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56Men their keep engagements

CHA P IE R O UT T I I { E -DAMAGES REMEDIES -EQUITABLE BASED -RECOVERY ON CONTRACT QUASI PROVISIONS -CONTRACT LIMITING REMEDIES OF -ELECTIONREMEDIES

T E A RI { I I { G O B I E CI I V E S BE TO YOU AFTER READING CHAPTER, SHOULD ABLE THIS ANSWERFOLLOWING THE QUESTIONS:
What is the differencebetweencompensatory damages? What are damages and consequential and when do courtsaward nominal damages, nomi naldamages? What is the standardmeasureof compensatory How are damages when a contract is breached? damages computed differentlyin construction contracts? is Under what circumstances the remedy of rescission and restitutionavailable? When do courtsgrant specificperformanceas a remedy? What is the rationaleunderlying the doctrine of election of remedies?

it whenistothe
of advantage not both to break them.!!
Solon, sixth cenhrry B.c.E. (Atlienian legal reformer)

l f,l centuriesago in the chapter-opening I A I r the Athenian political leader Solon instrr-rcted tfl l | - - | quotation, a contract will not be broken so long as "it is to the advantageof both" partiesto fulfill their contractual obligations.Normally, a person entersinto a conhact with for When it is no longer advantageous a party to fulfill her another to securean advantage. or his conhactual obligations,that party rnay breach the contract.As noted in Chapter 14, a dutiesunder breachof contract occurswhen a party fails to perform part or all of the reqr-rired the a contract.l Once a parf fails to perform or performsinadequately, other party-the nonremedies. breachingparty-can chooseone or more of several The most common remediesavailableto a nonbreachingparty under contract law As and reforrnation. disrescission restitution,specificperformance, and include damages, in at cussedin Chapter l, courts distinguishbehveenremedies law and remedies equity. this We Today,the remedyat law is normally monetarydamages. discuss remedyin the first and restitution,specificperforpart of this chapter.Equitable remediesinclude rescission mance,and reformation,all of which we examinelater in the chapter.Usually,a court will In not awardan equitableremedy unlessthe remedyat law is inadequate. the final pages of this chapter,we look at some speciallegal doctrinesand conceptsrelatingto remedies.

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CONTRACTS

(Second) ofContracfs, Section235(2). L Restatement

16'EIMtr

BREACH REMEDIES AND

As A breach of contractentitlesthe nonbreachingparty to sue for monetarydamages. you read in Chapter 4, damagesare designedto compensatea party for harm sufferedas a are result of another'swrongful act. In the context of contract law, damages designedto the nonbreaching party for the loss of the bargain. Often, courts say that compensate innocent partiesare to be placed in the position they would have occupied had the conhact been fully performed.2

of Types Damages
of There are basicallyfour broad categories damages: I and costs). Compensatory(to cover direct losses
ll'lTrtf{fiEElE The terms of a contract definitefor a must be sufficiently the courtto determine amountof damages award. to

losses). 2 Consequential(to cover indirect and foreseeable 5 Punitive (to punish and deter wrongdoing). 4 Nominal (to recognizewrongdoingwhen no monetarylossis shown). in were discussed Chapter 4 in the context of tort Compensatoryand punitive damages and nominal damas law. Here, we look at thesetypesof damages, well as consequential ages,in the contextof contractlaw.

the CompensatoryDamages Damagescompensating nonbreachingpartyfor the lossof the compensate iniured damages. These damages the bargainare known ascompensatory and provedto have arisendirectly from the loss actuallysustained party only for damages of the bargain caused by the breach of contract. They simply replace what was lost becauseof the wrong or damage. damages the differencebehveenthe value of is The standardmeasureof compensatory promisedperformanceunder the contractand the value of her or his breachingparty's the This amount is reducedby any lossthat the injured partyhasavoided. achralperformance. You conhact with Marinot Indushiesto perform certain personalservices FTxArvrprETll exclusivelyfor Marinot during August for a payment of $4,000.Marinot cancelsthe contract and is in breach.You are able to find anotherjob during Augustbut can earn only $1,000. You damages. You normallycan sueMarinot for breachand recover $1,000ascompensatory recoverfrom Marinot the amount that you spentto find the other iob. El Expenses may also of that are direcdyincurredbecause a breachof conhact-such asthoseincurred to obtain INCIDENTAT DAMAGES source-are called incidental damages. performancefrom another Damages awardedto compensate variesby type of contract.Certain types damages of compensatory The measurement for expenses that are directly for specialmention-contracts for the saleof goods,contracts the sale of contractsdeserve of incurred because a breach of contract-suchas those incurredto of land, and constructioncontracts. SaIe of Goods. In a contract for the sale of goods, the usual measure of compensatory damages is the difference between the contract price and the market price'r f.€n-EMFiFlsA MediQuick Laboratoriescontracts with Cal Computer Industries to purfor chaseten model UTS nehvorkseryers $8,000each.If Cal Computer fails to deliverthe is market price of the seryers $8,950,MediQuick's measureof and the current ten servers, causedby the (10 X $950), plus any incidental damages(expenses) damagesis $9,500 breaches and the seller has not yet produced the goods, breach. E If the buyer
(Second) Contracts, Section347;andSection1-106(l) of the Uniform CommercialCode (UCC). of 2. Restatement 3. This is the differencebehveenthe contract price and the rnarketprice at the time and place at which the goods in or wereto be delivered tendered. [SeeUCC 2-708, 2-71], and 2-715(l), discussed Chapter19.]

from another obtainperformance source.

I66mmml

CONTRACTS

lost profitson the sale,rather than the normall1, equal the seller's conpensator)'damages differencebehveenthe contractprice and the market price. eachparcelof land is unique,the reinedyfor a seller's Sale of Land. Ordinarily,because breach of a contractfor a saleof real estateis specificperformance-that is, the buyer is perfonnance disis the arvarded parcel of propertyfor which he or she bargained(specific (becausethe cussednore ftrlly later in this chapter).When tl-risremedy is ur-ravailable been sold,for example)or when the buyer is the partyin breach,the meaproperh,has sure of damagesis typically the difference behveen the contract price and the n'rarket follow this rule. The n-rajority states of price of the lar-rd. or ir-i Construction Contracts. The measureof dair-rages a builclir-rg constructionconand when the breach occurs.The owner on tract variesdeper-rdir-rg which party breaches of can breach at three different stages the construction: I has Beforeperformance begun.

