blaw ch 11-4 terms

There are 4 broad categories of damages:

- Compensatory (to cover direct losses and costs) - Consequential (to cover indirect and foreseeable losses) - Punitive (to punish and deter wrongdoing) - Nominal (to recognize wrongdoing when no monetary loss is shown)

consequential damages

- Foreseeable damages that result from a party's breach of contract - Differ from compensatory damages in that they are caused by special circumstances beyond the contract itself

punitive damages

- Generally are not awarded in lawsuits for breach of contract - Because they are designed to punish a wrongdoer and set and example to deter similar conduct in the future - they have no legitimate place in contract law

compensatory damages

- These damages compensate the injured party only for damages actually sustained and proved to have arisen directly from the loss of the bargain caused by the breach of the contract - Simply replace what was lost because of the wrong or damage and are often said to "make the person whole" - Courts will not award damages in an amount that leaves the nonbreaching party in a better position that they would have been in if the contract had not been breached

breach by contractor

- When the construction contractor breaches the contract - either by failing to begin construction or by stopping work partway through the project - the measure of damages is the cost of completion - Cost of completion includes reasonable compensation for any delay in performance - If contractor finishes late - measure of damages is the loss of use

To determine if a particular provision is for liquidated damages or is a penalty - court must answer 2 questions:

- When the contract was entered into, was it apparent that damages would be difficult to estimate in the event of a breach? - Was the amount set as damages a reasonable estimate and not excessive?

The measure of damages in a building or construction contract varies depending on which party breaches and when the breach occurs

- breach by owner - breach by contractor - breach by both owner and contractor

The measure of damages in a building or construction contract varies depending on which party breaches and when the breach occurs

- breach by the owner -

Liquidated damages provisions are frequently used in:

- construction contracts - contracts for the sale of goods - contracts with entertainers and professional athletes

incidental damages

- expenses that are caused directly by a breach of contract - Example - expenses such as those incurred to obtain performance from another

Ordinarily because each parcel of land is unique:

- the remedy for a seller's breach of a contract for a sale of real estate is specific performance - The buyer is awarded the parcel of property for which they bargained

penalty

A contract clause that specifies a certain amount to be paid in the event of a default or breach of contract but is unenforceable because it is designed to punish the breaching party rather than to provide a reasonable estimate of damages

Mitigation of damages:

A rule requiring a plaintiff to do whatever is reasonable to minimize the damages caused by the defendant

Liquidated damages:

An amount, stipulated in a contract, that the parties to the contract believe to be a reasonable estimate of the damages that will occur in the event of a breach

breach by owner

Owner may breach at 3 different stages; before performance has begun, during performance, or after performance has been completed

exculpatory clauses

Provisions stating that no damages can be recovered

limitation-of-liability clauses

Provisions that affect the availability of certain remedies

nominal damages

When no actual damage or financial loss results from a breach of contract and only a technical injury is involved - court may award nominal damages to the innocent party

Breach by both owner and contractor

When the performance of both parties falls short of what their contract required - the courts attempt to strike a fair balance in awarding damages

When a seller fails to deliver goods, knowing that the buyer is planning to use or resell those goods immediately:

a court may award consequential damages for the loss of profits from the planned resale

Most lawsuits for nominal damages are:

brought as a matter of principle under the theory that a breach has occurred and some damages must be imposed regardless of actual loss

Damages are designed to:

compensate a party for harm suffered as a result of another's wrongful act

If owner breaches BEFORE performance has begun:

contractor can recover ONLY the profits that would have been made on the contract (profits equal total contract price less the cost of materials and labor)

If owner breaches DURING performance:

contractor can recover the profits plus the costs incurred in partially constructing the building

n the context of contract law:

damages compensate the nonbreaching party for the loss of the bargain

Liquidated damages provisions usually are:

enforceable

A clause that excludes liability for negligence may be:

enforced in some situations when the parties have roughly equal bargaining positions

the waiver:

erases the past breach and the contract continues as if the breach had never occurred

Although a penalty also specifies a certain amount to be paid in the event of a default or breach of contract:

it is designed to penalize the breaching party, not to make the innocent party whole

A breach of contract entitles the:

nonbreaching party to sue for monetary damages

Normally a provision excluding liability for fraudulent or intentional injury will:

not be enforced

a clause excluding liability for illegal acts, acts that are contrary to public policy, or violations of law will:

not be enforced

Business people often waive breaches of contract to:

obtain whatever benefit is still possible out of a contract

Liquidated damages differ from:

penalties

When a person's action cause both a breach of contract and a tort (fraud):

punitive damages may be available

if a court finds that a provision calls for a penalty:

the agreement as to the amount will not be enforced and the recovery will be limited to actual damages

For the nonbreaching party to recover consequential damages:

the breaching party must have known (or had reason to know) that special circumstances would cause the nonbreaching party to suffer an additional loss

If owner breaches AFTER the construction has been completed:

the contractor can recover the entire contract price plus interest

The standard measure of compensatory damages is:

the difference between the value of the breaching party's promised performance under the contract and the value of their actual performance

Under doctrine of mitigation of damages:

the duty owed depends on the nature of the contract

In most situations, when a breach of contract occurs:

the innocent injured party is held to a duty to mitigate/reduce the damages that they suffer

waiver

the knowing relinquishment of a legal right; the right to require satisfactory and full performance

The waiver of breach extends only to:

the matter waived and not to the whole contract

When a waiver of a breach of contract occurs:

the party waiving the beach can't take any later action on it

If the answer to either question determining liquidated damages or penalties is no:

the provision is a penalty and usually will not be enforced

If the answers to both questions determining liquidated damages or penalties are yes:

the provision is for liquidated damages are normally will be enforced

Whether a limitation-of-liability clause in a contract will be enforced depends on:

the type of breach that excused by the provision

In a contract for the sale of goods:

the usual measure of compensatory damages is an amount equal to the difference between the contract and market price