Remedies for Breach of Contract

Question 1

What are the options for monetary damages at common law?

Answer 1

A party may only elect one of these remedies:

1. Expectation interest
2. Reliance interest
3. restitutionary interest.

Question 2

What are expectation damages?

Answer 2

An aggrieved party is entitled to the amount that will restore him to the position he would have been in had the contract been fully performed.

Question 3

How do you calculate expectation damages?

Answer 3

Loss of value

+ incidental costs

+ consequential costs

• payments received
• costs saved

Question 4

List four situations in which the aggrieved party may not be able to recover the full amount of expectation damages?

Answer 4

1. Where the cost of performance greatly exceeds the market value of performance
2. Where expectation damages cannot be calculated with reasonable certainty
3. When damages are unforeseeable
4. Where damages can be mitigated/reasonably avoided.

Question 5

What type of companies have difficulty getting expectation damages?

Answer 5

A new business with no profit history.

Question 6

What are reliance damages?

Answer 6

A monetary award that restores the aggrieved party to the position they were in prior to the contract.

Question 7

What are the types of monetary damages?

Answer 7

1. Expectation damages
2. Reliance Damages
3. Restitutionary Damages

Question 8

How do you calculate reliance damages?

Answer 8

Any expenditures made in preparation for performance or in actually performing

-minus-

Any loss the breaching party can prove the aggrieved party would have suffered had the contract been fully performed).

Question 9

What is the use-case for reliance damages?

Answer 9

When expectation damages are unavailable. When expectation damages are uncertain or speculative.

Question 10

What are restitutionary damages?

Answer 10

An award that provides the value of the benefits conferred on the other party in the transaction.

Question 11

How do you calculate restitutionary damages?

Answer 11

1. The reasonable value or cost of the benefit conferred
2. The extent to which the other party’s property has increased in value due to performance rendered.

Question 12

When are restitutionary damages most often used?

Answer 12

In a losing contract.

Question 13

What is the only time when restitutionary damages are available?

Answer 13

Where the aggrieved party has partly performed but not fully performed.

Question 14

What are liquidated damages?

Answer 14

A contract clauses designed to provide a set formula damages in the event of a breach.

Question 15

When are liquidated damages enforceable vs. unenforceable?

Answer 15

Enforceable: damages designed to compensate only for breach

Unenforceable if: it is a penalty designed to punish a breach.

Question 16

What is the test for liquidated damages clauses?

Answer 16

Primary consideration: was the clause reasonable at the time of contracting in relation to the anticipated harm?

Secondary consideration: was the clause reasonable in relation to the harm that actually occurred due to the breach?

Question 17

What happens if a court rules that a liquidated damages clause is in fact a penalty?

Answer 17

The clause is stricken from the contract and damages are recoverable according to the default rules.

Question 18

What are the UCC seller’s remedies?

Answer 18

1. Profit
2. Incidental damages

Question 19

What does a seller of goods right to recover depends upon?

Answer 19

Whether the goods have been delivered and accepted by the buyer.

Question 20

What is a seller’s remedy if goods have been delivered to and accepted by the buyer?

Answer 20

The seller’s remedy is for the contract price for the goods accepted.

Question 21

The seller’s remedy if goods have not been delivered to and accepted by the buyer if the seller has resold?

Answer 21

The contract price for the goods - Gain for resale.

Question 22

The seller’s remedy if goods have not been delivered to and accepted by the buyer if the seller has not resold?

Answer 22

The contract price for the goods - the market price for the goods.

Question 23

What is the only remedy for lost volume sellers?

Answer 23

The profit they would have made on the lost sale.

Question 24

Define lost volume sellers.

Answer 24

A lost volume seller is one whose supply of goods exceeds the demand for the same (Best Buy)

Question 25

What is a seller of goods always entitled to if a buyer breaches?

Answer 25

Incidental damages.

Question 26

What are incidental damages?

Answer 26

The storage cost associated with getting stuck with the goods + cost of resale - expenses avoided on account of breach

Question 27

A buyer of goods remedies depend upon what factor?

