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Ch. 18 Outline

• 1. Damages• 2. Rescission and Restitution• 3. Specific Performance• 4. Reformation• 5. Recovery Based on Quasi Contract• 6. Election of Remedies• 7. Waiver of Breach• 8. Contract Provisions Limiting Remedies

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Introduction

• Most Common Remedies:– Damages (4 types).

_______________________– Rescission and Restitution.– Specific Performance.– Reformation.– Recovery Based on Quasi Contract.

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Four Basic Types of Money Damages

1. Compensatory Damages

2. Consequential Damages

3. Punitive Damages

4. Nominal Damages

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Compensatory Damages

See Regular Handout

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§1: Damages

• Compensatory Damages—direct losses.– Sale of Goods: difference between contract and

market price.– Sale of Land: specific performance.– Construction Contracts: varies.

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§1: Damages

• Consequential (Special) Damages—foreseeable losses.– Breaching party is aware or should be aware, cause

the injury party additional loss.– Case : Hadley v. Baxendale (1854).

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Damages

• Punitive Damages—punish or deter future conduct.– Generally not available for mere breach of

contract.– Usually tort (e.g., fraud) is also involved.

• Nominal Damages—no financial loss.– Defendant is liable but only a technical injury.

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Mitigation of Damages

• When breach of contract occurs, the innocent injured party is held to a duty to reduce the damages that he or she suffered.

• Duty owed depends on the nature of the contract.

• Case : Fujitsu Ltd. v. Federal Express Corp. (2001).

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Liquidated Damages • Liquidated Damages.

– A contract provision which specifies an amount to be paid as damages in the event of future default or breach of contract. The amount is based on a reasonable estimate of the value of the promised performance.

• Penalties.– Specify a certain amount (bearing no relationship to the value

of performance) to be paid in the event of a default or breach of contract and are designed to penalize the breaching party. They are rarely enforceable.

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§2: Rescission and Restitution• Rescission.

– A remedy whereby a contract is canceled and the parties are restored to the original positions that they occupied prior to the transactions.

• Restitution.– Both parties must return goods, property, or

money previously conveyed.

• Note: Rescission does not always call for restitution. Restitution is called for in some cases not involving rescission.

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§3: Specific Performance

• Equitable remedy calling for the performance of the act promised in the contract.

• Remedy in cases where the consideration is:– Unique (land);– Scarce; – Not an available remedy in contracts for

personal services.

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§4: Reformation

• Equitable remedy allowing a contract to be reformed, or rewritten to reflect the parties true intentions.

• Available when an agreement is imperfectly expressed in writing.

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§5: Recovery Based on Quasi Contract

• Equitable theory imposed by courts to obtain justice and prevent unjust enrichment.

• Party seeking quantum meruit must show the following:– A benefit was conferred to the other party.

– Party conferring did so with the reasonable expectation of being paid.

– The benefit was not volunteered (not a gift).

– Retaining benefit without paying for it would result in unjust enrichment of the party receiving the benefit.