performed all of his duties under the contract and no performance by the other side remains due other than payment of a definite sum of money for that performance.
Bush v. Canfield
Restitution is an “off the contract” remedy sought to compensate a plaintiff where someone else has been unjustly enriched at their expense
Attorney General v. Blake
Double agent case; legitimate interest to ensure no profit
