Breach of Contract Remedies Requirements of a Contract Mutual Assent

Breach of Contract & Remedies Requirements of a Contract Mutual Assent (Agreement) Consideration Capacity Legality Defenses • Genuiness of assent • Form • • • • Breach of Contract & Remedies Historical Remedies Under Common Law Remedies Given by Courts of Law • Land • Goods • Money Remedies Given by Courts of Equity • Specific Performance • Injunction • Recission Breach of Contract & Remedies Purpose of Remedies Remedies are the means of enforcing a right or preventing or redressing a wrong and consist of legal or equitable relief. It protects one or more of a promisee’s • Expectation Interest • Reliance Interest • Restitution Interest Restatement of Contract § 344 Breach of Contract & Remedies 1 Expectation Interest Interest in having the benefit of the bargain by being put in as good a position as if the contract had been performed Breach of Contract & Remedies Reliance Interest Interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as if the contract had not been made Breach of Contract & Remedies Restitution Interest Interest in having restored any benefit that has been conferred on the other party Breach of Contract & Remedies 2 Types of Remedies • Damages • Rescission & Restitution • Specific Performance Note: Courts also allow recovery based on quasi-contractual obligations in certain situations even when there is no express contract Breach of Contract & Remedies Damages Definition Money claimed by, or ordered to be paid to, a person as compensation for loss or injury Breach of Contract & Remedies Damages • • • • Types of Damages Compensatory Consequential Punitive Nominal Breach of Contract & Remedies 3 Compensatory An amount awarded to a complainant to compensate for a proven injury or loss; damages that repay actual losses Breach of Contract & Remedies Sale of Goods “… the measure of damages for nondelivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages … but less expenses saved in consequence of seller’s breach.” U.C.C. § 2-713 Breach of Contract & Remedies Sale of Lands If seller breaches • Specific Performance If land has already been sold or buyer breaches • Difference between contract price and market price Breach of Contract & Remedies 4 Construction Contracts What the Contractor will be entitled to if the Owner breaches depends upon the time of breach • Before Beginning Performance Profits • During Construction Profits plus costs • After Construction All Costs Breach of Contract & Remedies Consequential Losses that do not flow directly and immediately from an injurious act, but that result indirectly from the act Breach of Contract & Remedies Punitive Damages awarded in addition to actual damages when the defendant acted with recklessness, malice, or deceit. Note: Punitive damages, which are intended to punish and thereby deter blameworthy conduct, are generally not recoverable for breach of contract Breach of Contract & Remedies 5 Nominal A trifling sum awarded when a legal injury is suffered but when there is no substantial loss or injury to be compensated Breach of Contract & Remedies Mitigation of Damages The principle requiring a plaintiff, after an injury or breach of contract, to use ordinary care to alleviate the effects of the injury or breach Note: If the defendant shows that the plaintiff failed to mitigate damages, the plaintiff’s recovery may be reduced Breach of Contract & Remedies Remedies Agreed to Under Contract Contracts can expressly provide for remedies such as • Liquidated damages • Penalties Breach of Contract & Remedies 6 Liquidated Damages Definition An amount contractually stipulated as a reasonable estimation of actual damages to be recovered by one party if the other party breaches Breach of Contract & Remedies Penalties Penalty Clause A contractual provision that assess an excessive monetary charge against a defaulting party. Note: Generally unenforceable Breach of Contract & Remedies Rescission & Restitution Rescission (Cancellation) Where one party puts end to contract by reason of a breach by the other party. Generally available as a remedy or defense for a nondefaulting party and restores the parties to their precontractual positions Breach of Contract & Remedies 7 Specific Performance Equitable remedy available if remedy at law is inadequate. Specific performance consists of an order by the court addressed to a party to perform or be held in contempt Special Cases include • Sale of Land: Legal remedy inadequate because every parcel is unique • Personal Service Contracts: Not given based on public policy against involuntary servitude and difficulty in compelling performance Breach of Contract & Remedies Reformation An equitable remedy by which a court will modify a written agreement to reflect the actual intent of the parties Examples • Fraud • Mutual Mistake Breach of Contract & Remedies Quasi-Contract • • • • Courts may award recovery if a plaintiff shows A benefit was conferred A reasonable expectation of being paid Benefit not volunteered Unjust enrichment of the receiving party Breach of Contract & Remedies 8 Election of Remedies A claimant’s act of choosing between two or more concurrent but inconsistent remedies based on a single set of facts Breach of Contract & Remedies Waiver of Breach Waiver The voluntary relinquishment or abandonment -- express or implied -- of a legal right or advantage Breach of Contract & Remedies Contract Provisions Limiting Remedies • Exculpatory Clauses: contract provisions stating that no damages can be recovered • Limitation-of-Liability Clauses: cover the availability of certain remedies Note: Enforceability depends on type of breach Breach of Contract & Remedies 9