Remedies

Question 1

Specific performance generally

Answer 1

If the legal remedy (money damages) is inadequate, the non breaching party may seek specific performance
- order from the court to the breaching party to perform or face contempt of court charges

Available for land and rare / unique goods

Question 2

When specific performance is always available

Answer 2

Specific performance is always available for land sale contracts because all land is unique

Available for goods that are rare or unique at the time performance is due

Question 3

Specific performance and service contracts

Answer 3

Specific performance is never available for breach of a contract to provide services, even if the services are rare or unique

A court may enjoin a breaching employee from working for a competitor throughout the duration of the contract if the services contracted for are rare or unique

Question 4

Covenant not to compete and specific performance

Answer 4

Most courts will grant an order of specific performance to enforce a contract not to compete if
- the services to be performed are unique (thus rendering money damages inadequate), and
- the covenant is reasonable

To be reasonable, covenant must
- be reasonably necessary to protect a legitimate interest of the person benefited by the covenant
- be reasonable as to its geographic scope and duration, and
- not harm the public

Question 5

Specific performance in goods contracts

Answer 5

Specific performance may be imposed in contracts for goods if
- goods are unique, or
- buyer is unable to cover

Watch out for artwork, antiques, custom made goods

Question 6

Laches

Answer 6

In addition to standard contract defenses, an action for specific performance is subject to the equitable defense of latches

Latches - a claim that the pl has delayed bringing the action and that the delay has prejudiced the defendant

Question 7

Unclean hands

Answer 7

In addition to standard contract defenses, an action for specific performance is subject to the equitable defense of unclean hands

A claim that the party seeking specific performance is guilty of wrongdoing in the transaction being sued upon

Question 8

Sale to a bona fide purchaser

Answer 8

In addition to standard contract defenses, an action for specific performance is subject to the equitable defense of 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

Question 9

Buyer’s right to replevy identified goods - on buyer’s prepayment

Answer 9

If a buyer has made at least part 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
- the seller becomes insolvent within 10 days after receiving the buyer’s first payment, or
- the goods were purchased for personal, family, or household purposes

In either case, buyer must tender any unpaid portion of the purchase price to the seller

Question 10

Buyer’s right to replevy identified goods - on buyer’s inability to cover

Answer 10

Buyer may replevy undelivered, identified goods from the seller if the buyer, after reasonable effort, is unable to secure adequate substitute goods

Question 11

Buyer’s right to specific performance

Answer 11

Right to specific performance where the goods are unique or in other proper circumstances

May order specific performance even where the goods have not yet been identified to the contract by the seller

Question 12

Seller’s right to withhold goods

Answer 12

If the buyer fails to make a payment due on or before delivery, the seller may withhold delivery of the goods

May also withhold goods when the goods are sold on credit and, before the goods are delivered, the seller discovers that the buyer is insolvent

But seller must deliver the goods if the buyer tenders cash for their payment

Question 13

Seller’s right to recover from buyer on buyer’s insolvency

Answer 13

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

The 10-day limitation does not apply if misrepresentation of solvency has been made in writing to the particular seller within three months before delivery

Question 14

Seller’s right to stop delivery of goods in possession of carrier - buyer insolvency

Answer 14

The seller may stop delivery of goods in the possession of a carrier or other bailee if they discover that the buyer is insolvent

But must deliver the goods if the buyer tenders cash for their payment

Question 15

Seller’s right to stop delivery of goods in possession of carrier - buyer’s breach

Answer 15

The seller may stop delivery of carload, truckload, planeload or larger shipments of goods if the buyer breaches the contract or the seller has a right to withhold performance pending receipt of assurances

Question 16

Seller’s ability to force goods on buyer

Answer 16

The seller’s ability to force goods on a buyer is limited to an action for price when the seller is unable to resell the goods to others at a reasonable price

Question 17

Right to demand assurances

Answer 17

Actions or circumstances that increase the risk of nonperformance by a party to a contract but do not clearly indicate that performance will not be forthcoming

Cannot be treated immediately as an anticipatory repudiation

If there is reasonable grounds for insecurity with respect to a party’s performance, the other party may demand in writing assurances that performance will happen

