Business Law and the Regulation of Business Chapter 18: Remedies By Richard A. Mann & Barry S. Roberts

Topics Covered in this Chapter A.Monetary Damages B.Remedies in Equity C.Restitution D.Limitations on Remedies

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

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.

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.

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.

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.

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

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.

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

Contract Remedies No Remedy Equitable Remedies may be available Legal Remedies are available Compensatory Damages Restitution Reliance Damages Has the contract been breached? Are legal remedies adequate? Is there a provision for reasonable liquidated damages? Recovery of liquidated damages Yes No Yes No