Answer 27

If the buyer covers: purchases replacement goods.

Question 28

How do you calculate a buyer of goods damages if:

1. Buyer covers?
2. Buyer does not cover?

Answer 28

1. If the buyer covers: the damages = Cover price - Contract Price
2. If the buyer does not cover: the damages = Market Price - Contract Price.

Question 29

What are incidental damages for a buyer of goods?

Answer 29

The cost of securing cover.

Question 30

What can a buyer of goods seek for damages?

Answer 30

Incidental damages + Consequential damages

Question 31

What are the consequential damages for a buyer of goods?

Answer 31

Foreseeable costs arising to the buyer because of a particular need or use of the goods in question (e.g. lost profits).

Question 32

What reduces a buyer of goods damages?

Answer 32

Costs Avoided

Question 33

What are the buyer’s damages if they accept non-conforming goods?

Answer 33

The buyer is entitled to recover the difference between:

(The value of goods contracted for) - (The value of the goods received).

Question 34

When is specific performance available?

Answer 34

When a monetary reward is considered inadequate.

Question 35

List two examples of when monetary reward is considered inadequate.

Answer 35

1. Unique Objects
2. Real Property

Question 36

What contracts is specific performance absolutely not available for?

Answer 36

1. Contracts for personal services

And

2. Contracts requiring ongoing cooperation between the parties.

Question 37

When is specific performance under the UCC allowed?

Answer 37

1. A buyer has adequately searched but unable to cover
2. Output contracts

And

3. Requirement contracts.

Question 38

What are negative injunctions?

Answer 38

Orders by the court prohibiting the breaching party from taking a particular action.

Question 39

When an employee is under contract for a specified period of time and the employee breaches the contract by departing before the end of that period, when will a negative injunction be available to prevent the employee from competing?

Answer 39

When the employee’s services are unique or extraordinary.

Question 40

What three factors do non-compete clauses depend upon?

Answer 40

1. Is there a significant business justification for enforcing post-employment restraints (e.g. access to trade secrets)
2. Is the scope of the non-compete clause reasonable in duration and geographical reach

And

3. Is there an express provision of a covenant not to compete?

Question 41

What types of promissory estoppel damages that can be recovered?

Answer 41

Depending upon jurisdiction

1. Expectation Damages
2. Reliance Damages
3. Chosen on a case by case basis

Question 42

When can restitution be brought as a cause of action outside breach of contract?

Answer 42

1. To recover the benefits conferred under a failed contract
2. To recover benefits conferred by a breaching party, as long as the other party receives damages for breach.

Question 43

What is the financial liability of a patient when emergency benefits are conferred by a health care professional without consent?

Answer 43

The patient is liable to pay for services rendered.

Question 44

What general rule applies to a person who bestows unrequested benefits to the benefiting party?

Answer 44

They are considered an officious intermeddler that will not be able to recover since there is no opportunity to decline by the benefiting party.

Question 45

When may a person who mistakenly confers benefits to another party be entitled to restitution from the mistaken party?

Answer 45

1. The mistake is not blameworthy
2. The recipient was aware of the error in time to prevent it

And

3. The recipient avails himself of the benefits at issue.

Question 46

When are provisions limiting or excluding damages not enforceable?

Answer 46

If they are:

1. Unconscionable

Or

2. Fail their essential purpose.

Question 47

What is the enforceability limitation of consequential damages for consumer good personal injuries?

Answer 47

The damages are prima facie unconscionable.

Question 48

What five factors distinguish between material breach and substantial performance?

Answer 48

1. the extent to which the aggrieved party will be deprived of the benefit for which he reasonably expected under the terms of the contract
2. the extent to which the aggrieved party can adequately be compensated via damages for the defective performance
3. the extent to which the breaching party will suffer forfeiture if a material breach is found
4. the extent to which the breach was willful or in bad faith rather than merely negligent or innocent
5. the likelihood that the breaching party will cure his failure within a reasonable time and in a manner consistent with the reasonable purpose of the contract.

Question 49

What does a material breach of a contract entitled the non-breaching party to do?

Answer 49

Terminate the contract.