Chapter 18

Contract Remedies

 

Objectives:

1. Compensatory damages, reliance damages

2. Define (a) nominal damages; (b) incidental damages; (c) consequential damages; (d) foreseeability of damages; (e) punitive damages; (f) liquidated damages; (g) mitigation of damages

 

I. Monetary Damages

          A. Compensatory damages (put plaintiff in position he would have been in but for breach)

                   1. Loss of value

                   2. Cost avoided

                   3. Incidental damages

                   4. Consequential damages

          B. Reliance damages (put plaintiff in position he would have been in but for contract)

          C. Nominal damages

          D. Tort damages (fraud and misrepresentation)

          E. Punitive Damages (punish the defendant to deter bad conduct)

          F. Liquidated Damages

                   1. Contract estimates damages

                   2. Real damages must be hard to determine, and estimate must be reasonable. Cannot be a penalty

          Westhaven v. Madison, p. 330.

          Facts: Shopping center lease. T must pay certain amount per day if T vacates. T vacated, and L claimed under liquidated damages clause. T argued that occupancy went up after T left, meaning L had no real damages.

          Issue: Was the liquidated damages clause enforceable?

          Holding: Yes. It met all the requirements, and the occupancy rate change did not make a difference.

 

II. Limitations on Damages

          A. Foreseeability (Hadley v. Baxendale)

          B. Certainty of damages

          C. Mitigation of damages (P must take reasonable steps to minimize damages)

          Parker, p. 333.

          Facts: Actress signs contract for one movie. Movie company cancels, wants her to do another movie. Pay would be the same.

          Issue: Did actress fail to mitigate by not taking other movie?

          Holding: No. In personal services, it is not reasonable to require P to take inferior employment.

         

III. Equitable Remedies

          A. Specific performance

                   Tamarand, p. 335.

                   Facts: Dispute arises over movie. Settlement agreement requires T promises S a screen credit saying "A Film by Terry Sanders." Subsequent prints did not have the credit, so S sues.

                   Issue: Should court order specific performance requiring future film releases to contain the credit?

                   Holding: Yes. Damages are inadequate. Every future showing would increase the damages.

          B. Injunctions

          C. Restitution

         

IV. Limitations on Remedies

          A. Election of remedies

          B. Loss of power of avoidance

                   1. Affirmance

                   Merritt, p. 338.

                   Facts: House sale. S promised that well would work. Turned out, it had been cut and cemented over. B sues for fraud, including compensatory and punitive damages, as well as recission. S argued that because B did not try to rescind right away, that right had been waived. Lower court found $42k in compensatory damages and $150k in punis, but refused to allow B to rescind.

                   Issue: Did B waive the right to rescind?
                   Holding: No. B can seek rescission and restitution, but then may not get compensatory damages. If restitution, then put B in position B would be in if contract never formed.