Remedies for Breach of Contract

Question 1

What are the options for monetary damages at common law?

Answer 1

A party may only elect one of these remedies:

1) Expectation interest
2) Reliance interest
3) Restitutionary interest
* More Info:* Common Law Monetary Damages

Question 2

What are expectation damages?

Answer 2

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.

Question 3

How do you calculate expectation damages?

Answer 3

Loss of value

+ Incidental costs

+ Consequential costs

• Payments received
• Costs saved
• More Info:* Expectation Damages

Question 4

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

Answer 4

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

Question 5

What type of companies have difficulty getting expectation damages?

Answer 5

A new business with no profit history

Question 6

What are reliance damages?

Answer 6

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

More Info: Reliance Damages

Question 7

What are the types of monetary damages?

Answer 7

1) Expectation damages
2) Reliance Damages
3) Restitutionary Damages

Question 8

How do you calculate reliance damages?

Answer 8

Any expenditures made in preparation for performance or in actually performing

-minus-

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

Question 9

What is the use-case for reliance damages?

Answer 9

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

Question 10

What are restitutionary damages?

Answer 10

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

More Info: Restitutionary Damages

Question 11

How do you calculate restitutionary damages?

Answer 11

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

Question 12

When are restitutionary damages most often used?

Answer 12

In a losing contract

Question 13

When is the only time restitutionary damages are available?

Answer 13

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

Question 14

What are liquidated damages?

Answer 14

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

Question 15

When are liquidated damages enforceable vs. unenforceable?

Answer 15

Enforceable: damages designed to compensate only for the breach

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

Question 16

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

Answer 16

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?

Question 17

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

Answer 17

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

Question 18

What are the UCC seller’s remedies?

Answer 18

1) Profit
2) Incidental damages
* More Info:* UCC Seller’s Remedies

Question 19

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

Answer 19

Whether the goods have been delivered and accepted by the buyer

Question 20

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

Answer 20

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

Question 21

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?

Answer 21

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

Question 22

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

Answer 22

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

Question 23

What is the only remedy for lost volume sellers?

Answer 23

The profit they would have made on the lost sale

Question 24

Define lost volume sellers.

Answer 24

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

Question 25

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

Answer 25

Incidental damages

Question 26

What are **incidental damages**?

Answer 26

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

Question 27

What **factor** does a **buyer's** remedy depend upon?

Answer 27

If the buyer **covers**, or purchases replacement goods

Question 28

How do you **calculate** **damages** for a buyer of goods if: 1) The buyer covers? 2) The buyer does not cover?

Answer 28

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

Question 29

What are **incidental damages** for a **buyer** of goods?

Answer 29

The cost of securing cover

Question 30

What can a **buyer** of **goods** seek for **damages**?

Answer 30

Incidental damages and consequential damages

Question 31

What are the **consequential** **damages** for a **buyer** of **goods**?

Answer 31

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

Question 32

What **reduces the** **damages** available to a **buyer** of goods?

Answer 32

Costs avoided

Question 33

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

Answer 33

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

Question 34

When is **specific performance available**?

Answer 34

When a monetary reward is considered inadequate

Question 35

List two examples of when **monetary rewards** are considered **inadequate**.

Answer 35

1. Unique objects 2. Real property

Question 36

In what contracts is **specific performance** absolutely **unavailable**?

Answer 36

1) Contracts for personal services And 2) Contracts requiring ongoing cooperation between the parties

Question 37

When is **specific performance** **allowed** under the **UCC**?

Answer 37

1) A buyer has adequately searched but is unable to cover 2) Output contracts And 3) Requirement contracts.

Question 38

What are **negative injunctions**?

Answer 38

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

Question 39

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?

Answer 39

When the employee's services are unique or extraordinary

Question 40

What three **factors** do **non-compete clauses** depend upon?

Answer 40

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

Question 41

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

Answer 41

Depending upon jurisdiction: 1) Expectation damages 2) Reliance damages 3) Damages chosen on a case by case basis

Question 42

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

Answer 42

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

Question 43

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

Answer 43

The patient is liable to pay for the services rendered.

Question 44

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

Answer 44

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

Question 45

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

Answer 45

1) The mistake is not blameworthy 2) The recipient was aware of the error in time to prevent it And 3) The recipient avails himself of the benefits at issue

Question 46

When are provisions **limiting** or **excluding damages not enforceable**?

Answer 46

If they are: 1. Unconscionable Or 2. Fail in their essential purpose

Question 47

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

Answer 47

Damages that are prima facie unconscionable are unenforceable.

Question 48

What **five factors** distinguish **material breachs** from **substantial performance**?

Answer 48

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

Question 49

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

Answer 49

Terminate the contract.