Fora summaryof how may be breached contracts on and other information contract law go to

2 During performance. 3 Ntei performancehas been completed. has begun,the contractor cat-trecoverottly If the owner breachesbeforeperformance l'rave been made on the contract(that is, the total contractprice less tlie profitstl'ratr,vould the during performance, contractor and labor). If the owner breaches the cost of rnaterials the incurredin partiallyconstructing buiiding.If the the recover profitsplus the costs can the has beencompleted, contractot can recoverthe es owner breach after the construction price plus interest. entire contract Wl-ren the contractor breachesthe construction contract-either by failing to begin constructiorror by stoppingwork partwaythrough the project-the measureof dan-rages for compensation any delayin peris the costof completion,rvhich includesreasonable is If the contractorfinisheslate, the measureof dan'rages the lossof use. The formance. of the ConceptSummarybelow sumnarizes the rules concernir-rg measurement damages contracts. in breached consfuuction that result fron-ia party'sbreach of condamages Consequential Damages Foreseeable damConsecluential consequential damages,or specialdamages. to tract are referrecl as in clamages that they are causedb,vspecialcircttmstances agesdiffer from con'ipensatory or beyond the contract itself. They flow fron'r the consequences, results,of a breach. that the buyer is planning to use or resell knowing WLen a sellerfails to delivergoods,

DAMAGEs CONSEQUENTIAL that Special damages compensate or for a lossthat doesnot directly result from the breach immediatelv For (for example, profits). the lost consequential plaintiff collect to they must havebeen damages, at foreseeable the time reasonably or the breach iniuryoccurred.

IN PARTY BREACH 0rruncr dlurner Owner {ontra r cto eontractor

T IM E O F BR EA C H has Beforeconstruction begun. During construction. is Afterconstruction completed. has Before construction begun. is Beforeconstruction completed.

ME A S U R E ME N TOF D A MA GE S and labor). pricelesscostof materials Profits(contract Profitsplus costsincurredup to time of breach. priceplus interest. Contract Costabovecontractpriceto completework. by incurred ownerto complete. all Cenerally, costs

567 ENEffitr
are damages awardedfor the lossof profits from thosegoodsimnlediately,consequential the plannedresale.
ls E X A M p t E l 5 . I l U l l l n o l e Co n tla cts lo n a ve e Sp e clllc llem sl l l P P eC i o l l er-one
|

BREACH REMEDIES AND

l l l at sne

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I

Gihnore In with the shipper, needs repairher printingpress. her contract to desperately or the that states shemustreceive item by Monday, shewill not be ableto print her paper the norrnally recover consequencan is Gilmore If andwill lose$1,000. theshipper late, (thatis,the $3,000 losses), in by causecl thedelay Ei tial damages 'fo recover to trEIH n sellerwho doesnot wish partymustknow (or havereason the darrages, breaching consequential to take on the riskof consequential to an the party suffer additional will circumstances cause nonbreaching know)thatspecial damages limitthe buyer's can for page a discusremedies contract. via feature the following on LandmarkintheLaw 1oss.4 thischapter's See in in a decided England 1854. sionof Hadleyv. Baxendale,case to irnpossible that it is sometlmes shouldrealiue ownersand managerc B$siness that cclleetlngdamages Theyshould also understand prex/ent c$ntraetdisputes. and time which can be exp*nsive litigation, thrcugha courtjudgmentrequires (ourt iudgrnents cften difficult to emforce, are Furtherrncre, consarming. party does nst have sufficientassetsto pay the particularlyif the breaching partiesgenerallychooseto settle thelr For arrvarded.5 these reasons, darcages €ontractdisputesbefsre trial ratherthan litigate in hopesof being alryarded-and in In being able to collect-damages other remedies}. sum,there is *ltisdo*n {or the cld saying,"a bird in the hand is worth two in the bsshj'

tr
are Punitive Damages Recall from Chapter 4 that punitive damages designedto punish a wrongdoerand to set an example to deter similar conduct in the ftiture. Punitive action for breach of congenerallyare not awardedin ar-r damages, or dan'iages, exemplary law because they are,in essettce, placein contract haveno legitimate tract.Such damages A penalties,and a breach of contract is not unlawful in a criminal sense. contract is sirr-rone partyfor the loss The law may compensate betweenthe parties. ply a civil relatior-iship of the bargain-no more and no less. actionscan causeboth a breachof contractand a tort. a In a few situations, person's or star-rdard duty of t57l Two partiesestablishby contracta certain reasonable EilaTTLE care. Failure to live up to that standardis a breach of the contract. The same act that breachedthe contract may also constitutenegligence,or it may be an ilitentional tort if, for example,the breaching party committed fraud. In such a situation, it is possiblefor for the nonbreachingparty to recoverpunitive damages the tort in addition to compensafor dan-rages the breach of contract. E and consequential tory from a breach of Nominal Damages When no actual damageor financial lossresr-rlts and only a technical injury is involved,the court may awardnominal damages contract as awardsare often small, sucl-r one dollar, but party. Nominal damages to tl-ieinr-rocent that the defendantactedwrongfuliy.Most lawsuitsfor norninal damages they do establish a are brought asa natter of principle under the theory tl-rat breachhasoccurred and some of must be imposedregardless actual loss. damages
20 . 4. UCC 2-7 1 5 ( 2 )S e eC h a p t e r . A afteririals,by enteringjudgrnents. judgmentmay orderthe losingpartyto pay monetary of 5. Colrts dispose cases, For can to damages the winning party.Collectinga judgnent, horvever, poseproblems. exanple,the juclgrnent debtorrnaybe irsolvent(unableto pay his or her bills when they come due) or haveonll a smallnet u'orth,or assets satis& debt (seeChapter26). to a the from seizing debtor's a exenptionlawsnay prevent creditor

NOMINAL DAMAGES

award(oftenone A smallmonetary when no to dollar)granted a plaintiff was suffered. damage actual

