1. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. and the Legal Environment, 10 th edition by Richard A. Mann & Barry S. Roberts Essentials of Business Law and the Legal Environment, 10 th edition by Richard A. Mann & Barry S. Roberts

2. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Topics Covered Chapter 18: Contract Remedies A.Monetary Damages B.Remedies in Equity C.Restitution D.Limitations on Remedies

3. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Compensatory Damages n Contract damages placing the injured party in as good a position as he would have held had the other party performed; equals loss of value minus cost avoided plus incidental damages plus consequential damages. –Loss of Value – value of promised performance minus value of actual performance –Cost Avoided – loss or costs the injured party avoids by not having to perform –Incidental Damages – arise directly out of a breach Consequential Damages – not arising directly out of a breach but arising as a foreseeable result of the breach

4. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Other Damages n Nominal Damages – a small sum awarded where a contract has been breached but the loss is negligible or unproved. n Reliance Damages – contract damages placing the injured party in as good a position as she would have been in had the contract not been made.

5. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Damages for Misrepresentation n Benefit-of-the-Bargain Damages – difference between the value of the fraudulent party's performance as represented and the value the defrauded party received. n Out-of-Pocket Damages – difference between the value given and the value received. n Punitive Damages – are generally not recoverable for breach of contract. n Liquidated Damages – reasonable damages agreed to in advance by the parties to a contract.

6. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Limitations on Damages n Foreseeability of Damages – potential loss that the party now in default had reason to know of when the contract was made. n Certainty of Damages – damages are not recoverable beyond an amount that can be established with reasonable certainty. n Mitigation of Damages – injured party may not recover damages for loss he could have avoided by reasonable effort.

7. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Remedies in Equity n Availability – only where there is no adequate remedy at law. n Types: –Specific Performance – court decree ordering breaching party to render promised performance. –Injunction – court order prohibiting a party from doing a specific act. –Reformation – court order correcting a written contract to conform with the original intent of the contracting parties.

8. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Restitution n Restoration of injured party to position she was in before the contract was made. n Available to: –Party Injured by Breach – if other party breaches the contract by nonperformance or repudiation –Party in Default – for any benefit conferred in excess of the loss caused by the breach

9. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Restitution n Statute of Frauds – if a contract is unenforceable because of the statute of frauds, a party may recover the benefits conferred on the other party in reliance on the contract. n Voidable Contracts – a party who has avoided a contract is entitled to restitution for any benefit conferred on the other party.

10. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Limitations on Remedies n Election of Remedies – if remedies are not inconsistent, a party injured by a breach of contract may seek more than one n Loss of Power of Avoidance – a party with the power to avoid a contract may lose that power by: –affirming the contract –delaying unreasonably in exercising the power of avoidance –being subordinate to intervening rights of 3rd parties

11. Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. Equitable Remedies may be available No Compensatory Damages Restitution Reliance Damages Legal Remedies are available No Contract Remedies Are legal remedies adequate? Yes Is there a provision for reasonable liquidated damages? Yes Recovery of liquidated damages Yes No RemedyHas the contract been breached? No