Remedies Contract

Remedies in Contract Law

Overview of Remedies

  • Corresponds with question six from the course overview.

  • Mnemonic device: "love for dogs treat every rover terrifically"; 'r' is for Remedies.

  • Requirements before discussing remedies:

    • Contract must be validly formed:

    • Offer must be present.

    • No termination must have occurred.

    • Valid acceptance must be established.

    • Valuable consideration or another ground for the enforcement of the promise.

    • No defenses to enforcement or excuses for nonperformance.

Breach of Contract

  • Breach defined:

    • Any deviation from promised performance, regardless of how slight.

  • Consequences of breach:

    • Remedies are available to aggrieved parties for nonperformance, as breach allows for remedies to be pursued.

Repudiation vs. Retraction

  • Repudiation:

    • An unambiguous indication that a breach will occur when the performance is due.

    • Example: A homeowner indicates she will not pay for a paint job after the painter has started.

  • Retraction:

    • Can retract a repudiation only up until the time that performance is due or until reliance occurs.

    • Example: If the homeowner retracts the repudiation before the performance is due and before the painter has relied on the repudiation, the duty to perform is reimposed.

  • Key Timing Considerations:

    • If the other party has relied on the repudiation, retraction is not possible.

Non-Monetary Remedies

  1. Specific Performance:

    • Definition: Court orders the breaching party to perform as originally promised.

    • Requirements for specific performance:

      • Legal remedy (monetary damages) must be inadequate.

      • Administration of the remedy should not unduly burden the court.

      • The contract terms must be certain and definite.

    • Categories qualifying for specific performance:

      • Land Sale Contracts: Courts typically award specific performance because all land is considered unique.

      • Example: Selling a unique property that has sentimental value.

      • Sale of Goods: Not generally available unless the goods are unique or no cover contract is available.

      • Example: Unique antiques or art pieces.

      • Personal Services Contracts: No specific performance due to the prohibition against involuntary servitude.

      • Courts avoid enforcing personal service contracts due to the burden of supervision and potential for conflict between parties.

  2. Reformation:

    • Definition: The court changes or reforms a contract to accurately reflect the agreement of the parties.

    • Situations for seeking reformation:

      • Mistakes in writing down the agreement.

      • Example: Omitting a crucial term such as mortgage assumption in a home sale agreement.

      • Fraudulent misrepresentation about the contents of the contract.

  3. Reclamation:

    • Definition: The right of an unpaid seller to recover goods.

    • Requirements for reclamation:

      • The sale must have started as a credit sale.

      • The buyer must be insolvent at the time of receiving the goods.

      • The seller must demand the return of goods within ten days of receipt.

      • The buyer must still possess the goods.

Monetary Remedies

  1. Compensatory Damages:

    • Designed to compensate the aggrieved party and restore them to the position they would have been in if the contract had been fulfilled.

    • Expectation Interest: The default monetary remedy in contract law.

      • Provides the amount needed to keep the aggrieved party in the position they expected.

    • Case Example - Hawkins v. McGee:

      • A physician promised to perform a surgery that would result in a perfect hand.

      • When the surgeon failed and left the patient with a scarred and hairy hand, the court ruled that the expectation value of a perfect hand should be awarded minus what the injured party was left with.

    • Limitations on Recovery of Expectation Damages:

      • Damages must be reasonably certain, foreseeable, and unavoidable.

      • Reasonably Certain: Speculative damages not allowed; must show damages with reasonable certainty.

      • Foreseeability: Must show that damages arise in the natural course of events or were specially communicated as foreseeable at the time of contract formation.

      • Case Reference - Hadley v. Baxendale: Consequential damages must be made foreseeable to recover them.

      • Unavoidable: Parties have a duty to mitigate damages; if they could have avoided them without undue risk, burden, or humiliation, they are not collectible.

  2. Reliance Damages:

    • Offered as a fallback measure when expectation damages can't be determined.

    • Aim to reimburse the aggrieved party for expenses incurred due to the reliance on the breached contract.

    • Example Cases:

      • Situations where expectation measures are uncertain but reliance expenditures can be clearly proven.

      • Use of reliance damages in promissory estoppel cases where damages are limited to detriment incurred (e.g. Goodman v. Dicker).

  3. Punitive and Nominal Damages:

    • Punitive Damages: Not awarded for breach of contract; contract law remedies are not for punishment but for compensation.

    • Nominal Damages: Awarded when there is a breach but little economic loss.

  4. Liquidated Damages:

    • Pre-agreed amount for damages specified in the contract.

    • Valid only if it is not considered a penalty:

      • Must be a reasonable forecast of compensation for harm that is difficult to measure.

    • Enforceability depends on the reasonableness of the specified amount.

  5. Restitution:

    • Designed to prevent unjust enrichment of the breaching party.

    • Requires:

      • Benefit conferred on the defendant.

      • Expectation of compensation for the benefit provided.

      • Benefit conferred was at the express or implied request of the defendant.

      • Resulting unjust enrichment for the defendant.

    • Measurement based on the value of the benefit conferred rather than the contract price.

Conclusion on Remedies

  • Non-Monetary Remedies:

    • Specific Performance, Reformation, Reclamation.

  • Monetary Remedies:

    • Expectation damages, reliance damages, restitution, obligations relating to the duty to mitigate, and consequences of punitive and nominal damages.

  • Ultimately, remedies are aimed at compensating the aggrieved party for losses due to breach of contract rather than punishing the breacher.