Until receive adequate assurances, party may suspend their own performance

If proper assurances are not given within a reasonable time (within 30 days after justified demeaned), they may then treat the contract as repudiated

Question 18

Monetary remedies generally

Answer 18

Damages can be recovered only to the extent that they can be proved with reasonable certainty and could not be avoided with reasonable effort

Compensatory
Punitive
Nominal
Liquidated

Question 19

Compensatory damages

Answer 19

The usual goal of damages for breach of contract is to put the non breaching party in the position they would have been in had the promise been performed

Standard measure - expectation

Reliance damages

Question 20

Expectation damages

Answer 20

In most cases, the plaintiff’s standard measure of damages will be based on an expectation measure - sufficient damages for them to buy a substitute performance

Put injured party in position they would be if contract performed

Question 21

Reliance damages

Answer 21

If the plaintiff’s expectation damages are too speculative to measure (cannot show with sufficient certainty), pl may elect to recover those damages that they have suffered based on their reasonable reliance

Cost of their performance - designed to put the plaintiff in the position that would have been in had the contract never been formed

Question 22

Incidental damages

Answer 22

Compensatory damages may also include incidental damages - costs incurred in dealing with breach

Mist commonly associated with contracts for sale go goods and include 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 by seller in storing, shipping, returning, and reselling the goods as a result of the buyer’s breach

Foreseeability does not matter

Question 23

Consequential damages

Answer 23

Arise because of the non breaching party’s particular circumstances and often consist of lost profits

May be recovered only if, at the time the contract was made, a reasonable person would have foreseen the damages as a probable result of a breach

Foreseeability is key - breaching party must have known or had reason to know of the special circumstances giving rise to the damages

And the subsequent loss resulting from the needs could not reasonably be prevented by cover

In contracts for sale of goods, only a buyer may recover consequential damages

Question 24

Certainty rule - monetary damages

Answer 24

The pl must prove that the losses suffered were certain in their nature and not speculative

Question 25

Punitive damages

Answer 25

Punitive damages are generally not awarded in contract cases

Question 26

Nominal damages

Answer 26

Nominal damages may be awarded when a breach is shown but no actual loss is proven

Question 27

Liquidated damages

Answer 27

May stipulate what damages are to be paid in the event of a breach

To be enforceable, need
- damages for contractual breach are difficult to estimate or ascertain at the time the contract is formed, and
- amount agreed on is a reasonable forecast

Must be in an amount that is reasonable in view of the actual or anticipated harm caused by the breach
- comparison between the amount of damages prospectively probable at the time of contract formation and the liquidated damages figure
- if unreasonable, will construe as a penalty and not enforce it

If met, receive liquidated damages amount even if no actual money or pecuniary damages have been suffered

Question 28

Buyers damages - seller does not deliver goods or buyer rejects/revokes

Answer 28

If the seller does not deliver, or the buyer properly rejects the goods or revokes acceptance of the goods, buyers basic damages consist of the difference between the contract price and either
- the market price, or
- the cost of buying replacement goods (cover)
Plus incidental damages and consequential damages, less expenses saved as a result of the breach

Question 29

Buyer covers - reasonable contract

Answer 29

If the buyer chooses the cover measure (the 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

Cover does not need to be best possible price, just reasonable good faith

Question 30

Market price - buyers damages

Answer 30

If the buyer measures damages by the difference between contract price and market price, market price usually is determined at the time the buyer learns of the breach and at the place of tender

This is available if don’t cover at all or not in good faith

Question 31

Time of measuring buyer’s damages vs. seller’s damages

Answer 31

The buyer’s damages are measured as of the time they learn of the breach

The seller’s damages are measured as of the time for delivery

Question 32

Buyer’s warranty damages - seller delivers nonconforming goods that buyer accepts

Answer 32

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

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 been according to the contract
- plus incidental and consequential
- value as promised minus value as delivered

Question 33

Notice requirement - damages for any defect of accepted goods

Answer 33

To recover damages for any defect as to accepted goods, the buyer must, within a reasonable time after they discover or should have discovered the defect, notify the seller of the defect

If they do not notify the seller within a reasonable time, they lose their right to sue

