BLAW Ch 16: Remedies for Breach of Traditional and E-Contracts

Liquidated Damages

Damages that parties to contract agree in advance should be paid if contract is breached.

Monetary Damages

An award of money. - Available whether the breach was minor or material. - Sometimes referred to as dollar damages - Compensatory, consequential, liquidated, and nomainal

Minor Breach

A breach that occurs when a party renders substantial performance of his or her contractual duties.

Mitigation of Damages

A nonbreaching party's legal duty to avoid or reduce damages caused by a breach of contract. e.g. a girl who gets fired has to make reasonable effort to find a comparable job. - an employee who accepts a non comparable job after being fired can sue for damages.

Rescission

An action to rescind a contract. Rescission is available if there has been a material breach of contract, fraud, duress, undue influence, or mistake.

Breach of the Implied Covenant of Good Faith and Fair Dealing

An implied covenant under which the parties to a contract not only are held to the express terms of the contract but are also required to act in good faith and deal fairly in all respects in obtaining the objective of the contract.

Construction Contract

Arises when owner of real property contracts to have contractor build structure or do other construction work. Compensatory damages recoverable for breach of construction contract vary with stage of completion of project when breach occurs. - Contractor may recover profits he would have made on contract if owner breaches construction contract before construction begins. - If builder breaches contract, owner can recover increased cost above contract price that he or she has to pay to have work completed by another contractor.

Compensatory Damages

Award of money intended to compensate a nonbreaching party for loss of bargain. Compensatory damages place the nonbreaching party as if the contract had been fully performed by restoring the "benefit of the bargain."

Material Breach

Breach that occurs when a party renders inferior performance of his or her contractual duties. - Nonbreaching party may rescind contract and seek restitution of any compensation paid under contract to breaching party. - Nonbreaching party discharged from any further performance. - Nonbreaching party may treat contract as being in effect and sue breaching party to recover damages

Injunction

Court order that prohibits person from doing an act. - Requesting party must show that he or she will suffer irreparable injury if injunction not issued.

Sale of a Good

Compensatory damages for a breach of a sales contract involving goods are governed by the UCC. - Usual measure of damages for breach of sales contract is difference between the contract price and the market price of the goods at the time and place the goods were to be delivered.

Types of Performance

Complete Performance: Contract is discharged. Substantial Performance: Nonbreaching party may recover damages caused by breach. Inferior Performance: Nonbreaching party may either (1) rescind the contract and recover restitution or (2) affirm the contract and recover damages.

Disclaimer of Consequential Damages

Consequential damages are often disclaimed in sales or license agreement. This means that breaching party is not responsible to pay consequential damages.

Nominal Damages

Damages awarded when nonbreaching party sues breaching party even though no financial loss has resulted from breach. Nominal damages usually $1 or some other small amount.

Employment Contract

Employee whose employer breaches employment contract can recover lost wages or salary as compensatory damages. - If employee breaches contract, employer can recover costs to hire new employee plus increase in salary paid to replacement.

Reformation

Equitable doctrine permits court to rewrite contract to express parties' true intentions. Usually available to correct clerical errors in contracts.

Consequential Damages (Special Damages)

Foreseeable damages that arise from circumstances outside a contract. - To be liable for these damages, breaching party must know or have reason to know that the breach will cause special damages to the other party.

Enforcement of Remedies

If nonbreaching party wins lawsuit, and breaching party refuses to pay judgement, court may: 1. Issue writ of attachment: orders sheriff or other government officer to seize property in possession of breaching party that he or she owns and to sell the property at auction to satisfy judgement 2. Issue a writ of garnishment: orders that wages, bank accounts, or other property of breaching party that is in hands of third parties be paid over to nonbreaching party to satisfy the judgement.

Penalty

Liquidated damages clause is considered a penalty if actual damages are clearly determinable in advance or if the liquidated damages are excessive or unconscionable. - if found to be excessive or unconscionable, liquidated damages are unenforceable, and nonbreaching party may actually just sue to recover actual damages.

Anticipatory Breach

Occurs when contracting party informs the other party in advance that her or she will not perform his or her contractual duties when due. - Can be expressly stated or implied from conduct. - Nonbreaching party's obligations discharged immediately. - Nonbreaching party may also sue immediately. No need to wait until performance is due.

Specific Performance

Orders breaching party to perform the acts promised in a contract. Courts have the discretion to award this remedy if subject matter of contract is unique. - land contracts (every piece of land is unique), works of art, antiques, items of sentimental value, rare coins, stamps, heirlooms, etc. Most other personal property does not. - Specific performance of personal service contracts not awarded.

Substantial Performance

Performance by a contracting party that deviates only slightly from complete performance. - Nonbreaching party can sue breaching party to recover damages by (1) deducting cost to repair defect or (2) suing the breaching party to recover cost to repair defect if breacing party has already been paid

Inferior Performance

Situation in which party fails to perform express or implied contractual obligations and impairs or destroys the essence of a contract.

Torts Associated with Contracts

Recovery for breach of contracts is usually limited to contract damages. Party that can prove contract-related tort may also recover tort damages.

Equitable Remedies

Remedy that is available if there has been a breach of contract that cannot be adequately compensated through a legal remedy or to prevent unjust enrichment.

Complete Performance (Strict Performance)

Situation in which party to a contract renders performance exactly as required by the contract. - Complete performance discharges that party's obligations under the contract.

Breach of Contract

Situation that occurs if one or both parties do not perform their duties as specified in the contract.

Restitution

The return of goods or property received from the party to rescind a contract. If the actual goods or property are not available, a cash equivalent must be made.

Intentional Interference

Tort that arises when a third party induces a contracting party to breach the contract with another party. 1. Valid, enforceable contract between contracting parties 2. Third-party knowledge of this contract 3. Third-party inducement to breach contract Third party can contract with breaching party without becoming liable for this tort if contracting party has already breached contract, and thus third party cannot be held to have induced breach.

Tender of Performance (Tender)

Unconditional and absolute offer by a contracting party to perform his or her obligations under a contract. - Tender discharges party's contractual obligations