what is the difference between compensatory damages and consequential damages? what are nominal...
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• What is the difference between What is the difference between compensatory damages and compensatory damages and consequential damages? What are consequential damages? What are nominal damages, and when do nominal damages, and when do courts award nominal damages? courts award nominal damages?
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• What is the standard measure of What is the standard measure of compensatory damages when a compensatory damages when a contract is breached? How are damages contract is breached? How are damages computed differently in construction computed differently in construction contracts?contracts?• Under what circumstances is the Under what circumstances is the
remedy of rescission and restitution remedy of rescission and restitution available? available?
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• When do courts grant specific When do courts grant specific performance as a remedy?performance as a remedy?• What is a limitation-of-liability What is a limitation-of-liability
clause, and when will courts enforce clause, and when will courts enforce it?it?
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• Most Common Remedies:Most Common Remedies:–Damages.–Rescission and Restitution.–Specific Performance.–Reformation.–Recovery Based on Quasi Contract.
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• CompensatoryCompensatory Damages—designed to Damages—designed to compensate nonbreaching party for compensate nonbreaching party for loss of the bargain.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.
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• CompensatoryCompensatory Damages (cont’d). 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.
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• Measurement of Damages for Measurement of Damages for Construction Contracts: Construction Contracts: varies (below).varies (below).
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• ConsequentialConsequential (Special) Damages— (Special) Damages—foreseeable losses.foreseeable losses.–Breaching party is aware or should be
aware, cause the injury party additional loss.
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• Punitive Damages—punish or deter Punitive Damages—punish or deter future conduct.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.
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• 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.
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• 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.–CASE 16.1 B-Sharp Musical Productions, Inc. v. B-Sharp Musical Productions, Inc. v.
Haber Haber (2010). Why was this liquidated damages, and not a penalty?
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• 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?
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• Sometimes damages are inadequate Sometimes damages are inadequate remedy. remedy. • Court can create equitable remedies: Court can create equitable remedies:
Rescission and Restitution.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.
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• 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.
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• Specific Performance.Specific Performance.–Equitable remedy calling for the
performance of the act promised in the contract.–Provides remedy in cases involving: • Sale of Land. CASE 16.2 Stainbrook v. Low Stainbrook v. Low
(2006). Why was specific performance an appropriate remedy in this case?• Contracts for Personal Services.
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• 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.
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• Reformation (cont’d).Reformation (cont’d).–When Fraud or Mutual Mistake is
Present. Reformation is used often in cases dealing with fraud or mistake.–CASE 16.3 Drake v. Hance Drake v. Hance (2009).
Was this really a mutual mistake?
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• 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”).
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• 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.
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• 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.
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• Exculpatory and Limitation of Exculpatory and Limitation of Liability clauses.Liability clauses.• UCC Allows Sales Contracts to Limit UCC Allows Sales Contracts to Limit
Remedies.Remedies.• Enforceability of Limitation-of-Enforceability of Limitation-of-
Liability Clauses: Liability Clauses: depends on type of depends on type of breach excused by provision.breach excused by provision.
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