Someone breaches a contract when he fails to perform a duty without a valid excuse. What is the remedy?
A remedy is the method a court uses to compensate an injured party.
One remedy might be an injunction. What is this?
An injunction ia an order forcing someone to do something, or refrain from doing something. An example would be an injunction for an employer preventing employees from working elsewhere in the same field.
One remedy might be the award of expectation damages. What is this?
An award of expectation damages is a cash remedy, meaning the money required to put one party in the position she would have been in had the other side performed the contract.
One remedy might be specific performance. What is this?
In cases of rare property, courts often award specific performance, forcing both parties to complete the deal because money damages will not suffice.
One remedy might be insisted on, but is very limited. What is a liquidated damages clause?
A liquidated damages clause means a provision in the contract declared in advance what one party will receive if the other side breaches. Courts sometimes—but not always—enforce these clauses. But sometimes, these are too harsh, and unenforceable.
The first step that a court takes in choosing a remedy is to decide what interest it is trying to protect. What is interest and what are the four principle contract interests? What type of remedy are they?
- Interest is a legal right in something.
- Expectation Interest. Legal remedy
- Reliance Interest. Legal remedy
- Restitution Interest. Equitable remedy
- Equitable Interest. Equitable remedy
Define Expectation Interest. What is the most common award for this?
- This refers to what the injured party reasonably thought she would get from the contract. The goal is to put her in the position she would have been in if both parties had fully performed their obligations.
- Also refered to as “direct damages,” Compensatory damages are the most common monetary awards and are those that flow directly from the contract. In other words, these are the damages that inevitably result from the breach.
- However, the injured party must prove the breach of contract caused damages that can be quantified with reasonable certainty.
In addition to compensatory damages, the injured party may seek consequential damages. What are these? What case ruling has since been unchanged? Who is entitled to these under the UCC?
- Also known as “special damages,” consequential damages are those resulting from the unique circumstances of this injured party.
- The rule from Hadley v. Baxendale has been unchanged ever since: the injured party may recover consequential damages only if the breaching party should have foreseen them when the two sides formed the contract.
- Under the UCC: Most courts hold that the seller of goods is not entitled to consequential damages, but the buyer is entitled to consequential damages provided that the seller could reasonably have foreseen them.
What are incidental damages and how does it pertain to the sale of goods (seller v. buyer)?
- Incidental damages are the relatively minor costs that the injured party suffers when responding to the breach.
- Seller’s Remedies If a buyer breaches a sale of goods contract, the seller generally has at least two remedies. She may resell the goods elsewhere. If she acts in good faith, she will be awarded the difference between the original contract price and the price she was able to obtain in the open market.
- Buyer’s Remedies The buyer’s remedies under the Code are similar to those we have already considered. She typically has two options. First, the buyer can “cover” by purchasing substitute goods. To cover means to make a good faith purchase of goods similar to those in the contract. The buyer may then obtain the difference between the original contract price and her cover price. Alternatively, if the buyer chooses not to cover, she is entitled to the difference between the original contract price and the market value of the goods.
What is reliance interest? What is it designed to do? In which types of cases do the ocurts award only these?
- The injured party may be unable to demonstrate expectation damages, perhaps because it is unclear he would have profited. But he may still prove that he expended money in reliance on the agreement and that in fairness he should receive compensation.
- If there is no way of proving his profits, and a court cannot give a party expectation interest. Instead, they might be awarded reliance damages. The reliance interest is designed to put the injured party in the position he would have been in had the parties never entered into a contract. This remedy focuses on the time and money the injured party spent performing his part of the agreement.
- The plaintiff must show that the defendant made a promise knowing that the plaintiff would likely rely on it, that the plaintiff did rely, and that the only way to avoid injustice is to enforce the promise. In promissory estoppel cases, a court will generally award only reliance damages. It would be unfair to give expectation damages for the full benefit of the bargain when, legally, there has been no bargain.
What is restitution interest? What types of cases is it awarded in?
- The restitution interest is 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.
- Restitution is awarded in two types of cases.
- First, the law allows restitution when the parties have reached a contract and one of them breaches. In such cases, a court may choose restitution because no other remedy is available or because no other remedy would be as fair.
- Second, courts may award restitution in cases of quasi-contract. In quasi-contract cases, the parties never made a contract but one side did benefit the other.
In some cases, money damages will not suffice to help the injured party. Something more is needed, such as an order to transfer property to the injured party (specific performance) or an order forcing one party to stop doing something (an injunction).