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("consequentialJ The rulethat noticeof special damages must be givenif consequential circumstances was first enunciatedin Hadley u are to be recovered casedecidedin 1854. Baxendole,a landmark a usedin a flour mill run by Thiscaseinvolved brokencrankshaft a Case Background to England. crankshaft The attached the steamenginein the Hadley familyin Gloucester, so the mill broke,and the shafthad to be sentto a foundrylocatedin Greenwich that a new shaftcould be madeto fit the other partsof the engine. the shaftfrom to hiredBaxendale, commoncarrier, tlansport a The Hadleys paymentin advance to and promised Baxendale received Gloucester Greenwich. to As deliverthe shaft the following day.lt was not deliveredfor severaldays,however. a had no extra the the consequence, mill was closedduringthosedaysbecause Hadleys the profitsthey lost to on crankshaft hand to use.The Hadleyssued Baxendale recover contendedthat the loss of profitswas "too remote." duringthat time. Baxendale that largemills,suchas that run by the In the mid-l8o0s,it was commonknowledge normally had more than one crankshaft casethe main one brokeand had to in Hadleys, that in lt this background the parties be repaired, happened this case. is against as from loss of profits positionson whether the damagesresulting arguedtheir respective was out for repairwere "too remote"to be recoverable. while the crankshaft

crucial before issue The lssuebeforethe Courtand the Court'sRuling The
Baxendale, the special of had informed the carrier, the courtwas whetherthe Hadleys that the mill would have the crankshaft's repair, particular in circumstances surrounding lf had to shut down while the crankshaft was beingrepaired. Baxendale been notifiedof time the contract was formed,then the remedyfor breaching this circumstance the at follow that would reasonably would havebeenthe amountof damages the contract profits. the lost from the breach-including Hadleys' by communicated the Hadleys In the court'sopinion,however, the only circumstances item to be transported to Baxendale the time the contractwas made were that the at of were the ownersand operators was a broken crankshaft a mill and that the Hadleys of indicate that not reasonably that thesecircumstances did that mill.The courtconcluded was delayed. if the mill would haveto stop operations the deliveryof the crankshaft Today, rule enunciotedby the court in the this cose still opplies. When domages ore oworded, compensotion is given only for those injuries thot the defendont could reosonqbly hove foreseen os o probable result of the usuol courseof eventsfollowing o breoch.lf the injury comploined of is outside the usuol ond foreseeablecourseof events,the plointiff mustshow specificallythot the defendont hod reason to know the focts ond foreseethe injury. Thisrule opplies to contractsin the online environmentos well. For exomple,supposethot o Web merchont /osesbusiness (ond profits) due to o computer system'sfailure. lf the foilure wos coused by molfunctioning softwore, the merchont normolly moy recover the lostprofits from the softwore maker if theseconsequentioldomoges were foreseeable. To bcote information on the web concerningfhe Hadleyv. se/ecf decision,go to this text's Web siteot Baxendale "Chopter | 5," and click on "URLsfor Londmorks!' 145 a. 9 Exch. 156Eng.Rep. (1854). 341,

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570 EIIIE

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CA S El5.l-Co ntin ue d

Justice. . 0F f N THEW0RDS THECOURT . . MARNa,
becauseHanson had an fBoeder] claims Hanson did not mitigate his dan-rages farming the Boeder land, which r'vould have substantially to opportr-rnity continue and chosenot to. *d."1.1n;t damages, x * x For the breachof an obligation arising from contract,the measure damages, of providedby the lawsof this state,is the amount which will expressly exceptwhen othetwise or thereby which in caused the com.pensate party aggrieted all the detrimentproximately for be likely to result therefrom.No damagescan be recov-would the ordinary courseof thi,ings in eredfor a Lreachof contractif they are not clearlyascertainable both their nature and added. origin. lF,mphasis l A person injured by the wrongful acts of another has a du[, to mitigate or minimize exertion or at triand must protect himself if he can do so with reasonable the damages as party only such_damages he could and can i..ou", from the delinquent fling expJnse, The du$ to mitigate damagesis sometimes not, wiih reasonableeffort, have avoided. to referred as the doctrineof avoidableconEequences' fEmphasisadded.] by to mitigatehis damages looking for other The flower] court found that Hansontried couri also found that Hanson was farming The farmland to rent, but was unsuccessful. 4,000 acresincluding the land he leasedfrom Boeder,but had the manpowerand equipThe court concludedthat even if Hansonwasable to find ment to farm up to 5,000acres. other farmland to rent, it would not have been replacementland but land to expandhis farming operation,and thereforeit would not have reduced his damages. The euidencepresentedat trial supportsthe court'sfindings. Hanson testifiedihat he in was not awareof any farmland availablefor rent and he ran advertisements the iocal testifiedthat during the courseof the looking for farmland to rent. He also newspapers l"^r., h" wasfarming a total of 4,000 acresbut he had the ability to farm 5,000acres,and he was alwayslooking for more land to rent to expandhis farming operation. he ihaiHanson attemptedto find other farmland to rent and adn'rits did Boederagrees he was unable to find any other not presentany evidenceto rebut Hanson'sclaim ihat land availableto rent. x * *

court rtre ANDREMEDY supreme of North DECISI0N
Dakotaaffirmedthe lower court'sjudgment'The state that the lower court did not supremecourt concluded to had attempted the misapply law in findingthat Hanson the supported and that the evidence mitigatehis damages lower court'sfindingson lost profits.

tried Boeder to the Consideration ouring triol,
retract his repudiotion of the leose to ollow Hanson to continue forming for the restof the leaseterm. Should the court hove considered this on occeptoble way for Hanson to mitigate his damoges?