Question 34

Damages when seller anticipatory breaches

Answer 34

The measure of damages when the seller anticipatorily breaches the contract is the different between the market price at the time the buyer learned of the breach and the contract price

Question 35

Consequential damages - goods for resale

Answer 35

If the buyer is in the business of reselling the goods, the seller is deemed to have knowledge of the resale

Question 36

Consequential damages - goods necessary for manufacturing

Answer 36

If a seller knows that the goods they provide are to be used in the manufacturing process, they should know that their breach would cause a disruption in production leading to a loss of profits

Question 37

Seller’s damages - buyer repudiates or refuses to accept conforming goods

Answer 37

Three measures for damages when the buyer wrongfully repudiates or refuses to accept conforming goods

In addition to incidental damages, the seller can
- resell the goods and recover the difference between the contract price and the resale price
- recover the difference between the market price measured as of the time and at the place of delivery and the contract price, or
- if the above measures are inadequate because seller lost volume seller, lost profits measure and the difference between the contract price and the cost to the seller

Question 38

Lost volume seller

Answer 38

To determine whether lost profits measure is appropriate, look at the seller’s supply

If seller’s supply of goods is unlimited (can obtain all the goods they can sell), they are a lost volume seller and the lost profits measure can be used
- if limited, lost profits measure cannot be used

Question 39

Seller’s damages - where buyer accepted goods and not paid

Answer 39

If the buyer has accepted the goods and
- has not paid, or
- has not accepted the goods and the seller is unable to resell them at any reasonable price, or
- if the good have been lost or damages at a time the risk of loss was on the buyer,
The seller may maintain an action against the buyer for full contract price

Question 40

Damages for contracts for sale of land

Answer 40

Standard measure is difference between the contract price and the fair market value of the land

Question 41

Employment contracts

Answer 41

Breach by employer - irrespective of when breach occurs, full contract price

Breach by employee - recover cost of replacing the employee and employee can offset money owed for work done to date

Employment at will - at any time for any reason so no breach

Question 42

Construction contracts

Answer 42

Breached by owner - builder will be entitled to profits that would have resulted from the contract, plus any costs expended
- if breached after construction completed, full contract price plus interest

Breached by builder - owner is entitled to the cost of completion plus reasonable compensation for delay
- most courts allow builder to offset recover for work performed already to avoid unjust enrichment
- if only because of late performance, entitled to damages incurred by the late performance

Question 43

Installment contracts

Answer 43

If a contract calls for payments in installments and a payment is not made, only a partial breach
- recover only missed payment, not entire contract price

But contract may include an acceleration clause

Question 44

Duty to mitigate

Answer 44

Under the common law, the non breaching party cannot recover damages that could have been avoided with reasonable effort

Cannot incur further expenditures or costs and must make reasonable efforts to cut down their losses by procuring a substitute performance at a fair price
- if don’t, cannot recover what could have been saved
- generally, party can recover expenses of mitigation

Only reduces a recovery, does not prohibit recovery

Question 45

Duty to mitigate - employment contracts

Answer 45

If the breaching employer can prove that a comparable job in same locale was available, then contract damages against that breaching employer for lost wages will be reduced by the wages that the pl would have received from comparable job

Question 46

Duty to mitigate - manufacturing contracts

Answer 46

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

But if the facts are such that competition of the manufacturing project will decrease rather than increase damages, right to continue

Question 47

Duty to mitigate - construction contracts

Answer 47

Builder does not owe a duty to avoid the consequences of an owners breach by securing other work

but does have a duty to mitigate by not continuing work after the breach
- but if competition will decrease damages, allowed

Question 48

Duty to mitigate - contracts for sale of goods

Answer 48

Under article 2, rule of mitigation generally does not apply
- injured buyer not required to cover and injured seller not required to resell

Market damages are always available if the buyer does not cover or seller does not resell

But seller generally cannot bring an action against buyer for full contract price unless goods cannot be resold at a reasonable price or were damages / lost when risk was on buyer

Question 49

Restitution

Answer 49

Alternative to contract damages

Not really part of k law - based on preventing unjust enrichment when one has conferred a benefit on another without gratuitous intent

