REmedies Flashcards
(15 cards)
Contract Remedies
- Breach of Contract (valid K)
Expectation Damages: Put P in the position they would have been in if the contract were fully performed (loss in value + other provable consequential / incidental losses). - Promissory Estoppel (no enforceable K, but reliance)
Reliance Damages Reimburse out-of-pocket expenses incurred in reasonable reliance on the promise. - Restitution (Quasi-contract): Prevent unjust enrichment by restoring the value of any benefit conferred on the promisor.
- Specific Performance (equitable)
Court order compelling performance Granted only if: (1) money damages are inadequate (unique goods, buyer inability to cover, real property, etc.) and (2) decree is feasible to enforce; rarely the right answer on the MBE.
Antique paintings, any land.
There is NEVER specific performance for personal service contracts because of Thirteenth Amendment prohibition of involuntary servitude. However, can get negative specific performance–court can enjoin breaching employee from working for a competitor for duration of contract.
Land Sale Contract Remedy
All land is unique
Specific performance is always a remedy for breach of a land sale contract.
This rule applies to the transfer of any interest in land, including transfer of leasehold estates.
Negative Specific Performance
There is NEVER specific performance for personal service contracts because of Thirteenth Amendment prohibition of involuntary servitude. However, can get negative specific performance–court can enjoin breaching employee from working for a competitor for duration of contract.
UCC § 2-702 – Seller’s Right to Reclaim Goods (Reclamation)
- When Reclamation Is Available:
Buyer was insolvent when it received the goods.
Seller makes a written demand for return within 10 days after buyer’s receipt.
Buyer still has the goods at the time the demand is made.
- Extended Period (Misrepresentation Exception)
The 10-day limit is waived if the buyer misrepresented its solvency in writing within three months before delivery; seller may then reclaim at any time while the buyer still has the goods.
- Limitations
Reclamation is cut off by the rights of a good-faith purchaser or a secured creditor who has already taken the goods or a security interest in them.
Expectation Damages
- Goal:
– Put the non-breaching party where they would have been had the contract been fully performed.
– Formula: Loss in value of the bargain + provable incidental + provable consequential damages – any costs saved. - Incidental Damages
Definition: Reasonable costs incurred mitigating or dealing with the breach (e.g., finding a replacement supplier, storing or shipping returned goods).
Rule: Always recoverable if reasonable; foreseeability is irrelevant.
- Consequential Damages
Definition: Additional losses specific to the plaintiff’s circumstances (lost profits, downstream losses) that flow from the breach.
Rule: Recoverable only if
(I) Reasonably foreseeable to the breaching party at contract formation, and
(II) Proven with reasonable certainty.
UCC Note: In a sale-of-goods contract, only the buyer may recover consequential damages. Not available to sellers.
Reliance Damages
Reliance Damages are given when the expectation is uncertain:
Reliance Damage reimburses out-of-pocket expenses incurred in reasonable reliance on the promise.
Punitive damages in contracts?
Punitive damages are never allowed in contracts.
Liquidated damages clauses
- When Enforceable:
A liquidated-damages clause is valid only if, at the time of contracting: (1) Actual damages were difficult to estimate, and (2) The stated amount is a reasonable forecast of expected loss. - “Reasonableness”
Common law: Amount must be reasonable in light of either (i) anticipated damages or (ii) actual damages at breach.
UCC: Clause must be reasonable in light of the anticipated or actual harm; grossly excessive amounts are penalties.
- If both elements are met, the clause is upheld; otherwise it is struck down as an unenforceable penalty.
Exam Tip:
A single, invariable lump-sum for any breach (big or small) is usually a penalty because it is not proportional to the likely harm.
Buyer’s Damages for Contracts
COVER: If the seller fails to deliver the goods, or the buyer rightfully rejects or revokes acceptance, the buyer may “cover” by purchasing substitute goods in good faith and without unreasonable delay. Damages = Cover price − Contract price, plus incidental and consequential damages.
MARKET PRICE: Alternatively, without covering, the buyer may recover Market price − Contract price, measured at the place of tender and at the time the buyer learns of the breach, plus incidental and consequential damages.
WARRANTY DAMAGES: If the buyer accepts nonconforming goods, damages are Value as promised − Value as delivered (warranty damages), plus incidental and consequential damages.
Seller Damages
Resale Measure: If the seller resells the goods in good faith and in a commercially reasonable manner, damages = Contract price – Resale price + incidental damages.
Market Measure: If the seller does not (or cannot properly) resell, damages = Contract price – Market price at the time and place for tender + incidental damages.
Lost Volume Seller (Lost Profits) Measure: If the above are inadequate—e.g., the seller could have made an additional sale but for the breach—damages = Profit (including fixed overhead) the seller would have earned on the breached contract. Often applies to dealerships.
Duty to Mitigate
General Rule: Under common-law mitigation, the non-breaching party may not recover damages that could have been avoided with reasonable efforts. They must act prudently to procure substitute performance at a fair price and may recover reasonable costs incurred in those mitigation efforts.
Scope of Duty: The duty extends only to similar or comparable subject matter; the injured party need not accept materially different, burdensome, or risky alternatives.
Employment Contracts: If a breaching employer proves that comparable employment was available, lost-wage damages are reduced by the wages the employee actually earned—or unreasonably declined—from that comparable job.
Sale to a Bona Fide Purchaser Defense
If the subject matter of a goods or land contract has already been sold to another who purchased for value and in good faith, the right to specific performance is cut off.
This is known as the equitable defense of sale to a bona fide purchaser.
Equitable Defense of Laches
The equitable defense of laches arises when a party delays in bringing an equitable action and the delay prejudices the defendant. Note that mere delay itself is not a ground for this defense.
Unclean Hands Defense
The unclean hands defense arises when the party seeking specific performance is guilty of some wrongdoing in the transaction being sued upon. Note that the wrongdoing must be related to the transaction being sued upon; it is not sufficient that the plaintiff has defrauded other persons in similar transactions.
Replevin
Replevy is a nonmonetary remedy found in Article 2 of the UCC. If a buyer has made at least part payment of the purchase price of goods that have been identified under a contract and the seller has not delivered the goods, the buyer may replevy (or recover) the goods from the seller if the seller becomes insolvent within 10 days after receiving the buyer’s first payment or the goods were purchased for personal, family, or household purposes. In either case, the buyer must tender any unpaid portion of the purchase price to the seller.
