When a contract has been breached one has to decide what type of justice will remedy the breach. There are different types of remedies and the one which will be applied depends on the circumstances and the type of breach. Restitution happens when there have been tangible losses and the wronged party wants those back. Reliance is when a person has suffered losses due to the contract being breached and wants to be paid back what was lost. Expectancy is when the contract isn't followed out and the wronged party wants to be paid out as if it was. Substitution relief is when there is no real way to make good on what happened so money is the best there is. Compensatory damages are those for a direct and foreseeable loss while punitive damages are for those which are not recoverable such as murder, libel or defamation. Nominal damages are a token amount. So according to the situation one has to decide which damages are most appropriate and how much. A medical case when a person suffers pain and injury will be different from a business case when a deal hasn't been followed through on. A person fired with undue cause will be different from someone who is caught stealing.
REMEDIES FOR BREACH OF CONTRACT Restitution Party recovering values conferred upon another Party through efforts to perform a Contract (Most worthy of a win, because Party has tangible losses) Unjust enrichment Reliance Party recovering losses suffered by virtue of reliance on Contract (innocent Party sustained a loss) “In as good a position as before” Expectancy Party realizing the value of expectancy created by a promise (Lost something party never had anyway) In as good a position as if Contract was completed. Substitution Relief – When K is breached, any remedy is only a substitute. Money is as close as the law can come REMEDIES AVAILABLE: P MUST CHOOSE ONE! Damages Specific Performance Rescission Restitution Quasi-Contract Tort Action COMPENSATORY DAMAGES – Direct Loss and Foreseeable (consequential) losses PUNITIVE DAMAGES – Not Recoverable NOMINAL DAMAGES – No real fiscal value, $1. MEDICAL CONTRACTS HAWKINS v MCGEE (p4) What was the promise? 100% perfect hand What was delivered? 40% hand What is P entitled to? The difference – 60% of K price! Any other losses are not part of the Contract “When a contract is breached, law protects by giving plaintiff his expectation interest. Reliance and Restitution are irrelevant!” p.5 Judge instructions for pain and suffering were in ERROR! They were price P wiling to pay for 100% perfect hand. CONTRACTS OUTLINE Page 1 of 7 Printed at 1:08 A8/P8 on 8/15/08 Walter M. Spader, Jr. SULLIVAN V. O’CONNOR (P7) P had 2 plastic surgeons Able to recover by Reliance theory: 1) Fee to the Defendant 2) Hospital Fee 3) Worsening of Condition 4) Pain and Suffering of 3rd Operation Pain and Suffering of first two surgeries waived (Expectancy Theory) CONSTRUCTION CONTRACTS: If Owner Breaches: Builder gets at least profits he would have made Or, expenses if he already incurred them If Builder Breaches: Owner gets Cost of Completion PLUS Reasonable Compensation for delays If only breach is late performance: only damages is loss of property use GROVES V. WUNDER (p11) D promised to leave land in a uniform grade but breached. Land would be worth $12k+ in promised position, but will cost $60k to get it to that grade Ct held D owed P $60k, D’s breach was willful and must deliver what P was promised. The time used to measure value is important! Difference in Value Rule: TC held that P is entitled to difference in value App court held damages as “cost of completion” ELLIOT V. CALDWELL (p12) [in Groves] Willful breach Must deter future contractors from breeching contracts! Ct expresses punishment concept…when you are bad you should not have benefit of the court treating you as if you didn’t! JACOB & YOUNG, INC. V. KENT (P12) [also in Groves] P entitled to full payment less diff between the value of the house with the pipes as to a house without the pipes. EQUITABLE DOCTRINE OF SUBSTANTIAL PERFORMANCE: If D’s breach was willful and finished project was substantially performed, D is entitled to full payment less P’s damages. CONTRACTS OUTLINE Page 2 of 7 Printed at 1:08 A8/P8 on 8/15/08 Walter M. Spader, Jr. PEEVYHOUSE (p19) “law is not absolute, for every dispute there is only one solution.” – Chen Same situation as Groves, but court only give $500 value of the land Purpose of remedies is to compensate the non-breaching party. “a breach is a breach, innocent or not, someone suffers.” SALES CONTRACTS: Standard: Damages is difference between Kprice and Market Price at time of delivery. Non-breaching party should be compensated. ACME MILLS v. JOHNSON Conversion – Seller converted buyer’s property without permission Buyer is entitled to sacks or value of the sacks ($80) ACME had no damages, even though he didn’t get his wheat B/c market price was lower on day of delivery He actually could have saved money by covering! Contract Market Rule by UCC: Time and place of delivery is relevant Must compensate aggrieved party for costs. Ie. K to sell book for $50 was breached P buys book for $60 P is entitled to $10 from D K price when buyer learned of breach, b/c he could then cover. Cover: Going to market for a substitute purchase Illinois Central RR. Chen: “I’m not sure SC appreciated facts well enough” CAROLINE NURSING HOME v DIX PO suing D for abandoning construction project. Ct says P can’t recover remainder of price to construct b/c no damages Construction can still be completed within Kprice! LUTEN BRIDGE DAMAGES FORMULA: Labor & Materials Expended + Expense Incurred on Past Performance + Profit Realized if Completed After you know there will be a breach, you cannot continue to perform the K and base damages on full performance! You have a duty to mitigate damages Parol Evidence Rule: In a written contract, things that are outside the K are not allowed. Parol basically is the preference for things to be in writing