Introduction to Remedies Flashcards
What are the three interests of recovery and which one is preferred?
- Expectation Interest (preferred and most common by courts)
- Reliance Interest
- Restitution Interest
What is an Expectation Interest? (The two ways a party’s expectation can be met)
- Money Damages
How Used: Courts compare the economic condition the plaintiff is in because of the breach and the economic position that plaintiff would have been in had the contract
been fully performed. The difference is the amount of
monetary damages that will be
awarded. - Specific Performance: court order that
compels the breaching party to perform its
contractual duties or be held in contempt of
court and be sanctioned.
Factors: Courts decide to award specific
performance based upon: (1) inadequacy of
money damages, (2) certainty of terms of
contract, (3) balance of the hardships on
the parties if the order is issued vs. if it is
not, (4) public policy interests, and (5) the
feasibility of court supervision.
What is a Reliance Interest?
Reliance Interest: Attempts to reimburse the plaintiff “for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made.”
only option: Monetary Damages
How Used: Courts attempt to compensate
any foreseeable out-of-pocket costs that
the plaintiff incurred related to the contract.
What is Restitution Interest?
Restitution Interest: Restores to the plaintiff “any benefit that he has conferred on the other party.” The focus is on the defendant and disgorging any unjust enrichment that occurred because of the breach.
Options:
- Money Restitution: A type of
money damages. The court normally calculates the fair market value of the property or services that the plaintiff
conferred on the breaching party and requires the
breaching party to pay that amount to the plaintiff. - Specific Restitution: Court
seeks to restore an identifiable thing or piece of property to
the injured party. If the defendant wrongfully has title
to a piece of property, then specific restitution would
transfer title to the property back to the plaintiff.
What type of money damages are available under Expectation Interest and what is the rule?
Rule: Contract damages are ordinarily based on the injured party’s expectation interest and are intended to give the benefit of the bargain by awarding a sum of money that will put the injured party in as good a position as if the contract was performed.
The injured party is normally entitled to:
* General damages,
* Consequential damages, and
* Incidental damages.
Damages are limited by the principles of certainty, causation, foreseeability, and mitigation.
What are the limitations on Damages under the Expectation Interest?
Limitations on Damages
Certainty: There must be reasonable certainty that a loss
occurred because of the breach and certainty on the dollar
amount of damages. Damages cannot be speculative.
Causation: For damages to be recoverable, the loss must have been proximately caused by the breach (i.e., sufficiently related to the breach).
Foreseeability: Damages must have been foreseeable to a
reasonable person familiar with the circumstances (or put
on special notice) at the time of contract formation.
Mitigation: The law will not allow the non-breaching party to recover for damages that could have been reasonably avoided even if the non-breaching party has to take some affirmative steps to avoid the loss.
The non-breaching party need only take reasonable action and does not have to mitigate if it would cause undue risk, burden, or humiliation.
What are general damages under Expectation Interest?
General Damages: those that “flow naturally from the
breach.” General damages compensate a plaintiff for the lost value of the breached contract to put the plaintiff in the
same position as if the contract had been fully performed.
Categories of General Damages:
* Replacement Cost: The
additional cost incurred over
and above the contract price to
purchase replacement goods
or services.
* Difference in Value: The
difference in value between
the value of the performance
tendered and the value of the
performance as promised.
How do you calculate general damages?
Real Estate Contract: The difference between the contract price and the fair market value of the property at the time of the breach.
Employment Contract (Employee Breach): The additional cost incurred by the employer to purchase the same services.
Employment Contract (Employer Breach): The salary due
under the contract less any amount earned in other employment.
Construction/Service Contracts (Contractor Breach): The reasonable additional cost or the diminution in value of the property caused by the breach.
Construction/Service Contracts (Contracting Party Breach): The cost expended by the contractor up until breach plus the profit the contractor would have earned had the contract been fully performed.
What are consequential damages under Expectation Interest?
Consequential Damages: additional losses incurred because of special circumstances surrounding the particular contract breached. These consequential damages are a reasonable and natural consequence of the breach because of the special circumstances.
Rule: Consequential damages can be recovered only if the
defendant had reason to foresee the damages as a probable
result of the breach at the time of contract formation.
What are incidental damages under Expectation Interest?
The reasonable costs incurred in an effort, whether
successful or not, to mitigate losses associated with the breach. Typically, these are the transaction costs incurred when trying to mitigate.
What are the types of adjustments and offsets?
● Prepayments and Other Performance
● Breach Saves Plaintiff Some Expense
● Breach Results in a Gain for Non-Breaching Party