A NA F 0 RCRI T I CA L t Y S I S - S o c i a l

tr
s D es [ i q u i d a t e da m a gve r suPe n a ltie s
DAMAGES TIQUIDATED in stipulated a contract, An amount, that the partiesto the contract to believe be a reasonable that of estimation the damages will occurin the eventof a breach.

that a certain dollar amount is to A liquidated damagesprovision in a contract specifies be oaid in the evenl of a future default or breach of contract. (Liquidated means determined, settled,or fixed.) For example,a provisionrequiring a constructioncontractorto pay $300 for everyday he or she is late in completing the proiect is a liquidated damages

]7I GIMEE

BREACHREMEDIES AND

A a differ frorn penalties. penalty specifies certain amount PENATTY provision.Liquidated damages that states that A contractual clause or be paid in the event of a defar-rlt breach of contract and is designedto penalize the to a certain amountof monetary provisioirs normally are enforceable. contrast,if In breachingparty.Liquidated damages will damages be paid in the event of of a futuredefaultor breach finds that a provisioncalls for a penalty,the agreementas to the amount will not a court are contract. damages a The and recoverywill be limited to actual damages.6 be enforced, ounishment a default for and not or To determinewhether a particular provisionis for liquidated damages for a penalty, for of a measure compensation the contract's breach. agreement The the court must ans\ethvo questions: would be difficult I At the time the contract was formed, was it apparentthat darnages to estimatein the event of a breach? estimateof those potential damages and a 2 Was the amount set as damases reasonable not excessive?7 are to If the answers botl-rquestions yes,the provisionnormally will be enforced.If either Liquidateddarnages provisions normallywill not be enforced. is answer no, the provision because is difficult to estimatethe amount it are frequentlyusedin constructioncontracts that would be causedby a delay in completing the work. of damages Should o court enforce d liquidated domoges clouse when the omount due under thot clouse exceedsthe actuol value of the controcted goods so significantly thot it seems unfoir? A court had to answerthis questionin a case involvingleasedequipment.Eaton from to equipment Inc., Hydraulics, entereda contract leasenearly$9 millionof computer a Corporation, computer leasingcompany.Four years later,Winthrop Winthrop Resources payment that Eatonhadfailedto meetnumerous of alleging for suedEaton breach contract, the equip(oftenbecause payments were late),failedto properly maintain the obligations The conpackand shipthe equipment backto Winthrop. parties' ment,and failedto properly the tract includeda liquidateddamagesclausethat provideda formula for calculating "Casualty in which would be the damages the eventof a breach. LossValue(CLV)," that Eaton was liablefor morethan $4 millionin Winthrop claimed on Based this clause, penalty. Eaton thatthe CLVwas unreasonable unenforceable an and Eaton argued damages. were returned presented that when the leaseendedand the computers evidence showing underthe CLV, eachhad a fair marketvalueof about975.Thevaluecalculated to Winthrop, more than four times their market was behrueen however, 9500 and gToo-considerably notingthat the provision was "clearly a fair not Eaton's argument, value. The court rejected provision was proper damages The marketvaluecalculation." courtheld that the liquidated at of natureof the valueof the computers termination the lease of because "the speculative internathat Winthropand Eatonwere both sophisticated The schedules." court reasoned for this knowing that the damages breaching that had negotiated contract tionalcompanies the valueof the equipment. essence, courtwould In timesthe fair market it couldbe several clause wasfair because damages not consider whetherthe amountdue underthe liquidated that on businesses had agreed the methodof calculation.s were sophisticated the parties
as to the penalty amountwill not be enforced, recovery be and will limitedto actualdamages.

@
The Concept Summary on the next page summarizesthe rules on the availabilityof the differenttypesof damages.

t 6 . T his is als o h e r u l e u n d e rt h e UCC. Se eUCC 2 - 7 1 8 ( l) . (Second) Section356(l). ofContracts, 7. Restatement Inc., ]61 F.3d465 18thClr. 2004) Corp.tt.EatonHydraulics, 8. WinthropResources

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ti,rltittti*lii,.
REMEDY Compensatory Damager Consequential Damages Punitive Damages Damages Nominal
A VA IL AB IT IT Y an A partysustains and proves injuryarising directly from the lossof the bargain. of Special circumstances, which the breaching partyis awareor shouldbe aware, loss. causethe injuredpartyadditional Damages normally are available when only a tort is also involved. There no financial is loss.

RES tT U
party. compensated the for The injured, is lossof the barsain. The injuredpartyis giventhe entirebenefl of the bargain, suchas forgoneprofits. Thewrongdoeris punished, and othersare from committingsimilaracts. deterred Wrongdoing established is without actual beingsuffered. plaintiffis awarded The damages a nominalamount(suchas gl) in damages. partyis paid the amount The nonbreaching for unless stipulated the contract the breach, in the amountis construed a penalty. as

Liquidated 0amages

provides specific A contract a amountto be paidas damages the eventthat the in is contract laterbreached.

In some situations,damages an inadequateremedy for a breach of contract.In these are cases, nonbreachingparty may askthe court for an equitableremedy.Equitable remethe and restitution,specificperformance,and reformation. dies include rescission

Rescission Restitution and
As disctrssed Chapter 14,rescission essentially actionto undo, or cancel,a contractin is an to return nonbreachingpartiesto ihe positionsthat they occupiedprior to the transaction. is is When fraud, mistake,duress, faiiure of consideration present,rescission available. or The failure of one partyto perform under a contractentitlesthe other partyto rescindihe contract.e The rescinding party must give prompt notice to the breachingparty.
RESTITUTION An equitable remedyunderwhich a person restored his or her is to position priorto lossor original injury or placed the position in he or shewould havebeenin hadthe breach occuned. not

Restitution To rescinda contract,both partiesgenerallymust make restitution to each other by returning goods,property,or funds previouslyconveyed.l0Ifthe physicalproperty or goodscan be returned,they must be. If the propertyor goodshavebeen consumed, restitutionmust be made in an equivalentdollar amount. Essentially, restitution involvesthe recaptureof a benefit conferredon the defendant that has unjustlyenrichedher or him. Andreapays$32,000to Myles in return for his promiseto designa housefor her. The next day,Myles callsAndreaand tells her that he hastaken a positionwith a largearchitecturalfirm in anotherstateand cannot design the house. Andrea decidesto hire another architeci that afternoon.Andrea can requirerestitution $12,000 of because Myleshasreceived un justbenefitof $32,000. an E Restitution Is Not Limited to RescissionCases Restitutionn'raybe required when a contract is rescinded, but the right to restitution is not limited to rescissioncases.
9. The rescission discussed here refersto unilateral rescission, which only one party u'antsto undo the contract. in ln mufual rescission, the both partiesagreeto undo the contract.Mutual rescission discharges contract;unilateral rescission generallyavailableas a rernedyfor breach of contract. is (Second) Contracts,Section 370. 10. Restatement of

