2. What is the difference between compensatory damages and consequential damages? What are nominal damages, and when do courts award nominal damages?  What is the difference between compensatory damages and consequential damages? What are nominal damages, and when do courts award nominal damages?  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2

3. What is the standard measure of compensatory damages when a contract is breached? How are damages computed differently in construction contracts? What is the standard measure of compensatory damages when a contract is breached? How are damages computed differently in construction contracts? Under what circumstances is the remedy of rescission and restitution available?  Under what circumstances is the remedy of rescission and restitution available?  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3

4. When do courts grant specific performance as a remedy? When do courts grant specific performance as a remedy? What is a limitation-of-liability clause, and when will courts enforce it? What is a limitation-of-liability clause, and when will courts enforce it? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 4

5. Most Common Remedies: Most Common Remedies: – Damages. – Rescission and Restitution. – Specific Performance. – Reformation. – Recovery Based on Quasi Contract. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 5

6. Compensatory Damages—designed to compensate nonbreaching party for loss of the bargain. Compensatory Damages—designed to compensate nonbreaching party for loss of the bargain. – Damages actually sustained (out-of- pocket), directly arising from breach. – Standard Measure: difference between value of promised performance and value of actual performance.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 6

7. Compensatory Damages (cont’d). Compensatory Damages (cont’d). – Incidental Damages: expenses cause directly by breach of contract. – Measurement of Damages: Sale of Goods: difference between contract and market price. Sale of Land: specific performance. Construction Contracts.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7

8. Measurement of Damages for Construction Contracts: varies (below). Measurement of Damages for Construction Contracts: varies (below). © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 8

9. Consequential (Special) Damages— foreseeable losses. Consequential (Special) Damages— foreseeable losses. – Breaching party is aware or should be aware, cause the injury party additional loss. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9

10. Punitive Damages—punish or deter future conduct. Punitive Damages—punish or deter future conduct. – Generally not available for mere breach of contract. Usually tort (e.g., fraud) is also involved. Nominal Damages—no financial loss. Nominal Damages—no financial loss. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 10

11. Mitigation of Damages. 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. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 11

12. Liquidated Damages Versus Penalties. Liquidated Damages Versus Penalties. – Liquidated Damages: specific amount agreed to be paid as damages in the event of future breach. – Penalties: designed to penalize, generally unenforceable. B-Sharp Musical Productions, Inc. v. Haber – CASE 16.1 B-Sharp Musical Productions, Inc. v. Haber (2010). Why was this liquidated damages, and not a penalty? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 12

13. Liquidated Damages Versus Penalties. Liquidated Damages Versus Penalties. Enforceability (cont’d). Enforceability (cont’d). – Court asks two questions: When contract was entered into, was it apparent damages would be difficult to estimate in the event of a breach? Was the amount set as damages a reasonable estimate and not excessive? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 13

14. Sometimes damages are inadequate remedy. Sometimes damages are inadequate remedy. Court can create equitable remedies: Rescission and Restitution. Court can create equitable remedies: Rescission and Restitution. – Rescission: remedy whereby a contract is canceled and the parties are restored to the original positions that they occupied prior to the transactions.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14

15. Rescission and Restitution. Rescission and Restitution. – Restitution: both parties must return goods, property, or money previously conveyed. – Note: Rescission does not always call for restitution. Restitution is called for in some cases not involving rescission. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 15

16. Specific Performance. Specific Performance. – Equitable remedy calling for the performance of the act promised in the contract. – Provides remedy in cases involving: Stainbrook v. Low Sale of Land. CASE 16.2 Stainbrook v. Low (2006). Why was specific performance an appropriate remedy in this case? Contracts for Personal Services. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 16

17. Reformation: 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.  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 17

18. Reformation (cont’d). Reformation (cont’d). – When Fraud or Mutual Mistake is Present. Reformation is used often in cases dealing with fraud or mistake. Drake v. Hance – CASE 16.3 Drake v. Hance (2009). Was this really a mutual mistake? © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 18

19. When Quasi Contract is Used. When Quasi Contract is Used. – Arises when no contract actually exists. Remedy created by courts to obtain justice and prevent unjust enrichment. – Party conferring benefit can recover in quantum meruit (“as much as she deserves”).  © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 19

20. When Quasi Contract is Used (cont’d). When Quasi Contract is Used (cont’d). – When no contract exists. – When a contract exists but is unenforceable. – Partially performing party can recover value of services when contract is unenforceable. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 20

21. Requirements of Quasi Contract. Requirements of Quasi Contract. – Benefit was conferred to the other party. – Party conferring benefit reasonably expected to be paid. – The benefit was not volunteered. – Receiving benefit without paying for it would result in unjust enrichment. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21

22. Exculpatory and Limitation of Liability clauses. Exculpatory and Limitation of Liability clauses. UCC Allows Sales Contracts to Limit Remedies. UCC Allows Sales Contracts to Limit Remedies. Enforceability of Limitation-of- Liability Clauses: depends on type of breach excused by provision. Enforceability of Limitation-of- Liability Clauses: depends on type of breach excused by provision. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 22

23. © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 23