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REMEDIES CHAPTER 18 COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 1 Introduction Most Common Remedies: Damages. Rescission and Restitution. Specific Performance. Reformation. Recovery Based on Quasi Contract. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 2 Damages Compensatory Damages—direct losses. Sale of Goods: difference between contract and market price. Sale of Land: specific performance. Construction Contracts: varies. Consequential (Special) Damages—foreseeable losses. Breaching party is aware or should be aware, cause the injury party additional loss. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 3 COMP AND SPECIAL Kathy’s Komputers, K’s with Conrads’s Cables. Kathy to purchase 100 specialized xyz computer cables for the KKmodel model 1020 at $10.00 per cable. Delivered by Nov 1,2006. Conrad breached contract, unable to complete per specifications and failed to deliver by Nov 1,2006. Kathy had K’ed with Doug’s computer store, to sell 50 KK model 1020 by Nov 15,2006.She is unable to make sale. Kathy wants to sue Conrad’s for breach of contract, claiming compensatory and special (consequential damages). COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 4 Damages Punitive Damages—punish or deter future conduct. Generally not available for mere breach of contract. Usually tort (e.g., fraud) is also involved. Nominal Damages—no financial loss. Defendant is liable but only a technical injury. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 5 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. Duty owed depends on the nature of the contract. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 6 Mitigation Damages Tom K’s with Marsha to purchase 50 paper compound Extra large storage bins. Marsha ships 50 paper compound Extra Small storage bins to Tom. Tom cannot use these at all and he had told Marsha he needed the bins yesterday. Tom tells Marsha he is going to sue her for breach of K. Tom buys the needed bins from Ben. He leaves the bins he received from Marsha in the yard, exposed to elements. That very night a passerby throws a lit cigarette into the storage yard and ignites Marsha’s bins. They are completely destroyed. Tom Sues Marsha for breach and Marsha claims that Tom did not Mitigate the damages…who wins? COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 7 Liquidated Damages Provisions Liquidated Damages. A contract provides a specific amount to be paid as damages in the event of future default or breach of contract. Penalties. Specify a certain amount to be paid in the event of a default or breach of contract and are designed to penalize the breaching party. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 8 Rescission and Restitution Rescission. A remedy whereby a contract is canceled and the parties are restored to the original positions that they occupied prior to the transactions. Restitution. Both parties must return goods, property, or money previously conveyed. Note: Rescission does not always call for restitution. Restitution is called for in some cases not involving rescission. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 9 Specific Performance Equitable remedy calling for the performance of the act promised in the contract. Remedy in cases where the consideration is: Unique (sale of land); Scarce; or Not available remedy in contracts for personal services. What about Builder’s contracts? COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 10 Reformation Equitable remedy allowing a contract to be reformed, or rewritten to reflect the parties true intentions. Available when an agreement is imperfectly expressed in writing. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 11 Recovery Based on Quasi Contract Equitable theory imposed by courts to obtain justice and prevent unjust enrichment. Party seeking quantum meruit must show the following: A benefit was conferred to the other party. Party conferring did so with the reasonable expectation of being paid. The benefit was not volunteered. Retaining benefit without paying for it would result in unjust enrichment of the party receiving the benefit. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 12 Election of Remedies Doctrine created to prevent double recovery. Nonbreaching party must choose which remedy to pursue. UCC rejects election of remedies. Cumulative in nature and include all the available remedies for breach of contract. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 13 Waiver of Breach If the nonbreaching party knowingly accepts incomplete or defective performance from the breaching party, the nonbreaching party has waived her right to complete and proper performance. Nonbreaching party should give notice to the breaching party that full performance will be required in the future. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 14 Contract Provisions Limiting Remedies Exculpatory clauses. Provisions stating that no damages can be recovered. Limitation of liability clauses. Provisions that affect the availability of certain remedies. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 15