Remedies for Breach of Contract Flashcards Preview

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Flashcards in Remedies for Breach of Contract Deck (49):

What are the options for monetary damages at common law?

A party may only elect one of these remedies:

1) Expectation interest

2) Reliance interest 

3) Restitutionary interest


More Info: Common Law Monetary Damages


What are expectation damages?

An aggrieved party is entitled to the amount that will restore him to the position he would have been in had the contract been fully performed.


How do you calculate expectation damages?

Loss of value

+ Incidental costs

+ Consequential costs

- Payments received

- Costs saved 


More Info: Expectation Damages


List four situations in which the aggrieved party may not be able to recover the full amount of expectation damages

1) Where the cost of performance greatly exceeds the market value of performance

2) Where expectation damages cannot be calculated with reasonable certainty

3) Where damages are unforeseeable

4) Where damages can be mitigated/reasonably avoided


What type of companies have difficulty getting expectation damages?

A new business with no profit history


What are reliance damages?

A monetary award that restores the aggrieved party to the position they were in prior to the contract


More Info: Reliance Damages


What are the types of monetary damages?

1) Expectation damages

2) Reliance Damages

3) Restitutionary Damages


How do you calculate reliance damages?

Any expenditures made in preparation for performance or in actually performing


Any loss the breaching party can prove the aggrieved party would have suffered had the contract been fully performed.


What is the use-case for reliance damages?

When expectation damages are unavailable or when expectation damages are uncertain or speculative


What are restitutionary damages?

An award that provides the value of the benefits conferred on the other party in the transaction


More Info: Restitutionary Damages


How do you calculate restitutionary damages?

1) The reasonable value or cost of the benefit conferred

2) The extent to which the other party's property has increased in value due to the performance rendered


When are restitutionary damages most often used?

In a losing contract


When is the only time restitutionary damages are available?

When the aggrieved party has partly performed but not fully performed.


What are liquidated damages?

A contract clause designed to provide a set formula for caluculating damages in the event of a breach


When are liquidated damages enforceable vs. unenforceable?

Enforceable: damages designed to compensate only for the breach

Unenforceable: damages are essentially a penalty designed to punish a breach


What is the test for assessing the enforceability of a liquidated damages clause?

Primary consideration: Was the clause reasonable at the time of contracting in relation to the anticipated harm which breach would cause?

Secondary consideration: Was the clause reasonable in relation to the harm that actually occurred due to the breach?


What happens if a court rules that a liquidated damages clause is in fact a penalty?

The clause is stricken from the contract and damages are recoverable according to the default rules


What are the UCC seller's remedies?

1) Profit

2) Incidental damages


More Info: UCC Seller's Remedies


What does a seller of goods' right to recover depend upon?

Whether the goods have been delivered and accepted by the buyer


What is a seller's remedy if goods have been delivered to and accepted by the buyer?

The seller's remedy will be for the contract price of the goods accepted


What is the seller's remedy if goods have not been delivered to and accepted by the buyer, but the seller has resold the goods?

The contract price for the goods minus the gain from the resale


What is the seller's remedy if goods have not been delivered to and accepted by the buyer if the seller has not resold?

The contract price for the goods minus the market price for the goods.


What is the only remedy for lost volume sellers?

The profit they would have made on the lost sale


Define lost volume sellers.

A lost volume seller is one whose supply of goods exceeds the demand for the same (such as Best Buy)


More Info: Lost Volume Sellers


What is a seller of goods always entitled to if a buyer breaches?

Incidental damages


What are incidental damages?

The storage cost associated with getting stuck with the goods, plus the cost of resale, minus expenses avoided on account of the breach


What factor does a buyer's remedy depend upon?

If the buyer covers, or purchases replacement goods


How do you calculate damages for a buyer of goods if:

1) The buyer covers?

2) The buyer does not cover?

1) If the buyer covers, the damages equal the cover price minus the contract price

2) If the buyer does not cover, then the damages equal the market Price minus the contract price


What are incidental damages for a buyer of goods?

The cost of securing cover


What can a buyer of goods seek for damages?

Incidental damages and consequential damages


What are the consequential damages for a buyer of goods?

Foreseeable costs arising to the buyer because of a particular need or use of the goods in question (e.g. lost profits)


What reduces the damages available to a buyer of goods?

Costs avoided


What are the buyer's damages if they accept non-conforming goods?

The buyer is entitled to recover the difference between the value of the goods contracted for and the value of the goods received. 


When is specific performance available?

When a monetary reward is considered inadequate


List two examples of when monetary rewards are considered inadequate.

1. Unique objects

2. Real property


In what contracts is specific performance absolutely  unavailable?

1) Contracts for personal services


2) Contracts requiring ongoing cooperation between the parties


When is specific performance allowed under the UCC?

1) A buyer has adequately searched but is unable to cover

2) Output contracts


3) Requirement contracts.


What are negative injunctions?

Orders by the court prohibiting the breaching party from taking a particular action


When an employee is under contract for a specified period of time and the employee breaches the contract by departing before the end of that period, when will a negative injunction be available to prevent the employee from competing?

When the employee's services are unique or extraordinary


What three factors do non-compete clauses depend upon?

1) Is there a significant business justification for enforcing post-employment restraints (e.g. access to trade secrets)

2) Is the scope of the non-compete clause reasonable in duration and geographical reach


3) Is there an express provision of a covenant not to compete?


What types of damages can be recovered in a contract action based on promissory estoppel?

Depending upon jurisdiction:

1) Expectation damages

2) Reliance damages

3) Damages chosen on a case by case basis


When can restitution be brought as a cause of action outside breach of contract?

1. To recover the benefits conferred under a failed contract

2. To recover the benefits conferred by a breaching party, as long as the other party receives damages for the breach


What is the financial liability of a patient when emergency benefits are conferred by a health care professional without consent?

The patient is liable to pay for the services rendered.


What general rule applies to a person who bestows unrequested benefits on the benefiting party?

They are considered an officious intermeddler that will not be able to recover since there is no opportunity to decline by the benefiting party.


When may a person who mistakenly confers benefits to another party be entitled to restitution from the mistaken party?

1) The mistake is not blameworthy

2) The recipient was aware of the error in time to prevent it


3) The recipient avails himself of the benefits at issue


When are provisions limiting or excluding damages not enforceable?

If they are:

1. Unconscionable


2. Fail in their essential purpose


What is the enforceability limitation of consequential damages for consumer goods personal injuries?

Damages that are prima facie unconscionable are unenforceable. 


What five factors distinguish material breachs from substantial performance?

1) The extent to which the aggrieved party will be deprived of the benefit he reasonably expected to recieve under the terms of the contract

2) The extent to which the aggrieved party can adequately be compensated via damages for the defective performance

3) The extent to which the breaching party will suffer forfeiture if a material breach is found

4 )the extent to which the breach was willful or in bad faith rather than merely negligent or innocent

5) The likelihood that the breaching party will cure his failure within a reasonable time and in a manner consistent with the reasonable purpose of the contract


What does a material breach of a contract entitle the non-breaching party to do?

Terminate the contract.