375 GIEffitr
Restitritionmay be sought in actions for breach of contract, tort at :ctions, and other actior-rs law or in equity. Usually, restitution ian be obtained when funds or property has been transferredby of nistake or because fraud.An awardin a casemay include resti hrtion of funds or propertyobtained through embezzlement,con'.ersion,theft, copyright infringement,or misconductby a party in specialrelationship. a confidential or otl-rer

BREACH REMEDIES AND

Sp eci fPer f ot m a n c e ic
The equitableremedyof specific performance callsfor the perfornrance of the act promised in the contract.This remedy is often it in :Llractiveto a nonbreachingparty becar,rse providesthe exactbargain pron-rised the ;onhact. It also avoidssome of the problemsinherent in a suit for monetarydamages. Frrst,the nonbreachingparty need not worry about collecting the judgment. Second,the nonbreachingparty need not look around for another contract.Third, the actual perforbe nance n-ray more valuablethan the monetary damages. will the Norn'raily,however,specificperformance_ not be granted r-rnless party'slegal is for remedy (monetarydamages) inadequate.tlFor this reason,contracts the sale of Monetary damages ordinarily are adequate .oods rarely qualify for specificperformairce. identicalgoodscan be bought or sold in the marbecause substantially in suchsituations ket. Only if the goodsare unique will a court grant specificperformance.For instance, damages paintings,sculptures, and rare booksand coins are often unique, and n-ionetary identical srrbstitutes the market. in 'n'ill not enable a buyer to obtain substantially in Saleof Land A court will grant specificperformanceto a br-ryer an action for a breach contractinvolving the saleof land. In this situation,the legal remedyof monetarydam'rf the buyer adequatelybecauseevery parcel of land is unique; :ges will not cornpensate ,r'rbriously, buyer cannot obtain the sameland in the same location elsewhere. Only the ,,r'hen when the sellerhassold the propspecificperformanceis unavailabie(for exarnple, instead. be else)will damages awarded erh'to sorneone Is specificperformancewarrantedwhen one of the partieshas substantially-but not i1lr'-performed under the contract?That was the questionin the following case.
Supposethot a seller controds to sell some valuoble coins to a buyer. If the seller breoches the contract, would specificperformonce be on oppropriate remedy for the buyer to seek?Why or why not? (PhotoDisc/Cetty lmages)
SPECIFI€ PERFORMANCE

requiring An equitable remedy that exactly performance was the granted onlywhen specified; usually monetary damages would be an inadequate remedy and the subject is matterof the contract unrque.

(Second) Contracfs, Section359 of ll. Restatement

Courtof Appealsof Indiana,842 N.E.2d 586 (2006).

;, 'qJrs*/. ; In April2004,Howard agreed sellto TrentLow fortyacresof land in to Stainbrook Thirty-hruo the acres of Indiana, $45,000. for County, Jennings were wooded and eightwere tillable.Underthe agreement, of and othercosts, Low was to payfor a survey the property Low gaveStainbrook due in November. a tax payment including They a checkfor $1,000to show his intentto fulfillthe contract. to close dealon May I l, and Low madefinancial the agreed On to arrangements meet his obligations. May 8, a tractorrolled

I

i

\:i-.S/

son over and ? , B A c K c R o U N D A cT s on Stainbrook, he died.Stainbrook's David AND F
;

DavidaskedLow to became executor his father's the of estate. Low refused and filed withdrawhis offerto buy the forty acres. to statecourtagainst David, seeking enforce a suit in an Indiana performance. David The the contract. courtorderedspecific appellate court,arguing, appealed a stateintermediate to with Low was that his father's contract amongotherthings, "ambiguous inequitablel' and
n C A S E1 5 . 2 - C o n t i n u e s e x t p ag e

r74 t!8tm!t

CONTRACTS

C A SE1 5.2 -Con tinu ed

f N Il{E WORDS THE 0t C0URT . . vAtDtK, . Judge.
* * * contendsthat Low failed to preserve remedy of specificperil ;;a. the fDavid] formance here becausehe failed to perform sufficiently r-rnder Agreement. * * * The the Estatearguesthat "in order to be entitled to specificperformance,the claimant has the burden to provefull and completeperformanceon their part of the conhact." Low x * * argues that specificperformancewasappropriatebecause either substantially performedhis oblihe gationsunder the Agreementor offeredto do so,and this, rather than full and complete performance, is all that is required to presewea claim for specificperformance. We agree with Low. Because Low offered to perform his obligations under the Agreement,specificperformancewasa proper remedy.x * * The Estateargues that Low is not entitled to the remedy of specific performance because he did not pay the November 2004 property taxes.Low, however, * * * offered to make the tax payment and the Estaterefusedhis offer. The Estatealso contends* * * that specificperformancewas inappropriatebecause Low failed to tender the purchaseprice listed in the Agreementand arrangefor a survey of the land beforethe closingdate.* * * The Estate's argumentassumes that a party may not be grantedspecificperformanceunlessthat party hasfully and completelyperformed under the terms of the contract. On the contrary, x * * specificperformanceis an appropriate remedyto a pafi who has substantially performedunder the terms of the contract. RegardingLow's payment of the purchaseprice, we note that Low * * * had obtained financing before the closing date, and there is nothing x x * to indicate that he was not prepared to meet his financial obligations at that time. Further, * * * shortly after Stainbrook's death,the Executorof the Estaterequested that Low withdraw his offer, and Low declined to do so, indicating that he was preparedto go forward. RegardingLow's failure to order a land survey, the Estatepresents evidenceto suggest no that this matter, particularlyin isolation,reaches level of failure to perform under the Agreement,and the r".d"fll;r: to sanctionsuch a rule. [Emphasisadded.] The Estatefinally arguesthat the trial court should not have awardedspecificperformance here becausethe Agreement between Low and Stainbrook was unfair. * * * Since Low was hventy-hvoyearsold and Stainbrookwas eighty-nineat the time of contract, and becausethe combined estimates propertyand timber valueswas as high as of and Low and Stainbrookhad agreedto a $45,000.00 purchaseprice, the $121,000.00 Estatearguesthat the trial court should have found the contract to be unfair or unconscionableand to have found that Low would be uniustly enriched by its execution. * * * The Estatestipulatedat trial that Stainbrookwas co*petent at the time of contract, and evidence was presentedthat Stainbrook consulted a lawyer regarding the Agreement and that he insistedupon severalhandwritten changesto the contract that benefitedhis own interests. find no supportfor the Estate's We contentionthat Stainbrook was anything lessthan a party entirely capableof entering into this Agreement,nor for its contention that the Agreementwas unfair. DICISI0N AND REMEDY rne stateintermediate appellatecourt held that specificperformance was an appropriate remedyin this caseand affirmedthe lower court'sorder.The appellatecourt explained that a contracting party's performance sufficient supporta substantial is to court'sorderfor specificperformance. Here,"Low both offeredto performand substantially performedhis contractual obligationsl' CASE 15.2-C onti nues page next