Can be used both when contract breached and when contract is unenforceable or no contractual relationship existed at all in first place
- but if plaintiff has fully performed, limited to damages under contract

Action for implied in law contract, an action in quasi-contract, or an action for quantum merit

Question 50

Restitution - measure of damages

Answer 50

Generally, measure is value of benefit conferred

Usually based on the benefit received by the defendant
- but recovery may also be measured by the detriment suffered by the plaintiff if the benefits are difficult to measure or the benefit measure would achieve an unfair result

Question 51

Restitution when breach by plaintiff

Answer 51

Under some circumstances, a pl may seek restitution even though the plaintiff is the party who breached

If breach was intentional, some courts won’t grant the breaching party restitution
- modern courts will permit but limit it to the contract price less damages incurred

Question 52

Restitution of advance payments or deposit if buyer of goods breaches

Answer 52

If the buyer has paid part of the purchase price in advance and then breaches, they can usually recover some of the payments

Unless seller can prove greater damages, can keep advance payments totaling 20% of purchase price or $500, whatever is less

Balance must be returned to buyer

If valid liquidated damages clause, seller need refund only the excess of the buyer’s payments over the amount of liquidated damages

Question 53

Consider three things when breaching party attempting to collect on a partially performed contract

Answer 53

Generally, when there is a breaching party attempting to collect on a partially performed contract, should consider, in order
- substantial performance
- divisibility
- restitution

Question 54

Restitution when contract unenforceable

Answer 54

Restitution may be available in a quasi-contract action when a contract was made but is unenforceable and unjust enrichment otherwise would result

Question 55

Restitution when no contract involved

Answer 55

Restitution may be available in a quasi-contract action when there is no contractual relationship between the parties if:
- the plaintiff has conferred a benefit on the defendant
- the pl conferred the benefit with the reasonable expectation of being compensated for its value
- the defendant knew or had reason to know of the plaintiff’s expectation, and
- the defendant would be unjustly enriched if they were allowed to retain the benefit without compensating pl

Question 56

Rescission generally

Answer 56

Rescission is a remedy whereby the original contract is considered voidable and rescinded

Parties left as though a contract had never been made

Generally all equitable defenses are available in rescission action

If the plaintiff has paid money to the defendant, entitled to restitution in addition to rescission

Question 57

Grounds for rescission (5)

Answer 57

Mutual mistake of a material fact

Unilateral mistake if the other party knew or should have known of the mistake

Unilateral mistake if hardship by the mistaken party is so extreme it outweighs the other party’s expectations under the contract

Misrepresentation of fact or law by either party as to a material factor in the negotiations that was relied upon, and

Other grounds - duress, undue influence, illegality, lack of capacity, and failure of consideration

Question 58

Reformation

Answer 58

Remedy whereby the writing setting forth the agreement between the parties is changed so that it conforms to the original intent of the parties

Grounds
- mistake
- misrepresentation

Negligence does not bar reformation - failure to read

Clear and convincing evidence standard

No PER, majority rule is no SOF

Question 59

Reformation - mistake

Answer 59

To reform a contract because of mistake, there must be
- an agreement between the parties,
- an agreement to put the agreement in writing, and
- a variance between the original agreement and the writing

Question 60

Reformation - misrepresentation

Answer 60

If a writing is inaccurate because of a misrepresentation, plaintiff can choose between reformation and avoidance

Reformation - misrepresentation must relate to the content or the legal effect of the record
- misrepresentations as to the subject matter aren’t grounds for reformation - damages and rescission

Question 61

Statutes of Limitations - UCC

Answer 61

For sales contracts, UCC provides for a four year statute of limitations

Parties may shorten period by agreement to no less than one year
- but cannot lengthen it

Begins to run when a breach occurs - whether aggrieved party knows of breach

Question 62

SOL and breach of warranty

Answer 62

Breach occurs and limitations period begins to run upon delivery of the goods
- even if buyer doesn’t discover breach

If express warranty that explicitly extends to future performance of goods, four year period doesn’t begin until buyer should’ve discovered the breach

Because implied warranties cannot explicitly extend to future performance, breached if at all upon delivery