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Chapter 17

Remedies
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Remedies
Money damages
Specific performance
Injunction

Reformation

Money Damages

Usually:
Expectation damages
or
Reliance damages
or
Restitution damages
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Money Damages (cont)


Sometimes:
Liquidated damages, and/or
Punitive damages
Rarely:
Nominal damages
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Expectation Damages
What the injured party reasonably
thought he would get from the
contract.
The goal is to put him
in the position he would have
been in if both parties had fully
performed their obligations.
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Expectation Damages
are the sum of:
Compensatory damages, if any, and

Consequential damages, if any, and


Incidental damages, if any.

Compensatory Damages
Are the most common monetary awards for
the expectation interest.

aka direct damages those that flow


directly from the contract
that directly result from the breach
Must be proven with reasonable certainty
(cannot be speculative)
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Compensatory Damages
Example
Example: Actress breaches her contract with
film company.

Compensatory Damages:
Incremental cost of new actress $1 million
Extra wages for crew
+ $2.5 million
Total
$3.5 million

Consequential Damages
Those resulting from the unique
circumstances of this injured party

aka special damages


Must have been foreseeable to the
breaching party at the time the contract
was made.
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Hadley v. Baxendale
Summary of facts
Whats the issue?
How did the court rule
and why?
Discussion

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Berkel & Company Contractors v. Palm &


Assoc Inc. YOU BE THE JUDGE!

Summary of facts
Two votes
Discussion

Incidental damages
Relatively minor costs
the injured party incurs
when there has been a breach.

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Reliance Damages
Money expended by the injured party in
reliance on the agreement
for which in fairness he should receive
compensation.
The goal is to return the injured
party to the state he was in before he
entered into the contract with the
breaching party.
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Reliance Damages example


Travel, hotel, wages for the cast & crew for four
days.
Money spent developing the script after Reina
made her promise.
The unrecoverable portion of money spent on
costumes & sets.

Note that the injured party has


a duty to mitigate damages.
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Promissory Estoppel
Reliance damages are typically given in
promissory estoppel cases.

Restitution Damages
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.

Example: Toews v. Funk, Idaho Court of


Appeals, 1994
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Restitution in rescission cases


Restitution damages are common remedy
in contracts rescinded on basis of:
Fraud
Misrepresentation
Mistake
Duress

Mitigation of Damages
Duty to mitigate by the non-breaching party:
Must make reasonable efforts to keep
damages as low as possible (to prevent
unnecessary loss)
May not recover damages
that could have been avoided
with reasonable efforts.

Nominal Damages

Sometimes people sue even though they


know that proving any damages will
be difficult.

Nominal damages are a token award


that says you won.
Both parties must pay their own court
costs.
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Liquidated Damage Clause


A provision stating in advance how
much a party must pay if it breaches
the contract

Liquidated Damages
A court will generally enforce a liquidated
damages clause if:

1. At the time of creating a contract, it was


very difficult to estimate actual damages,
and
2. The liquidated amount is reasonable.
(Penalties are not enforceable.)
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Lake Ridge Academy v. Carney


Summary of facts
How did the lower courts
rule?
Whats the issue?
How did the court rule
and why?

Punitive Damages
Only awarded in contract case when
it involves conduct such as bad
faith or fraud.

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Specific Performance
A form of mandatory injunction in which a party
is ordered to perform as specified in the
contract.

A court will award specific performance only in


cases involving the sale of land or some other
asset that is unique.

Injunction
In contract law, an injunction is an order to
cease and/or desist from doing something.

Example: Money damages will


not compensate for an
unpleasant odor wafting in from
neighbors pig farm.
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Injunction
A preliminary injunction: A court
order issued early in a lawsuit
prohibiting a party from doing
something during the lawsuit.

A permanent injunction: Defendant


must forever stop the activity.

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Reformation
A remedy in which the court
rewrites a contract to reflect the
original intention of the parties.

Reformation is rare.
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