gmfiHE 575
t A S E t5. 2-Con tinu ed

AND BREACH REMEDIES

reaffirmed the principle thot "[s]peciftcperformonce is f!$ t iotter of coursewhen it involvescontractsto purchosereol :stote."Thecourt alsoemphosizedthat "[o] porty seeking spedficperformonceof o real estqtecontroctmust prove thot he

rhecourt IMPORTAryT? cAsE tE= wHYls THls

'

l_

t"

pertormed his contraclobligotionsor offered hassubstontiolly the to do sol'The court'sreasoningunderscores importanceof focusing on the elementsof o principle to resolve a cosefoirly-

@

contractsrequire one party to work Contracts for Personal Services Personal-service for anotherparty.Courts norrnally refuseto grant specificperformanceof con:,,rsonally This is becauseto order a party to perfornr personalservices ::its for personalservices. his or her will arnountsto a type of involuntary servitude,which is contrary to .:rinst in .-,- public policy expressed the Thirteenth Amendment to the U.S. Constitution. the courts do not want to monitor contractsfor personalservices. l,frrrlover, €TAMilE rJ^elIf you contraci with a brain sllrgeonto perform brain surgeryon yolr to ,rd the sllrgeonrefuses perform, the court will not compel (and you certainly would ri'ant) the surgeonto perform under thesecircunstances.There is no way the court .-.i n-reaniigfulp.iforrr.lrtt.. in such a situation.l2@ -rn assure

Reormat ion f
tl-reir expressed l.;+omntiort is an equitablerernedyusedwhen the partieshaveimperfectly to reflectthe par.-:reementin writing. Reforrnationallowsa court to rewrite the contract :..s' lrue intentions.Courts order reformation rnost often when fraud or rnutual mistake If : present.fBExAMFG-r5sl Keshancontractsto buy a forklift from Shelleybut the writ=1 contractrefersto a crane,a mutual rnistakehas occurred.Accordingly,a court could ;iorm tfie contract so that the writing conforms io the parties' original intention as to '.iich pieceof equipmentis being sold' E The first occurswhen hvo Courts frequently reform contractsin two other situations. :ties who have made a binding oral contract agreeto put the oral contract in writing tlre courtsallow into evi-1t. in doing so, rnakean error in statingthe terrns.Universally, *-1ce the correct terms of the oral contract,therebyreforming the written contract.The ..cond situation occurs when the partieshave executeda written covenantnot to cotn:.te (seeChapter I l). If the covenantnot to competeis for a valid and legitimatePurPose some .uch as the sale of a business)but the area or tirne restraintsare unteasonable, er-rtire and will enforce the by - rurts will reform the restraints making thern reasonable Oiher courts,however,will ihrow the entire restrictivecovenantout as ,-ntract reforn-red. the preser-rts remedies,includthe following page grapl'rically .. illegal. Exhibit l5-l or-r that rq reforr-nation, are availableto ihe nonbreachingparty.

R..califrom Chapter B that a quasi contract is not a true contract but rather a fictional that is imposedon the partiesto preventunjust enrichment. Hence, a quasicon:rrltLract The legal obligation contract exists. .:ct providesa baiis for relief when no er-rforceable
not set uP l?. Similarly, courts often refuse to order specific performance of constructiotl contracts becanse coutts are - , ' p e r a l e ar co l l sl ru cfi o l l su P Cr vi50ror ellgllleer s. s

575 llNIImEt

CONTRACTS

that the partyacceptingthe benefitshasmade an implied because law considers the arises promise to pay for them. Generally,when one party confersa benefit on another party, justice requiresthat the party receivingthe benefit pay a reasonable value for it.

Ar W h e n u a s i o n tr a ctseUse d C Q
contract is a iegal theory under which an obligation is imposed in the absenceof Qr-rasi when there is no actual conIt an agreement. allowsthe courtsto act as if a contractexists tract or agreementbehveenthe parties.The couris can alsouse this theory when the parfor ties have a contract,but it is unenforceable some reason. recoveryis often granted when one party has partially performed Quasi-contractual for and to It under a contractthat is unenforceable. providesan alternative suir-rg damages allows the party to recover the reasonable value of the partial performance. r5Tol Ericson contractsto build two oil derricksfor Petro Industries.The derlxExAMpLE ricks are to be built over a period of three years,but the partiesdo not createa written After contract.Therefore,the Statuteof Fraudswill bar the enforcementof the contract.l3 one derrick, Petro Industriesinforms him il-ratit will not Pay for the Ericson compleies derrick. Ericson can sue PetroIndustriesunder the theory of quasicontract. E

FfiT.Efffiim Thefunction of a quasicontract to imposea legal is on obligation a partywho madeno actualpromise.

