Remedies for Contract

Question 1

Expectation damages

Answer 1

Expectation damages compensate P for the value of the benefit P expected to receive from the contract. Measured by P’s injury stemming from the contract’s nonperformance.

Question 2

Potential limitations on contract expectation (and consequential) damages

Answer 2

1. Causation: damages must be caused by the contract breach.
2. Foreseeability: damages must be foreseeable to a reasonable person at the time of contract formation.
3. Certainty: damages must be capable of being calculated with certainty and not be overly speculative.
4. Unavoidable: P has a duty to take reasonable steps to mitigate his losses, in a contract this usually involves “cover”.
5. Liquidated damagesclause that is valid will control and be the only measure of damages allowed for breach of the underlying K.

Question 3

Consequential damages

Answer 3

Consequential damages compensate for damages that are a direct and foreseeable consequence of the contract not being performed and are found in addition to expectation damages.

Question 4

Incidental damages

Answer 4

Incidental damages include those costs reasonably incurred when the other party is in breach.

• Incidental damages are used to replace expectation damages when damages are difficult to calculate.

Question 5

Liquidated damages

Answer 5

LD are stipulated in a clause in the contract. A valid LD clause will be enforced by the court when:

• damages are difficult to calculate
• the stipulated amount bears a reasonable relationship to the anticipated loss and is not a punishment.

Question 6

Nominal damages

Answer 6

serve as a declaration that the contract has been breached, but P sustained no loss.

Question 7

Punitive damages

Answer 7

Punitive damages are not awarded in contract, unless the misconduct rise to the level of an independent tort, such as fraud.

Question 8

Legal restitution

Answer 8

Restitution damages are appropriate where D has derived a benefit, or been unjustly enriched, and it would be unfair to allow D to keep the benefit, or P wants his property back. There are three types of restitution:

1. Quasi-contract (money restitution)
2. Replevin (personal property)
3. Ejectment (real property)

Question 9

Quasi-contract

Answer 9

Quasi-contract applies where there is no legally binding contract, but D has derived a benefit and fairness requires payment to P. It is measured by the value of the benefit unjustly retained.

Quasi-contract can arise in three ways:

1. No attempt to contract: P can recover the value of the benefit unjustly retained by D.
2. Unenforceable contract: P can recover the value of the benefit unjustly retained by D (e.g. K is illegal, SOF failure, etc.)
3. Breached contract: when P is a nonbreacher, P can recover the value of the benefit conferred; when P is in breach, the traditional rule provides for no recovery, the modern trend provides for limited recovery.

Question 10

Equitable Remedies

Answer 10

Only available when remedy at law is inadequate. Two equitable remedies that are specific to contracts:

1. Rescission
2. Reformation

Question 11

Rescission of contract

Answer 11

Rescission permits a party to invalidate a contract and restores the parties to the position each would have been in if the bargain had not been entered into.

1. No meeting of the minds: there must be a contract formation problem resulting from fraud, duress, mutual mistake, unilateral mistake, or a material misrepresentation.
2. Typically only available to the wronged party
3. Equitable defenses of laches and unclean hands are applicable.

Question 12

Reformation of contract

Answer 12

Reformation permits a contract be rewritten by the court to reflect the parties true agreement when:

1. Meeting of the minds: the parties had a meeting of the minds; and
2. Contract as written doesn’t reflect the parties’ agreement because of an error. (Proper ground for reformation include fraud, material misrepresentation, or mutual mistake)
3. Typically only available to the wronged party
4. Equitable defenses of laches and unclean hands are applicable.

Question 13

Injunctions

Answer 13

Three types of injunctive relief for contract:

1. TRO
2. Preliminary injunctions
3. Specific Performance

Question 14

Specific Performance

Answer 14

A permanent injunction in contract where the court orders D to perform on the contract as promised.

The following requirements must be met:

1. Contract is valid and terms are sufficiently definite and certain
2. Contract conditions imposed on the plaintiff are satisfied.
3. Inadequate legal remedy
4. Mutuality of performance: both parties to the contract must be eligible to have their performance under the contract ordered by the court. (this is only at issue if one party cannot be ordered to perform)
5. Feasibility of enforcement: personal service contract will likely not be ordered because the court will not order a person to personally perform work for another.
6. No defenses: no laches, unclean hands, or defenses to the underlying contract

Memorization: Chocolate Cheesecake Is My Favorite Dessert.

Question 15

Laches in contract

Answer 15

Equitable defense when P has unreasonably delayed, resulting in prejudice to D.

Question 16

Unclean hands in contract

Answer 16

Unclean hands provides a defense when P has conducted himself unfairly in the transaction in dispute.

Question 17

Defenses to the underlying contract

Answer 17

ANy failure of the underlying contract can operate as a defense since a vlaid contract is a requirement for an injunction.

Question 18

Real Property Remedies: Encroachments

Answer 18

Encroachments are trespasses where D’s structure invades P’s property. This could also happen in an adverse possession action. With an encroachment, P is entitled to damages, ejectment, and injunction.

Question 19

Real Property Remedies: Waste

Answer 19

Waste occurs where there is an “injury” to the real property by one with a present interest against a future interest holder.

• Voluntary waste is a deliberate, destructive act. The remedy is damages for the diminution of value or the cost of repair, and/or an injunction.
• Permissive waste occurs when the property is poorly maintained. The remedy is damages for the cost of repair. Injunction is not usually available because of difficulty to supervise.
• Ameliorative waste is where a present interest holder makes impermissible improvements to the property that actually enhance the property’s value. Though a present interest older is not permitted to do this, there are no damages because there is no loss in value. However, an injunction may be granted.