final Flashcards
(55 cards)
Contract Damages- goal
Damages are meant to place the claimant in the same position as if the contract had been fully performed or in the position if the contract never existed. Damages cannot exceed what would have been provided if the contract was fully performed by both parties- to encourage contract formation.
Compensatory damages in contracts
substitutionary damages; give the non-breaching party monetary as a substitute for the thing they contracted to receive.
Have to be:
1. caused/certain
2. foreseeable/within contemplation of the parties
3. unavoidable
new business rule
comes up when the non-breaching party to a contract is trying to show consequential damages, like lost profits.
if the non-breaching party is a new business, then they will not be able to provide the amount of lost profits with certainty.
The modern rule is to allow expert testimony along with evidence of profits made by similar businesses.
Applies in the caused/certain prong for compensatory damages
compensatory damages- foreseeable or contemplated
non-breaching party must have known or should have known that the damages could result from a breach at the time of the contract formation. Must be within the contemplation of the parties
compensatory damages- unavoidable
Cover: the buyer buys a substitute product or service or the seller tried to sell it someone else.
must be done in good faith, with no unreasonable delay, and a reasonable purchase. non-breaching party should do this if they have the reasonable ability to do so.
general compensatory damages
benefit of the bargain damages or damages that are a natural result of the breach. base damages= damages that are a direct result of the breach
incidental damages= cost of dealing with the thing after the breach
general damages are within the contemplation of the parties because they are a natural consequence of a breach and are sufficiently predictable. These are measured objectively and are expectation and reliance damages.
special compensatory damages
damages which are caused by the breach but not objectively the natural and probable consequence of it. they are secondary or derivative to general damages. certainty and foreseeability may be difficult to prove- must have been communicated to the breaching party or actually known to the breaching party at the time of contracting or the breaching party should have known about the risk of these damages at the time of contracting.
contract damages do not allow for unanticipated injury.
liquidated damages
parties to the contract pre-determine the damages that can re recovered if a breach occurs.
check:
1. is it an unenforceable penalty?
amount of damage is uncertain/difficult to anticipate at the time of contract formation PLUS amount of liquidated damages are reasonable compared to the harm incurred because of the breach.
2. [modern approach] are they reasonable?
consider the relationship to the amount anticipated to the actual harm. difficulties in proving loss because of the breach. inconvenience of non-feasibility of other remedies.
generally no contract damages in
emotional distress and punitive damages
efficient breach
a willful breach but not done in bad faith-
efficient breach is when one party finds it more efficient to breach a contract and pay a penalty than to carry out its contractual obligations. However, the breach is only considered efficient if there is no harm done to the other party and the breaching party is better off.
punitive damages are not allowed
opportunistic breach
a willful breach but one done in bad faith.
the breaching party breaches to harm the other party or increase their benefit without making the non-breaching party whole.
punitive damages may be allowed for an opportunistic breach if fraud, malice, gross negligence, or oppression is proved by clear and convincing evidence.
rescission
equitable relief to put both parties in the position as if the contract never existed. P seeking rescission wants the contract cancelled.
to obtain rescission, the plaintiff must be willing and able to return any benefits already received under the contract. A party whose consent to certain terms was obtained through mistake or fraud must rescind the entire contract.
does not require inadequate remedy at law.
requirements for rescission
- mutual consent or grounds to rescind
when the parties mutually consent to rescind the contract or when the rescinding party shows grounds the contract is void or voidable.
fraud and mutual mistake are grounds for rescission because they do not reflect a true, voluntary agreement.
fraud= a party was deliberately misled about the terms of the contract cannot be said to have voluntarily entered into the contract. usually requires a showing of an 1) untrue assertion of fact/ assertion made with knowledge of falsity/mistake with intent to deceive 2) actual reliance, and 3) justifiable reliance.
Mutual mistake= both parties think the contract requires something other than what it does shows that there was no meeting of the minds. it cannot be unilateral mistake.
there term or terms subject to the fraud or mistake must be a material term.
ask: did the fraud or mistake on a material term cause the plaintiff from truly consenting to the terms of the contract. - promote notice/ no prejudice
P must notify D promptly of the intent to rescind. D is not prejudiced by the delay - offer to restore/ ability to restore the benefits
has the party/property substantially changed from its original position? rescission may not be ordered if unwinding the deal is too difficult.
if there is rescission- probably restitution
restitution
used when it is needed to put the parties back to the pre-contract position and prevent a detriment or a windfall to either party. this can include: reliance damages, improvements, rental value, punitive damages. can include repelling, equitable lien, constructive trust
P has the choice between damages or rescission
can affirm the contract and sue for damages or can disaffirm the contract and sue for rescission.
The P cannot recover both
tort fraud elements
- untrue assertion of fact/assertion made with knowledge of falsity
- actual reliance
- justificable reliance
- there does not have to be contract for torts fraud damages
torts fraud damages
out of pocket damages= k price - FMV of item delivered or benefit of the bargain = FMV promised - FMV of item as delivered
+ punitive damages
+ tort of fraud does not require a return of the item.
fraud remedial options
contract damages; expectation & reliance damages (contract remains)
contract equitable remedy: rescission & restitution (contract goes away)
tort damages (contract remains) benefit of the bargain, consequential damages, emotional distress, punitive
reformation
reformation is an equitable remedy where the court changes the terms of a contract. reformation is appropriate where the terms of the written instrument are mistaken- they do not show the true intent of the agreement between the parties.
reformation is appropriate where the mistake is material enough to matter but not so significant that the modification will fundamentally change the agreement. the court is not in the business of re-writing contracts
the goal of reformation to negate the mistake and result in a contract that represents the parties true intent.
grounds for reformation
mutual mistake or ignorance or mistake by one party coupled with the other party knew about the mistake and did not disclose it.
elements for reformation: a valid contract exists and valid grounds exists to rewrite the contract (the written terms do not represent a meeting of the minds.
generally a contract will not be reformed if doing so will cause future harm to either party, lead to an illegal or one sided contract, or harm a third party.
specific performance
equitable remedy.
it is an injunction by which a court orders a party to comply with the terms of a valid contract.
requirements:
1. breach of a valid contract (offer, acceptance, consideration, contract defenses)
2. inadequate legal remedy (unique item, difficult to calculate, liquidated damages clause, real property presumptions, personal property presumption)
3. definite and certain terms (price, product, timing,
4. P complied with conditions precedent
5. mutuality of performance
6, enforcement is feasible
7. enforcement is equitable/ no available affirmative defenses.
specific performance defenses
laches, unclean hands, undue hardship, contract defenses
statute of frauds
must be in writing and signed by the party to be charged. applies to real property contracts, contracts that cannot be performed within one year, $500 or more, collateral contracts, promises made in consideration of marriage
exceptions- may be enforced from partial performance, promissory estoppel, UCC seller receipt of payment or buyer receipt of goods.
UCC- sale of goods purpose and expectation damages
parties expect to get the benefit of the bargain.
expectation damages put them in the post contract position (benefit of the bargain)
goal is to encourage future contracts