o f Qu Co R T h e e q u ir e m e n ts a si n tr a ct
To recoveron a quasicontracttheory,the party seekingrecoverymust showthe following: t The party conferreda benefit on the other party. expectationof being paid. 2 The party conferredthe benefit with the reasonable 5 The pariy did not act as a volunteer in conferring the benefit. 4 The party receivingthe benefit would be unjustly enriched by retaining the benefit w i th o u tp a yi n g for i t. all lgExAMprEls.filIn Example I 5.10,Ericson can sue in quasicontractbecause of the recoveryhave been fulfilled. Ericson built the oil derrick conditionsfor quasi-contractual with the expectationof being paid. The derrick conferredan obviousbenefit on Peho Industries,and PetroIndustrieswould be unjustly enriched if it was allowed to keep the derrick without payingEricson for the work. Therefore,Ericsonshould be able to recover the reasonablevaiue of the oil derrick that was built (under the theory of quantum
13. Contracts that by their terms cannot be performed within one year from the day after the date of contract formation must be in writing to be enforceable (see Chapter 13).

r3il ffilTffiiErl
AND BREACH REMEDIES

value is ordinarilyequalto the The reasonable meruitl4-"as mllch ashe or shedeserves"). iair marketvalue. E

can be recoveredfor certain -\ contract may include provisionsstatingthat no damages will be limited to a maximum atnottnt.The contract or hpes of breaches thatdamages or may also providethat the only remedyfor breach is replacenent, r-epair, refund of the are can be recovered calleclexculpatory statingthat no damages pui.hrr. price. Provisions are ,lourn, (see Chapter ll). Provisionsthat affect tfie availability of certain remeclies clauses. calledlimitation-of-liability may be clauses fi|.ftIll Exculpatory on on will be enforcedclepends the type of clauses dePending ar-rd heldunconscionable, Whether thesecontractprovisions positions bargaining the relative liability for negby breachthat is excused the provision.For example,a clauseexch-rding to and of the parties the importance is clausefor negligence When an exculpatory ligence may be enforcedin some cases. of the oublicinterest the business the to seeking enforce clause. cJntained in a contractmade betweenpartieswho have roughly equal bargainingporver, will the clauseusr-rally be enforced.The Uniform Commercial Code (UCC) specifically allows limitation-ofliability clausesto be included in contractsfor the sale of goods,as for A in ri.il1 discussed detailin Chapter20.15 provisionexcludingliability- fraudulent be or intentional injury, however,will not be enforced.Likewise,a clauseexcludingliabilit,v tbr illegal actsor violationsof the law will not be enforced. the At iir,t. ir-r following casewasthe enforceabilityof a limitation-ofJiability clausein cor-rtract. a home-inspection
mehr-oo-rvuht ftuahrl-tuhm 14. Pronounced 15.LI CC 2 - 7 1 9 .

485,841 A2d9O7 (2OO4)' 366 N.J.Super. Division, Appel,late SuperiorCourtof NewJersey, la wiib r a r v.r u tg e r s.e d u /se a r c h.shi ml a

firstand KarenHaley, EricLucier homefor to buy a single-family contracted time home buyers, Township, in Williams Berlin and from SI2B,5OO James Angela Limited Associates, askedCambridge The NewJersey. buyers the CALpresented buyers (CAL), performa home inspection. to of to that limitedcAljs liability "$500,or 50o/o with a contract sum is smaller' whichever paidto CALby Client, feesactually

Lucier of omissions, errors, [or] breach contractl' Al On the signed contract. CALsbehalf, Vasys reluctantly paid The buyers a and the performed inspection issued rePort' and Haleymovedinto the house, afterLucier CAL$385.Shortly to estimated cost roof rePairs which required they noticedleaks, statecourt Theyfiled a suit in a New Jersey to $8,OOO $10,000. for damages the loss.CALfiled seeking CALand others, against judgmen!claiming underthe that a motionfor summary if its clause, liability, any,was limitedto oneDivision," limitation-of-liability name'" Select'Appellate by on a. Click thelinkto "search party the The price, $192.50. courtgranted or box in in "Lucier" thefirstboxand"Williams"thesecond Click half of the contract andtype appellate to plaintiffs appealed a stateintermediate of School Law motion.The University Rutgers the to Form" access opinion. on "submit court. site. this maintains Web New in Camden, Jersey, Di J [Judge,A ppel l ate vi si on] l N THE W Q RDS 0F T tl E C QU R T . " . L 1 SA ,.A .D. **** lirnitation of liabilitv clausewith the of we beein our analysis the enforceabiliq'of tl-re will be enforcedaswritten. Ordiliarily, courtswill that contracts f.rndarneital proposition of not rewrite contractsto favor a party,for the PurPose giving that party a better bargain' not hesitated to strike limitecl liabilih- clausesthat are unconHowever, courts have or scionable in violationof public policy.

but include, AND BACKGROUND FACTS Suchcauses * * *are not limitedto, CA[s negligence,

n C A S E1 5 . 3 - C o n t i n u e s e x t Pa g e

I78:tr[iIUET

CONTRACTS

CASE1 5.5 -Con t inued

There is no hard and fast definition of unconscionability.x x x Unconscionability is an amorphous conceptobttiously ethic. The standard designed establish broadbusiness to a of conduct that the term implies is a lack of good faith, honesQin fact and observance of fair dealing. fEmphasisadded.] In determiningwhether to enforcethe terms of a contract,we look not only to its adhesive nature, but also to the subject matter of the contract,the parties'relativebargaining positions,the degree of economic compulsion motivating the adhering party, and the public interests affectedby the contract.Where the provisionlimits a party'sliability, we pay particular attention to any inequality in the bargainingpower and statusof the partieq as y.f ,, the substance the contract. of We also focus our inquiry on whether the limitation is a reasonable allocation of risk betweenthe partiesor whether it runs afoul of the public policy disfavoring clauses which effectivelyimmunize partiesfrom liability for their own negligentactions.To be enforceable, the amount of the cap on a party'sliability must be sufficientto provide a realistic incentive to act diligently. Applying theseprinciplesto the home inspectioncontractbefore us, we find the limitation of liability provision unconscionable. We do not hesitateto hold it unenforceable (l) for the following reasons: the contract,preparedby the home inspector,is one of adhesion; (2) the parties,one a consumer and the other a professional expert, have grossly unequal bargainingstatus;and (3) the substance ofthe provisioneviscerates contract the and its fundamental purposebecause the potential damagelevel is so nominal that it has the practical effect of avoidingalmost all responsibility the professional's for negligence. Additionally,the provision is contraryto our state's public policy of effectuatingthe purpose of a home inspection contract to render reliable evaluationof a home's fitnessfor to p"rf}r; and holding professionals certain industry standards. The foisting of a contract of this type in this setting on an inexperiencedconsumer * clearly demonstrates lack of fair dealing by the professional. x * a x x * If, upon the occasionaldereliction, the home inspector's is only consequence the obligation to refund a few hundred dollars (the smaller of fifu, percent of the inspection contractprice or $500), there is no meaningful incentive to act diligently in the performance of home inspection contracts.To compound the problem, such excessively restricteddamageallowanceis grossly to disproportionate the potential lossto the homebuyer if a substantialdefect is negligentlyoverlooked. The impact upon the homebuyer and can be indeed monumental, consideringissues such ashabitability,health and safety,

