Contracts - Remedies

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  1. Types of damages?
    • 1) Compensatory
    • 2) Liquidated
    • 3) Punitive - unavailable for K actions
    • 4) Restitution
    • 5) Equitable Relief
  2. What are compensatory damages?
    • put nonbreaching party in position he would have been had promise been performed
    • purpose is to compensate P, not punish D for breach. No punitive damages for breach
    • 1) expectation damages (benefit of the bargain)
    • 2) incidental damages (costs incurred in dealing with breach, finding a replacement; always recoverable)
    • 2) reliance damages (cost of plaintiff's performance)
    • 3) consequential damages (special damages)
    • Note: P must subtract avoidable damages
  3. Expectation damages
    • Bar essay: write this
    • 1) The purpose of money damages is to compensate.
    • 2) In CA, money damage rules are based on protection of the non-breaching party’s expectation interests.
    • 3) That means that a person making a contract expects that it will be performed without breach.
    • 4) That means money damages are based on the amount of money required to put the plaintiff in the same economic position as if the contract had been performed without breach.
    • Formula: ($ value of performance w/o breach) – ($ value of performance w/breach)
  4. Consequential Damages
    • 1) special damages arising from P’s special circumstances,
    • 2) which D knows of at time of K,
    • 2) only if foreseeable
  5. Avoidable Damages
    • no recovery for damages that could have been avoided w/out undue burden on P
    • [Continuing to perform after the other party’s breach, not recov.]
    • [Turning down other, comparable opportunities, not recov.]
    • This is a defense, thus BOP on Defendant, NOT P’s duty to mitigate
  6. Seller breaches, Buyer keeps goods:
    (FMV if perfect) – (FMV as delivered)
  7. Seller breaches, seller has the goods:
    (Mkt price at time of breach [or reasonable replacement price, whichever is greater]) – (K price)
  8. Buyer breaches, buyer keeps the goods:
    (K price)
  9. Buyer breaches, seller has the goods
    • (K price) – (resale price [mkt price @ delivery])
    • UNLESS: lost volume seller rule applies
  10. Lost volume seller rule
    • 1) supply of goods unlimited
    • 2) damages = provable lost profits
    • Ex: Seller contracts to sell leather clothing to D for $1,000.
    • (Assume that D is buying goods that are part of Seller's regular inventory – “off the rack” so to speak.)
    • D breaches. Seller sells the very same items to Buyer2 for $1,000.
    • Seller can recover lost profits from D.
  11. Liquidated Damages
    • contract provision that sets the amt of damages; concern is penalty is too high, against public policy as a punishment
    • Requirements:
    • 1) Damages were difficult to calculate at the time the K was formed
    • 2) Amount must be a reasonable forecast of damages, and NOT a penalty
  12. Damages must be established with reasonably certainty
    • Certainty Limitation: Damages must be established with reasonable certainty
    • so if new business, try RELIANCE recovery (below)
  13. Reliance Damages
    puts P back in same position as if no K
  14. Restitution Damages
    • Quasi-contract relief
    • Measured by value of the benefit conferred:
    • 1. Benefit of the bargain: contract price minus “cover” price
    • 2. Net benefit received: reasonable value of breaching party’s services less damage incurred due to the breaching party’s failure to perform
  15. Contracts sets a limitation of Remedies
    • establishes ceiling. If unconscionable- not allowed.
    • Concern is penalty is too low
  16. Specific Performance
    • Type of equitable remedy
    • Requires
    • 1) valid K
    • 2) satisfaction of P's conditions/Performance
    • 3) inadequate remedy at law [money damages not adequate]
    • 4) feasibility
  17. Exam tip regarding specific performance
    • 1) Judicial administration concern of enforcing specific performance – how would the court enforce the order to require player to play for the team he didn’t want to? Owner tells the judge he missed 3 shots last night
    • 2) balance judicial administration vs. difficulty of determining money damages
  18. What situations are eligible for specific performance?
    • 1) Ks for real estate sales (but NO specific performance when there’s a 3rd party bona fide purchaser from seller that will be harmed by specific performance)
    • 2) Goods if UNIQUE (antique, art, custom-made)
    • 3) NEVER SP for services K, but court has discretion to grant injunctive relief to compel someone to not work for a competitor
  19. Reclamation remedy?
    [limited] right of unpaid seller to get its goods back
  20. Seller’s right of reclamation
    • 1) Buyer must have been insolvent at the time the goods received,
    • 2) Seller demands return of goods within 10 days of receipt of goods, and
    • 3) Buyer has goods at the time of demand.
  21. Buyer’s right of reclamation:
    • 1) identified goods
    • 2) FULLY PAID for goods
    • 3) seller who becomes insolvent within 10 days
  22. Rescission remedy?
    • Cancels K for:
    • 1) mistake
    • 2) fraud
    • 3) duress
    • 4) breach
  23. Reformation remedy?
    modifying a written agreement to reflect the parties' agreement
Card Set
Contracts - Remedies
Contracts - Remedies
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