1. Breach of Contract and Remedies

2. Lesson Learning Outcomes
At the conclusion of this lesson, the student should be able to:
Determine a breach of contract
Explain the various remedies for breach of contract
Differentiate between the different remedies for breach of contract

3. Overview Contract Breach Remedy
Agreement, Consideration, Capacity, Legality
Breach
Non-performance
Failure to perform an absolute duty required under the K
Remedy
Relief provided to the innocent party

4. Breach of Contract What is it? How does it occur?
be sure to be able to distinguish between a breach and situation where party says other is breaching when in actuality a defense has been raised to enforcement
e.g., Statute of Frauds, Genuineness of Assent
Failure to perform agreement, or failure of consideration

5. Remedies... At Law In Equity
classic compensation for injury limited to
land
items of value
money
In Equity
based on principles of justice and fairness
relief provided through
specific performance
injunctions
rescission and restitution

6. Remedies at Law Damages... RM.RM.RM.RM
Compensation for loss of the Benefit of the Bargain
Most common remedy
“... innocent party to be placed in the position they would have occupied had the contract been fully performed...”

7. Four Types of Damages
Compensatory
Consequential
Punitive
Nominal

8. Compensatory Damages
Compensation for the loss of the benefit of the bargain
Injuries must be actually sustained
Must arise directly from the loss of the bargain
Generalized examples
Sale of Goods contract
Land contract
Construction contract

9. Compensatory Damages Sale of Goods contract e.g., Seller Breach
Benefit of Bargain?
Twenty RM
Market Price
RM100
K Price
RM80

10. Compensatory Damages Sale of Land contract
Best remedy: Specific Performance.... why?
Because each parcel of land is unique...
But what if land has been sold after breach?
Will RM damages be enough if the new owner won’t sell?

11. Compensatory Damages Construction Contract
Breach by owner can occur at essentially three different times
Before (profits)
During (profits and costs incurred)
After (Contract price + interest)
Event of Contractor Breach?
all costs by owner to complete construction... w/o waste

12. Four Types of Damages Consequential (Specials) Compensatory Punitive
Nominal

13. Consequential Damages
Key issue
FORESEEABILITY
must know or have reason to know as by special relationship
Defendant must be able to reasonably foresee injury as a probable result.... injury or damage?

14. Four Types of Damages
Compensatory
Consequential
Punitive
Nominal

15. Punitive Damages Inconsistent with contract theory
contract as a civil relationship between two parties
business has its own way to punish...
... are awarded usually only in connection with torts

16. Four Types of Damages
Compensatory
Consequential
Punitive
Nominal

17. Nominal Damages Technical injury only No actual damages suffered
but has an injury been suffered?
Typically RM1
what about lawyers fees?
“A matter of principle”

18. Mitigation of Damages “...cause to be less harsh...”
injured party must use reasonable means to mitigate loss
some examples
employment
rental apartments
what are “reasonable means”... what is an “acceptable tenant”... etc.

19. Liquidated Damages
Sum certain... calculable... determined... specified amount
Cannot be punitive... as already noted penalties have no place in contract law
The Test:
When contract entered into, was it apparent that damages would be difficult to estimate in event of breach?
Was amount set reasonable and not excessive?
Estimation of damages? Reasonable?

20. Construction Contract example:
California earthquake
destruction of major public roads
Contract to rebuild
Per day costs of road closing
Contract awards extra RM for early completion
Contract payment decreases for late completion

21. Remedies... At Law In Equity
classic compensation for injury limited to
land
items of value
money
In Equity
based on principles of justice and fairness.
relief provided through
specific performance
injunctions
rescission and restitution
reformation

22. Equitable Remedies Usually only awarded if legal remedies are inadequate
Specific Performance
Injunctions
Rescission & Restitution
Reformation

23. Specific Performance
Contracts don’t usually provide a good case for the granting of this remedy
major exception: Contract for the sale of land
because of uniqueness of parcel

24. Specific Performance
Appropriate where the legal remedy (RM damages) is inadequate
“... an order to perform what was promised...”
Injured party gets what was agreed to under the contract
Why is SP not usually appropriate where the dispute centers around the sale of goods?

25. Injunctions
“... forbids defendant to do some act... which he is threatening or attempting to commit, or restraining him in the continuance thereof, such act being unjust and inequitable, injurious to the plaintiff, and not as such as can be adequately redressed by an action at law...”

26. Injunctions Not a typical remedy in contract disputes
Difference between positive and negative
Some use in a negative fashion in personal services contracts
e.g., Contract dispute between a performing artist and promoter... prohibition on performing in same area for a different promoter

27. Requirements for an Injunction
Remedies at law inadequate, thus causing irreparable harm...
Plaintiff must demonstrate at least a reasonable likelihood of success at trial
Threatened injury to the plaintiff outweighs the threatened harm the granting of the injunction may inflict on the defendant
Whether by granting the preliminary injunction the public interest would be disserved

28. Rescission and Restitution
Purpose of rescission is restitutionary
a dissolution or “undoing” of the contract...
restoration of the parties to their positions before the contract was entered into
“status quo ante”
If not mutually decided upon, the rescission must be grounded in something that makes the contract voidable
Example: genuineness of assent problems

29. Remember Genuineness of assent…..
Even if all the elements of a contract are present according to the objective theory of contracts, a contract may be unenforceable if there is not Genuine Assent by the Parties. If assent is not genuine, the contract can be avoided by the party whose assent was not genuine

30. Contracts That May Lack Genuineness of Assent
Contracts Entered Into on the Basis of
Mistakes
Misrepresentation
Undue Influence
Duress

31. Rescission and Restitution
Unilateral
rescission must be grounded in something that makes the contract voidable
What would these be?
Mutual
no need to have a GOA problem
is there a need for it to be completely executory?
Restitution is payment ordered by a criminal court after the offender has been found guilty.  Civil damages are ordered when someone has won a lawsuit in civil court. 

32. Difference between Mutual & Unilateral Rescission
One discharges the contract
the other is available as a remedy for breach of contract

33. Reformation Another Equitable Remedy...
Differs from R&R most significantly in that it does not try to undo the contract...
... but rather attempts to reform, correct or modify the contract so that it accurately reflects the agreement of the parties

34. Reformation
Plaintiff must show by “clear and convincing” evidence that the parties had reached agreement on a term and that because of a mutual mistake (or unilateral mistake + misconduct by the other) the term wasn’t included.
e.g., “scrivener’s error”- A clerical error in a legal document