Remedies in contract


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Remedies in contract

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Remedies in contract

  1. 1. Remedies CHAPTER 18
  2. 2. Quote of the Day <ul><li>“ Everyone complains of his memory, none of his judgment.” </li></ul><ul><li>Francois, duc de la Rochefoucauld, </li></ul><ul><li>French writer </li></ul>
  3. 3. Breaching the Contract <ul><li>Someone breaches a contract when he fails to perform a duty without a valid excuse. </li></ul><ul><li>A remedy is the method a court uses to compensate an injured party. </li></ul><ul><li>An order forcing someone to do something, or refrain from doing something, is an injunction . </li></ul>
  4. 4. Identifying the “Interest” <ul><li>Expectation Interest </li></ul><ul><ul><li>Designed to put the injured party in the position she would have been in had both sides fully performed their obligations. </li></ul></ul><ul><li>Reliance Interest </li></ul><ul><ul><li>Designed to put the injured party in the position he would have been in had the parties never entered into a contract. </li></ul></ul>
  5. 5. Identifying the “Interest” (cont’d) <ul><li>Restitution Interest </li></ul><ul><ul><li>Designed to return to the injured party a benefit that he has conferred on the other party, which it would be unjust to leave with that person. </li></ul></ul><ul><li>Equitable Interest </li></ul><ul><ul><li>When money is not sufficient to help the injured party, a court may order a transfer of property or may issue an injunction to prevent a particular action from continuing. </li></ul></ul>
  6. 6. Compensatory Damages <ul><li>Compensatory damages are the most common monetary awards. </li></ul><ul><li>They generally flow directly from the contract, such as an order to pay what was promised or to pay for expenses caused by the breach. </li></ul><ul><li>The injured party must prove the breach caused damages that can be quantified with reasonable certainty. </li></ul>
  7. 7. Consequential Damages <ul><li>Consequential damages are those resulting from the unique circumstances of this injured party. </li></ul><ul><li>Because damage calculation can be complex, there are companies that specialize in doing the work on behalf of litigants or other interested parties. </li></ul>Click here for the web page of a damage calculation company.
  8. 8. Incidental Damages <ul><li>Incidental damages are the relatively minor costs incurred when the injured party responds to the breach (obtaining cover ), such as the extra cost of buying replacement goods. </li></ul>Acme agrees to sell 1000 widgets to Big Bob’s for $1 each, but fails to deliver. Big Bob has to buy 1000 widgets from ConCo for $1.25 each. Big Bob can recover incidental damages of the extra $250 from Acme.
  9. 9. Seller’s Remedies <ul><li>If she acts in good faith , she will be awarded the difference between the original contract price and the price she was able to obtain in the open market. </li></ul><ul><li>Most courts hold that the seller of goods is not entitled to consequential damages. </li></ul>
  10. 10. Buyer’s Remedies <ul><li>She will be awarded the difference between the original contract and her cover (replacement) price. </li></ul><ul><li>Under the UCC, the buyer is entitled to consequential damages provided that the seller could reasonably have foreseen them. </li></ul>
  11. 11. Law and Equity <ul><li>Restitution in Cases of a Valid Contract </li></ul><ul><ul><li>Restitution is a common remedy in contracts involving fraud, misrepresentation, mistake, and duress. </li></ul></ul><ul><li>Restitution in Cases of Quasi-Contract </li></ul><ul><ul><li>A court may award restitution, even in the absence of a contract, where one party has conferred a benefit on another and it would be unjust for the other party to retain the benefit. </li></ul></ul>
  12. 12. Other Equitable Interests <ul><li>Specific Performance </li></ul><ul><ul><li>A court will order the parties to perform the contract only in cases involving the sale of land or some other asset that is unique. </li></ul></ul><ul><li>Injunction </li></ul><ul><ul><li>An injunction is a court order that requires someone to do something or refrain from doing something. </li></ul></ul><ul><li>Reformation </li></ul><ul><ul><li>Reformation is a process in which a court will partially “re-write” a contract. </li></ul></ul>
  13. 13. Special Issues of Damages <ul><li>Mitigation of Damages </li></ul><ul><ul><li>A party may not recover for damages that could be avoided with reasonable efforts. </li></ul></ul><ul><li>Nominal Damages </li></ul><ul><ul><li>Nominal damages are a token sum, such as $1, given to a plaintiff who demonstrates that the defendant breached the contract but cannot prove damages. </li></ul></ul>
  14. 14. Liquid Damages <ul><li>A liquid damages clause , is a provision stating in advance how much a party must pay it if it breaches. </li></ul><ul><li>A court will generally enforce a liquidated damages clause if : </li></ul><ul><ul><li>(1) at the time of creating the contract it was very difficult to estimate actual damages, and </li></ul></ul><ul><ul><li>(2) the liquidated amount is reasonable. </li></ul></ul>
  15. 15. Punitive Damages <ul><li>Designed not to compensate the injured party, but to punish the breaching party. </li></ul><ul><li>In awarding punitive damages, a court must consider three “guideposts”: </li></ul><ul><ul><li>The reprehensibility of the conduct, </li></ul></ul><ul><ul><li>The ratio between the harm suffered and the award; and </li></ul></ul><ul><ul><li>The difference between the punitive award and any civil or criminal penalties used in similar cases. </li></ul></ul>
  16. 16. “ The flexible powers of a court should enable it to craft a just remedy for almost any breach of contract.”