common law contract: remedies
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RemediesJune 22, 2012
Slide 1
Common Law of Contract
Remedies
RemediesJune 22, 2012
Slide 2
Damages and RestitutionTo date we have discussed remedies in the context of defenses to formation.
Fraud, duress, mistake, etc.
This lecture deals only with remedies for breach of contract.
This discussion presupposes that there is an enforceable contract and there has been a material breach.
RemediesJune 22, 2012
Slide 3
QuasiContractThe prevention of unjust enrichment
Really not a contract at all, but an obligation imposed by law.
Theory is employed to allow for remedy where technically no contract exists.
RemediesJune 22, 2012
Slide 4
Restitution v. DamagesRestitution – goal is to place both parties in the position they had PRIOR to entering into transaction.
Damages – goal is to place the aggrieved party in the same economic position s/he would have obtained if the contract had been performed.
RemediesJune 22, 2012
Slide 5
3 Questions Concerning RemediesWhat is the nature and extent of the plaintiff's compensable loss?
look at harm and extent that law allows to recompense for it.
What remedy is most efficient to address loss?
sometimes there is more than one way to address loss.
Are there policies or principles that limit defendant's liability?
RemediesJune 22, 2012
Slide 6
Basic GoalValid K justifies future expectations.
Goal = cure disappointment by giving victim what was promised and expected under K.
Judged objectively
Commonly the remedy is money, not specific performance.
RemediesJune 22, 2012
Slide 7
Why not Specific Performance?Practicality and policy
See next slide for example
Traditional dichotomy between law and equity
Traditionally, common law courts could only grant money damages.
Equitable relief like specific performance could only be granted by the equity courts.
Equity courts could only grant remedy when there was no common law remedy available.
RemediesJune 22, 2012
Slide 8
ExampleSarah Nade hires famous signing coach Mel Odey to help her win the Superstar contest. The K called for Mel to give Sarah a week's worth of four hours per day lessons in return for $1,500.
At the last minute Mel gets an offer to go on tour with the Rolling Stones as a backup singer. He must leave immediately.
Sarah sues. Why not grant her specific performance?
RemediesJune 22, 2012
Slide 9
Monetary Award IllustrationLet's say Sarah was able to find another coach who could give equivalent lessons for $1,800.
Sarah expected to get the lessons for $1,500, so this is $300 more than she expected.
To put her close to her expectations, court would award Sarah $300 in damages.
RemediesJune 22, 2012
Slide 10
Principles of Expectation ReliefMeeting Plaintiff's expectation is rarely totally satisfied.
Sarah didn't really get exactly what she bargained for, which were lessons from Mel.
Contract law normally compensates only for economic injury.
RemediesJune 22, 2012
Slide 11
Principles of Expectation ReliefContractual promise means nothing more than a commitment to either perform or to pay compensation for lack of performance.
However, there is a quasimoral element. The more D is to blame, the more damages a court can award
RemediesJune 22, 2012
Slide 12
Calculation of Expectation DamagesDamages =
Plaintiff's loss in value (promised – received = loss)
Plus
Any other loss (consequential and incidental damages)
text gives examples such as shipping or storage costs.
Less
Cost or loss Plaintiff avoided by not having to perform.
RemediesJune 22, 2012
Slide 13
Substitution Example
Training received = Spent $1,500
Training received = Spent $1,800
Position if K performed Position after breach
Spent $300 beyond expectation
Payment of this amountachieves expectation
RemediesJune 22, 2012
Slide 14
Loss with no Available Substitution
Give Lessons= Earns $1,500
Give no lessons = Earns $0
Position if K performed Position after breach
Received $1,500 below expectation
Payment of this amountachieves financialexpectation
RemediesJune 22, 2012
Slide 15
Loss in Income but Saving in Cost
Position if K preformed Position after breach
Work + payout $600
No work +pay out $0
Earns $1,500 Earns $0
= profit $900 = profit $0
Received $900 below expectation
Payment of thisamount achievesexpectation
RemediesJune 22, 2012
Slide 16
ExampleK said Sarah had to buy Mel's music book (which she did) and drive across town to Mel's studio.
Damages =
$300 (what it cost her to get replacement) Plus
$50 already spent on Mel's book Less
$75 she would have spent to drive to Mel's studio.
Damages = $275
RemediesJune 22, 2012
Slide 17
LimitationsForeseeability – damages should be consistent with what was reasonably contemplated by the parties.
Certainty – must show breach resulted in financial loss.
Mitigation – victim cannot worsen the loss.
RemediesJune 22, 2012
Slide 18
ForeseeabilityDamages are foreseeable when:
at the time of the making the contract
party who breached reasonably should have realized
that those damages would be a likely consequence of the breach.
RemediesJune 22, 2012
Slide 19
Rule of HadleyCan only recover for breach those damages that:
arise naturally, according to the usual course of things, from such a breach OR
may reasonably be supposed to have been in the contemplation of both parties at the time they make the K, as the probably result of the breach.
RemediesJune 22, 2012
Slide 20
Damages that Arise NaturallyCalled “general damages”
include imaginable and obvious consequential damages
Tree falls on roof, damaging it. Homeowner contracts roofer to fix immediately that day. If roofer breaches:
He must surely contemplate the probability of direct damages—homeowner gets another roofer
but also must realize there could be further damages if it rains (consequential damages)
RemediesJune 22, 2012
Slide 21
Special DamagesSame facts but let's say there is a piece of equipment bolted to the floor underneath where the roof now has a hole.
If roofer breaches, he will not be responsible for damages rain might do to it unless he was told prior to forming the K about it.
Thus, the damages must be reasonably contemplated by the breaching party.
RemediesJune 22, 2012
Slide 22
The Heron II Case
RemediesJune 22, 2012
Slide 23
MitigationDuty to Mitigate If the plaintiff has, through bad faith or unreasonable action (or inaction) aggravated her damages, the defendant is not held responsible for the increase in loss.
must be dishonest, opportunistic, vindictive, or deviate from what would be expected from reasonable person.
By finding another coach, Sarah mitigated.Let's say she hired Michael Jackson at $30,000 a week. This would be unreasonable.
RemediesJune 22, 2012
Slide 24
Reasonable CertaintyPlaintiff must prove injury and amount of loss.
As a general rule, the more clearly Plaintiff shows injury, the greater effort the factfinder will put into finding a compensation figure.
Text notes difference between lost profits of existing business and lost profits of new business.
RemediesJune 22, 2012
Slide 25
Specific PerformanceCourt order commanding defendant to perform the contract.
Commonly awarded if real property is at issue.
No specific performance remedy available for personal service contracts.
Only awarded when damages are not adequate remedy.
Court can combine part performance remedy with award of damages.
RemediesJune 22, 2012
Slide 26
Van Wagner Example
RemediesJune 22, 2012
Slide 27
Equitable RemediesSpecific Performance – compels affirmative action
Injunction
prohibits D from doing some particular act.
must demonstrate that damages remedy is not available
Restitution
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