BLW 302 Ch.19

Remedy

Remedy

relief provided for an innocent party when the other party has breached the contract

Most Common Remedies

• Damages.

• Rescission and Restitution.

• Specific Performance.

• Reformation.

Types of Damages

• Compensatory

• Consequential

• Punitive

• Nominal

Compensatory

Actual Damages (covers direct losses/costs)

Consequential

covers indirect and foreseeable losses

Punitive

punishes and deters wrongdoing

Nominal

recognizes wrongdoing when no monetary loss is
shown

Standard Measure

Difference between value of promised performance and value of actual performance.

HALLMARK CARDS , INC . V. MURLEY (2013)

COVENANT NOT TO COMPETE
• SEVERANCE PAY $735,000
• BREACHED WAS PAID BY NEW EMPLOYER $135,000
• JURY AWARDED $870,000 ($735K + $135K)
• REVERSED – COMPENSATORY WAS THE S EVERANCE PAY

Incidental Damages

Expenses cause directly by breach of contract

• Ex: Advertising expenses to find to new tenant

Sale of Goods

Difference between contract and market price

• Contract Price $100 – fail to deliver

• Costs of Replacement Product $110.

• Damages $10

Sale of Land

Breach by Buyer difference between contract price and ultimate sale achieved - recovery if amount is less

Construction Contracts

Breach by owner: Damages depend on whether breach was before, during, or after construction was completed.

• Before – Profit

• During – Profit plus cost incurred to that point.

• After – Full contract Price (which would include profit and costs anticipated by the
  builder)

Breach by contractor: The measure of damages is the cost of completion.
Breach by both owner and contractor: the courts attempt to strike a fair balance in awarding damages

Consequential (Special) Damages

Foreseeable damages that result from a party’s breach of contract

HADLEY V. B AXENDALE (1854).

• SHAFT TO A M ILL N EEDED REPAIRS

• HADLEY TOLD B AXENDALE NEED REPAIRED IMMEDIATELY – S HUT DOWN TILL NEW
  SHAFT DELIVERED

• DELAYED BY B AXENDALE FOR SEVERAL DAYS

• IS BAXENDALE LIABLE FOR THE LOST PROFIT WHILE M ILL SHUT DOWN ?

Punitive Damages

Punish or deter future conduct

• Generally not available for mere breach of contract.

• Punitive damages may be available when an action causes both a breach of contract and a tort

Nominal Damages

No financial loss. The award is given in a minimal amount

Mitigation of Damages

Duty of innocent injured party to reduce the damages that they suffered

Rental Agreements

Landlord must use reasonable means to find a new tenant if previous tenant defaults on rent and abandons the premises

Employment Contracts

A person who was wrongfully terminated owes a duty to take a similar job if one is available

Liquidated Damages

Specific amount agreed to be paid as damages in the event of future breach

Penalties

Designed to penalize, generally unenforceable

Rescission

The cancellation of a contract in order to return the parties to their pre-contract position

• failure of one party to perform entitles the other party to rescind the contract

Restitution

Generally, to rescind a contract, both parties must make restitution to each other by returning goods, property, or funds previously conveyed

Specific Performance

Equitable remedy that calls for the performance of the act promised in the contract

Provides remedy in cases involving:

• Sale of land – where seller refuses to transfer title.

• Contracts for personal services – not used generally

  • Involuntary servitude

  • Would require supervising work by the court.

Reformation

Equitable remedy allowing a contract to be reformed (or rewritten) to reflect the parties’ true intentions

Fraud or Mutual Mistake Is Present

Courts order reformation most often when fraud or mutual mistake is present

Written Contract Incorrectly States the Parties’ Oral Agreement

A court will reform a contract when two parties enter into a binding oral contract but make an error when attempting to put the terms into writing.

Covenants Not to Compete

Some courts reform the terms by making them reasonable and then enforcing the entire contract as reformed. Other courts throw out the entire restrictive covenant as illegal.

Quasi Contract

A legal theory under which an obligation is imposed in the absence of an agreement

• It is a remedy created by courts to obtain justice and prevent unjust enrichment.

• Party conferring benefit can recover in quantum meruit (“as much as they deserves”)

When Quasi Contract Is Used

• When one party has partially performed under a contract that is unenforceable.

• As an alternative to suing for damages and allows the party to recover the reasonable value of the partial performance

Requirements of Quasi Contract

• Benefit was conferred to the other party.

• Party conferring benefit reasonably expected to be paid.

• The benefit was not volunteered.

• Receiving benefit without paying for it would result in unjust enrichment

Waiver

Knowing relinquishment of a legal right to
require satisfactory and full performance

Consequences of a Waiver of Breach

When a waiver occurs, the party waiving the breach cannot take any later action on it.

Reasons for Waiving a Breach

Breaches of contract are often waived to obtain whatever benefit is still possible out of the contract

Waiver of Breach and Subsequent Breaches

Generally, a single waiver will not waive subsequent, additional, or future breaches, especially if unrelated to initial breach

Pattern-of-Conduct Exception

• Reasonable person standard.

• A pattern of conduct that waives successive breaches can operate as a continued waiver

Effect on the Contract

Non-waiving party remains liable for damages, but contract continues

Exculpatory Clauses

Provisions stating that no damages can be recovered

Limitation-of-Liability Clauses

Provisions that affect the availability of certain remedies

Enforceability of Limitation-of-Liability Clauses

Exclusion of liability for fraudulent or intentional injury, illegal acts, acts that are contrary to public policy, or violations of law will not usually be enforced