Chapter 17 Contracts ² Breach of Contract and Remedies

Reformation. Recovery Based on Quasi Contract.Introduction Damages. 2 . Specific Performance. Rescission and Restitution.

‡ No financial loss. 3 . ‡ Breaching party is aware or should be aware. ‡ Available when tort is also involved. Punitive Damages. Nominal Damages.§1: Damages Types of Damages: Consequential Damages. cause the injury party additional loss.

Duty owed depends on the nature of the contract. 4 .§2: 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.

Specify a certain amount to be paid in the event of a default or breach of contract and are designed to penalize the breaching party. Penalties. 5 . A contract provides a specific amount to be paid as damages in the event of future default or breach of contract. Penalties Liquidated Damages.Liquidated Damages vs.

Note: Rescission does not always call for restitution. money previously conveyed. Both parties must return goods. or the parties are restored to the original positions that they occupied prior to the transactions. A remedy whereby a contract is canceled and Restitution. property. Restitution called for in some cases not involving rescission. 6 .§2: Rescission and Restitution Rescission.

Scarce. or Not available remedy in contracts for personal services. 7 . Remedy in cases where the consideration is: Unique.§3: Specific Performance Equitable remedy calling for the performance of the act promised in the contract.

Available when an agreement is imperfectly expressed in writing. 8 .§4: Reformation Equitable remedy allowing a contract to be reformed. or rewritten to reflect the parties true intentions.

§5: Recovery Based on Quasi Contract Equitable theory imposed by courts to obtain justice and prevent unjust enrichment. Quantum meruit. Party seeking recovery must show the following: A benefit was conferred to the other party. The benefit was not volunteered. 9 . Party conferring did so with the reasonable expectation of being paid. Retaining benefit without paying for it would result in unjust enrichment of the party receiving the benefit.

UCC rejects election of remedies. 10 . Nonbreaching party must choose which remedy to pursue.§6: Election of Remedies Doctrine created to prevent double recovery. Cumulative in nature and include all the available remedies for breach of contract.

Nonbreaching party should give notice to the breaching party that full performance will be required in the future.§7: Waiver of Breach A pattern of conduct that waives a number of successive breaches will operate as a continued waiver. Nonbreaching party can still recover damages. but contract is not terminated. 11 .

Provisions stating that no damages can be recovered. Provisions that affect the availability of certain remedies. Limitation of liability clauses. 12 .§8: Contract Provisions Limiting Remedies Exculpatory clauses.

1: Fujitsu v. The next day.S. Meanwhile. Ross told FedEx it was rejecting the shipment and that FedEx should return the goods to Fujitsu at Ross¶s expense. Fujitsu found the goods covered with an oily residue. the container arrived in Austin and was held for clearance by the U. 13 . TX using FedEx.Case 17. to Ross in Austin. Customs Service. The goods left Austin in good condition. Federal Express (Mitigation of Damages) FACTS: Fujitsu shipped a container of silicon wafers from Japan. but when they arrived in Japan. Fujitsu reported the damage to FedEx.

FedEx appealed arguing that Fujitsu failed to mitigate its damages. FOR FUJITSU. HELD: AFFIRMED. Fujitsu filed suit for breach of contracts and the court found FedEx liable for $726. .1: Fujitsu v. which was not possible with the oily residue 14 on the bags.Case 17. Federal Express (Mitigation of Damages) FACTS (cont¶d) Fujitsu¶s insurance company directed FedEx to dispose the entire container of chips without opening the bags. Fujitsu could not mitigate its damages because because the chips could only be opened in a clean room.640 in damages.

2: Atel Financial v. Atel agreed.´ Later. a Kentucky firm engaged in coal mining.Case 17. Quaker asked Atel to temporarily forego payments so that Quaker could refinance its debts. 15 . The lease provided for liquidated damages in ³an amount equal to the present value of all monies to be paid by Lessee during the remaining Basic Term or any successive period then in effect. Quaker Coal Company (Liquidated Damages) FACTS: Atel leased heavy mining equipment to Quaker Coal Company. plus * * * the anticipated residual of the Equipment.

The next day. By the time of trial. Quaker had made all past due payments. when Quaker was over $700.2: Atel Financial v. Atel sued Quaker for breach of contract. Two weeks later.000 in arrears. Atel declared a default and demanded liquidated damages. 16 . Quaker finalized its debt restructuring and sent Atel a check for all outstanding invoices. Quaker Coal Company (Liquidated Damages) FACTS (cont¶d) Months later.Case 17.

Case 17. and hence unenforceable.´ . Court considered the liquidated damages clause to be a penalty clause. Quaker Coal Company (Liquidated Damages) HELD: FOR QUAKER. if it bears no reasonable relationship to the range of actual damages that the parties could have anticipated would flow from 17 a breach. ³[A] liquidated damages clause will generally be considered unreasonable.2: Atel Financial v. Court denied Atel¶s request for liquidated damages and entered a judgment in favor of Quaker.

In 1971. Halasz worked with Maglica to build Mag Instrument. although on its incorporation in 1974. In 1978.3: Maglica v. in 1955. Maglica. holding themselves out as man and wife. were paid equal salaries. but they never married. the business boomed. Mag Instrument. he and Halasz began to live together. Maglica (Quasi-Contract) FACTS: Maglica founded a machine shop business. and Halasz. all shares were issued to Anthony. the business began manufacturing the ³Mag´ flashlights. as president.Case 17. 18 . as secretary. and thanks to ideas and hard work on Claire¶s part.

FOR MAGLICA. but not for the benefit conferred on the business. Claire could recover for the value of her services.Case 17. HELD: REVERSED. Maglica appealed. the court will not impose ³a highly generous and extraordinary contract that the 19 parties did not make. The jury awarded Claire $84 million. Remanded for recalculation of award. based on the business¶s benefit from her services.3: Maglica v.´ . In this case. Maglica (Quasi-Contract) FACTS (cont¶d) The couple split in 1992. and Halasz sued Maglica seeking a recovery based on quantum meruit.

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