Transcript Chapter 18: Contracts — Breach of Contract and Remedies ©2001 West Legal Studies in Business.

Chapter 18:
Contracts — Breach of
Contract and Remedies
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©2001 West Legal Studies in Business. All Rights Reserved.
Introduction
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•
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Damages.
Rescission and Restitution.
Specific Performance.
Reformation.
Recovery Based on Quasi Contract.
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©2001 West Legal Studies in Business. All Rights Reserved.
§1: Damages
Types of Damages:
– Consequential Damages.
» Breaching party is aware or should be aware, cause
the injury party additional loss.
» Case 18.1: Hadley v. Baxendale (1854).
– Punitive Damages.
» Available when tort is also involved.
– Nominal Damages.
» No financial loss.
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§2: Mitigation of Damages
• When breach of contract occurs, the
innocent injured party is held to a duty to
reduce the damages that he or she suffered.
• Duty owed depends on the nature of the
contract.
• Case 18.2: Parker v. Twentieth Century Fox
Film Corp (1970).
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Liquidated Damages
Versus Penalties
• Liquidated Damages.
– A contract provides a specific amount to be
paid as damages in the event of future default
or breach of contract.
• Penalties.
– Specify a certain amount to be paid in the event
of a default or breach of contract and are
designed to penalize the breaching party.
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§2: Rescission and Restitution
• Rescission.
– A remedy whereby a contract is canceled and
the parties are restored to the original positions
that they occupied prior to the transactions.
• Restitution.
– Both parties must return goods, property, or
money previously conveyed.
• Note: Rescission does not always call for
restitution. Restitution called for in some
cases not involving rescission.
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§3: Specific Performance
• Equitable remedy calling for the
performance of the act promised in the
contract.
• Remedy in cases where the consideration is:
– Unique;
– Scarce; or
– Not available remedy in contracts for personal
services.
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§4: Reformation
• Equitable remedy allowing a contract to be
reformed, or rewritten to reflect the parties
true intentions.
• Available when an agreement is imperfectly
expressed in writing.
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§5: Recovery Based on
Quasi Contract
• Equitable theory imposed by courts to obtain
justice and prevent unjust enrichment.
• Quantum meruit. Case 18.3: Maglica v.
Maglica (1998). Party seeking recovery must
show the following:
» A benefit was conferred to the other party.
» Party conferring did so with the reasonable
expectation of being paid.
» The benefit was not volunteered.
» Retaining benefit without paying for it would result in
unjust enrichment of the party receiving the benefit.
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§6: Election of Remedies
• Doctrine created to prevent double recovery.
• Nonbreaching party must choose which
remedy to pursue.
• UCC rejects election of remedies.
– Cumulative in nature and include all the
available remedies for breach of contract.
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§7: Waiver of Breach
• A pattern of conduct that waives a number
of successive breaches will operate as a
continued waiver.
• Nonbreaching party can still recover
damages, but contract is not terminated.
• Nonbreaching party should give notice to
the breaching party that full performance
will be required in the future.
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§8: Contract Provisions
Limiting Remedies
• Exculpatory clauses.
– Provisions stating that no damages can be
recovered.
• Limitation of liability clauses.
– Provisions that affect the availability of certain
remedies.
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The Ethics of Contracts
• Freedom of Contract and Freedom from
Contract.
– Impossibility of Performance.
– Unconscionability.
– Exculpatory Clauses.
• Problems with Oral Contracts.
– Promissory Estoppel.
– Statute of Frauds.
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Law on the Web
• Website describing how contracts can be
breach.
• Nolo.com on contracts.
• Cornell U on contracts.
Legal Research Exercises on the Web.
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