Business Law_Chapter 18_Contract Remedies

Front 1

Most common types of contract remedies (3)

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1. Monetary

2. Equitable remedies of specific performance and injunction

3. Restitution

Front 2

Contract remedies are available to protect one or more of the following interests of the injured party for three reasons:

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1. Expectation interest

2. Reliance interest

3. Restitution interest

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Expectation interest

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Which is his interest to in having the benefit of his bargain by being put in as good as a position a the one he would have occupied had the contract been performed.

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Reliance interest

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Which is his interest in being reimbursed for loss caused by reliance on the contract by being put in a position as goods as the one he would have been in had the contract not been made

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Restitution interest

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Which is his interest in having restored to him any benefit the he has conferred on the other party

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Compensatory damages

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Contract damages placing the injured party in a position as good as the one he would have held had the other party performed; equals the loss of value minus loss avoided by injured party plus incidental damages plus consequential damages.

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Compensatory damages (four types)

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Loss of value

Costs avoided

Incidental damages

Consequential damages

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Loss of value

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Value of promised performance minus value the value of actual performance

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Cost avoided

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Loss or costs the injured party avoid by not having to perform

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Incidental Damages

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Damages arising directly out of a breach of contract

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Consequential damages

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Damages not arising directly out of a breach of contract but arising as a forseeable result of the breach

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Nominal damages

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A small sum awarded where a contract has been breached but the loss is negligible or unproved

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Reliance damages

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Contract damages placing the injured party in as good of a position as she would have been in had the contract not been made.

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Damages for misrepresentation (two types)

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1. Benefit of the bargain

2. Out of pocket damages

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Benefit of the bargain

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Difference between the value of the fraudulent party's performance as represented and the value the defrauded party received.

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Out of pocket damages

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Difference between the value given and the value received

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Punitive damages

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Generally not recoverable for breach of contract

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Liquidated damages

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Reasonable damages agreed to in advance by the parties to a contract

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Limitations on damages (3 types)

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1. Forseeability

2. Certainty

3. Mitigation

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Forseeability

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Potential loss that the party in default had reason to know of when the contract was made

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Certainty of damages

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Damages are not recoverable beyond an amount that can be established with reasonable certainty (can be a problem--ticket sales example)

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Mitigation of damages

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Injured party may not recover damages for loss he could have avoided by reasonable efforts

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Remedies in equity--(3 types)

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Only allowed where there is not adequate remedy at law

1. Specific performance

2. Injunction

3. Reformation

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Specific performance

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Court decree ordering breaching party to render promised performance

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Injunction

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Court order prohibiting a party from doing a specific act

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Reformation

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Court order correcting a written contract to conform with the original intent of the contracting parties

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Definition of restitution

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Restoration of the injured parties to the position she was in before the contract was made

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Availability of restitution (4)

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1. Party injured by breach

2. Party in default

3. Statute of frauds

4. Voidable contracts

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Party injured by breach

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If the other party totally breaches the contract by nonperformance or repudiation

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Party in default

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For any benefit conferred in excess of the loss caused by the breach

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Statute of frauds

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Where a contract is unenforceable because of the statute of frauds, a party may recover the benefits conferred upon the other party in reliance of the contract

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Voidable contracts

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A party who has avoided a contract is entitled to restitution for any benefit conferred on the other party

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Limitations on remedies (2)

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1. Election of remedies

2. Loss of power of avoidance

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Election of remedies

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If remedies are not inconsistent, a party injured by a breach of contract may seek more than one

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Loss of power of avoidance

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A party with the power to avoid a contract may lose that power (?)