LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14 Slide 1 Remedies for Breach of Contract Distinguish between minor and major breach Describe when the remedies of rescission and specific performance are available Define four types of damages and tell when they will be awarded by courts LESSON 14-1 GOALS

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 2 Hot Debate Why should Victoria be able to recover the cost of the rental car from the dealership? What are the reasons in the dealership’s favor for not reimbursing Victoria the cost of the rental car?

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 3 TYPES OF BREACH AND REMEDIES The law divides breaches of contracts into two categories: the major (or material) breach and the minor breach. Both are granted different remedies for injuries. A remedy means the action or procedure followed to enforce a right or to get damages for an injury to a right.

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 4 TYPES OF BREACH AND REMEDIES The basic remedies for major breach of contract include the following: Recission and Restitution Money Damages Specific Performance

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 5 TYPES OF BREACH AND REMEDIES (#12) The classification of minor and major breaches is an issue of fact to be decided by a judge or jury that determines whether a reasonable person would, in light of the particular facts and circumstances, view the breach as major or minor. (#12)The primary guideline is the significance of the breach in relation to the entire contract.

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 6 How Does Minor Breach Affect the Victim’s Duties? (#10) In a minor breach the victim must generally continue to perform the duties defined by the contract, but may offset the total amount of the contract for the amount of the breach. Offset is deducting the cost of completing or fixing a minor breach from payment of the contract price to the breaching party. (an action taken to recover damages)

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 7 How does Major Breach Affect the Victim’s Duties? (#10) For a major breach, the victim need not perform the duties specified in the contract.

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 8 What are Rescission and Restitution? Rescission and restitution are intended to place the parties in the same legal position they were in before contracting. Rescission allows the parties to treat the contract as canceled. Restitution is restoring or making good a loss. (recovering of money or property by an injured party)

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 9 What are Rescission and Restitution? (#13, Part 1 of 2) Rescission is available as a remedy when goods or property have been given to the defaulting party and restitution can be made to cancel the contract and place the parties in the same legal position as before the contract.

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 10 TYPES OF MONEY DAMAGES Compensatory Money Damages is the amount of money awarded to compensate for a plaintiff’s loss. (#14, Part 1 of 4) Compensatory money damages place the injured parties in the same financial position they would have been in if there had been no breach, including the recognition of any “bargains.”

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 11 TYPES OF MONEY DAMAGES Consequential Money Damages is money awarded to a party for foreseeable injuries caused by the other party’s breach. (#14, Part 2 of 4) Consequential money damages also put the injured parties in the same financial position as if the contract had been performed with the addition of money for foreseeable injuries caused by the breach.

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 12 TYPES OF MONEY DAMAGES Liquidated Money Damages are damages agreed upon before a possible breach of contract. (#14, Part 3 of 4)Liquidated money damages award amounts specified in the contract for non-performance unless they are punitive.

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 13 TYPES OF MONEY DAMAGES Punitive Damages is money a court requires a defendant to pay in order to punish and make an example of the defendant. (#14, Part 4 of 4) Punitive damages are added to other money damages to punish the defendant for a fraud or intentional tort.

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 14 TYPES OF MONEY DAMAGES Nominal Damages is a small amount granted in recognition of the rights that have been violated, when there is no actual injury.

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 15 What’s Your Verdict? Does Eve have an enforceable claim against Designs Inc.?

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 16 SPECIFIC PERFORMANCE Sometimes money damages are not an adequate remedy for breach of contract. Therefore a court may give the injured party the special relief or specific performance. Decree For Specific Performance is a court order to the defendant to do exactly what was promised in a contract.

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 17 SPECIFIC PERFORMANCE Money damages inadequate Subject matter unique (#11) A subject of a contract is unique if the same goods cannot be obtained from another source, as in the case of an antique car or work of art. For real property, it is assumed that all real property is unique, if for no other reason than its location. Ability to supervise Clean hands

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 18 SPECIFIC PERFORMANCE (#13, Part 2 of 2) Specific performance is available as a remedy when money damages are inadequate for the damages or the subject of the contract is unique and the injured party is blameless (“clean hands”) and the court is capable of supervising the specific performance.

LAW FOR BUSINESS AND PERSONAL USE © SOUTH-WESTERN PUBLISHING Chapter 14Slide 19 What’s Your Verdict? Did Kelly have any recourse?