Business Law Final (Chapter 19)

Most Common Remedies:

- Damages. - Rescission and Restitution. - Specific Performance. - Reformation. - Recovery Based on Quasi Contract.

Specific Performance provides remedy in cases involving:

- Sale of Land. - Contracts for Personal Services.

Types of Damages

1. Compensatory (to cover direct losses and costs). 2. Consequential (to cover indirect and foreseeable losses). 3. Punitive (to punish and deter wrongdoing). 4. Nominal (to recognize wrongdoing when no monetary loss is shown).

Damages

A breach of contract entitles the nonbreaching party to sue for monetary damages. In contract law, damages compensate the nonbreaching party for the loss of the bargain (whereas tort law damages compensate for harm suffered as a result of another's wrongful act). Often, courts say that innocent parties are to be placed in the position they would have occupied had the contract been fully performed.

Reformation

A court-ordered correction of a written contract so that it reflects the true intentions of the parties.

Penalty

A sum inserted into a contract not as a measure of compensation for its breach but rather as punishment for a default. The agreement as to the amount will not be enforced, and recovery will be limited to actual damages.

Liquidated Damages

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

Specific Performance

An equitable remedy requiring the breaching party to perform as promised under the contract; usually granted only when money damages would be an inadequate remedy and the subject matter of the contract is unique (for example, real property).

Restitution

An equitable remedy under which a person is restored to his or her original position prior to loss or injury, or placed in the position he or she would have been in had the breach not occurred.

Liquidated Damages vs. Penalties

Enforceability. Court asks two questions: - (1) At the time of contracting, was it apparent damages would be difficult to estimate in the event of a breach? - (2) Was the amount set as liquidated damages a reasonable estimate and not excessive?

The goal of damages:

Is either to "make the party whole" or give them the "benefit of their bargain."

Rescission

Is essentially an action to undo, or terminate, a contract—to return the contracting parties to the positions they occupied prior to the transaction.

Equitable Remedies

Sometimes, damages are an inadequate remedy for a breach of contract. In these situations, the nonbreaching party may ask the court for an equitable remedy. Equitable remedies include rescission and restitution, specific performance, and reformation.

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.