CONTRACTS OUTLINE Page 3 of 7 Printed at 1:08 A8/P8 on 8/15/08 Walter M. Spader, Jr. WRONGFULLY DISCHARGED EMPLOYEES: Are allowed to get full contract price less what they could reasonably still earn…ee has a duty to mitigate damages, as well! But no duty to accept inferior employment – see Parker PARKER v 20TH CENTURY FOX Damages= Kprice minus what she earned by her own efforts SMcL must use “reasonable effort” to find substantially similar employment but not inferior employment. COVER: Buyer must cover on the date of K completion – any earlier or later the risk is on the buyer even on K with multiple dates of delivery UCC §2-712 -- buyer is entitled to reasonable “cover costs” MISS FURNACE Cover at your own risk – Damages, is Mkt Price at time of each delivery You must cover in good faith KERSAGE COMPUTER D cut K ½ way through Ct says you can’t mitigate K P picked up, some business are “expandable” RELIANCE COOPERAGE Must resist efforts to have anticipatory breach remedies aid breacher ANTICIPATORY BREACH No requirement to bring suit immediately You don’t even need to stop what you are doing, if that may cause you greater losses UCC §2-610 – Must only wait a commercially reasonable time before seeking alternate sources of supply OLOFFSON v COOMER P K’ed with D for corn. D told P it was a bad season and he wouldn’t be able to grow the corn. P waited until the end of season and bought corn at highest price and then sought cover costs. Ct said P didn’t act commercially reasonable, as UCC requires. Corn was easily attainable at time of D notice of repudiation. UCC §2-706 through §2-709 CONTRACTS OUTLINE Page 4 of 7 Printed at 1:08 A8/P8 on 8/15/08 Walter M. Spader, Jr. SALES CONTRACTS NERI v. RETAIL MARINE P k’s to buy a boat and breached D sues for lost profit Ct damages = down-payment minus profit (UCC §2-821) Seller must be in as good a position as if contract had been completed. Davis Case – Must show that additional sales wouldn’t hurt profits HADLEY v BAXENDALE D responsible for reasonably foreseeable damages Damages that arise “naturally or reasonable contemplated by both Only responsible for special circumstances if they were communicated Chen: “Whenever a convention rule applies, Hadley does not” GLOBE REFINING D must consent to special damages VICTORIA LAUNDRY Reasonable to assume lost profits, D knew water heater was going to immediate use. VALENTINE V. GEN. AMERICAN CREDIT IN EMPLOYMENT CONTRACTS…the contract is economic so Mental Stress due to breach not recoverable b/c of employment at will Mental stress would be recoverable in caesarian contract or marriage K HERON II Damages in breach cannot put P “in a better position” RELIANCE DAMAGES CONTRACTS OUTLINE Page 5 of 7 Printed at 1:08 A8/P8 on 8/15/08 Walter M. Spader, Jr. CHICAGO COLISEUM v. DEMPSEY CASE Actual Damages – money already spent AFTER signing of the K is allowed Speculative Damages (gains prevented) are too uncertain for recovery Expenses Incurred in Restraining Attempt were at Ps own risk Expenses Pre-Contract are not recoverable as not foreseeable by D. BOONE V COE reliance case, if nothing is in writing – Statute of Frauds. Chen: “units of bad” – 2 in this case – very bad Exception to Statute would be if D received a benefit – here they did not RESTITUTION DAMAGES ANGLIA TV V. REED D has certain knowledge of pre-K expenses, being in the business Is liable for breaching contract for those expenses US V ALGERNON BLAIR Must pay restitution if you had benefit of P’s work! You can recover reasonable value of work! K is “thrown out” but is evidence of the value Algernon would have lost money if they completed the K, but that is irrelevant Suing for restitution or QM is not suing on the K. D was able to use what P did, and was the breacher – they pay! Same in Zara – if you base your claims on the K, you are affirming the K QM = Quantum Meruit – Work/Labor Done US v ZARA CONTRACTING 1) Extra Work separately compensable 2) Subcontract received on the K – should apply to subcontractor 3) Quantum Meruit – reasonable value. Incidental Reliance Losses – Specific to the nature of the Contract Essential – Reliance of preparation for performance or performance of K Incidental – Preparation for collateral transaction that P plans to do OLIVER v CAMPBELL (105) Lawyer sues Client who discharged him directly before verdict in QM QM was higher than Kprice…but since contract was substantially done Damages on Kprice If K has been performed, there is no restitution, only Kprice damages! CONTRACTS OUTLINE Page 6 of 7 Printed at 1:08 A8/P8 on 8/15/08 Walter M. Spader, Jr. Slades’s Case – major turning point in law – you can allege a second promise to pay, simply by having someone indebitatus. Non-transversable without a need to prove it! 1609 – Six Carpenters Case Traveler handed horse to attendant without a discussion of pay Traveler never promised, ie. Didn’t have to – pay! Employee who breaches contract: Unintentional – should recover QM Intentional – old view = nothing Modern view = Britton BRITTON v TURNER Quasi-Contract P only worked for 9.5 months of one-year contract Can recover for value of work done minus damages to D THACH v DURHAM Seller does not need to prove he is owed more than solely damages Burden is on defaulting buyer in seeking refund Down payments are for protection PINCHES P suing for building of church on Quantum Meruit restitution damages The church is useable, breach wasn’t willful. P is allowed K minus costs to fix errors KELLEY Use Pinches saying it is a substantial performance case! No! It is a restitution case! Restitution in Algernon: Reasonable Value of Service is Damages when D is in breach Restitution in Pinches Value of benefit received by D when P is in breach, unwillfully If promisor hasn’t completed b/c promisor breached, he can recover mkt value or work done CONTRACTS OUTLINE Page 7 of 7 Printed at 1:08 A8/P8 on 8/15/08 Walter M. Spader, Jr.
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