0"1":t1*:Oligations.
no Of course,we express comment on whether or not Vasys CAL breachedany duty or to Lucier and Haley under their agreement.Our holding here is only that if they are liable, the extent of any damagesfor which they should be liable is not limited by the terms of the contract.

DECISI0N ANDREMEDY state rhe intermediate
appellate courtheld that the provision was unenforceable. The limitation-of-liability clausein the CALcontractdid not limit the plaintiffs'recovery. court reversed ruling of The the the lower courtand remanded casefor further the proceedings.

F0RCRITICAt ANALYSIS- Soc i al
Consideration between whot isthe difference
the limitation-of-liobility clause in this cose and on exculpotory clouse (discussed Chopter I I on poge 301)? in

tr

EIIUHtr 579

AND BREACH REMEDIES

the Because remedies available. remedies a In many cases, nonbreachingparty hasseveral law of contractsrequiresthe-party to the with one"artother, common may be inconsistent lurpoge of the doc.hoor. which remedy to pursue.This is calledelsctionof remedies. ]\ agrees recovery' FExEMFIFEA )efferson trine of electio,tof ,emediesis to preventdouble remedya the contract' llE t$ltfllfl Which his mind and repudiates on plaintiff dePends the io sell his land to Adams.Then iefferson changes elects Adams receives the or damages for specificperformance..If subjectof the contract, Adams can sue for compensatory of of defenses the breaching PartY' a"-"g.r as a result of th. br"".h, she sf,ould not alsobe grantedspecificl9rfoP.anle of advantages choosing anvtactical unfairly end up with both the land that would mean she would contractbecause and the sales remedY, what the a particular to requiresAdgs to choosethe remwith resPect plaintiff can Prove The doctrine of election of remedies and the damages. sought' the remedy l51 double recovery. edy she wantsland it eliminatesany possibilityof , 'In the remecontras! remediesunder ihe UCC are cumulative.They include-all of or leasecontract.lbWe will examine dies availableunder the UCC for breach of a sales of ihe remedies the ucc provisionson limited remediesin chapter 20, in the context leaseofgoods. availableon the breach ofa contractfor the saleor le S""UCCZ-lO',naZ-tt.

for I One day,while Brunois preparing a difficultstunt,he KyleBrunoenters to directorand refuses with the getsinto an argument into a contractwith seekspecific to performany stunts'CanX Entertainment X Entertainment be Why or why not? of performance the contract? a stuntmanin a movie is that X Entertainment wheelieon a a that while performing high-speed 2 Suppose Brunois widelyknown as the bestmotorcycle producing. act reckless Brunois injuredby an intentionally motorcycle, and the movie,XfremeRlders,has stuntmanin the business, Will a court be likelyto employee' an X Entertainment of street-bike f high-speedreestyle involving scenes numerous Why or why not? clause? enforcethe limitation-of-liability I is Filming setto beginAugustI and end by December stunts. to would a court consider determineif the 5 Whatfactors the so that the film can be released followingsummer'Both is gt millionliquidated clause validor is a penalty? damages that the filmingmust end havestipulated parties the contract to the on time in orderto capture profitsfrom the summermovie clause damages that therewas no liquidated 4 Suppose that Brunowill be paid l0 Percent states The contract market. to (or the court refused enforceit) and X Entertainment from the moviefor his stunts'The contract of of the net proceeds the release the The breachcaused the breached contract. which specifies provision, damages a alsoincludes liquidated to be delayeduntil aftersummer.CouldBrunoseek film he the that if Brunobreaches contract, will owe X Entertainment for (special) damages lost profitsfrom the consequential a includes limitation-ofgl million.In addition, contract the Explain' movie marketin that situation? summer that if Brunois injuredduringfilming, stating clause liability Using is liability limitedto nominaldamages' X Entertainment's answerthe following in presented the chapter, the information questions.

566 damaSes consequential 565 damages incidental 570 damages liquidated

569 of mitigation damages 557 damages nominal penalty571

372 restitution 575 specific Performance

580 llNIIUn

CONTRACTS

PARTY AVAILABLE NONBREACHING TO COMMONREMEDIES Damages (See pages 365-372.) By partyfor the lossof the bargain. to the The legalremedydesigned compensate nonbreaching that they would the awardingmonetarydamages, court triesto placethe partiesin the positions partyfrequently has a The nonbreaching haveoccupiedhad the contractbeen fully performed. breach. or duty to mitigate (lessen reduce)the damagesincurredas a resultof the contract's in Damages can be classified the followingbroadcategories: partyfor injuries the damages-Damages that compensate nonbreaching 1. Compensotory from from the lossof the bargainresulting sustained and provedto havearisendirectly actually the breachof contract. is damages contracts the saleof goods,the usualmeasureof compensatory for a. ln breached betweenthe contractpriceand the marketprice. the difference the is of b. In breached contracts the saleof land,the measure damages ordinarily same as for for in contracts the saleof goods. dependson which party construction contracts, measureof damages the c. ln breached the breaches and at what stageof construction breachoccurs. beyondthe contract from special circumstances damages-Damages resulting 2. Consequential of itself;the damages flow only from the consequences a breach.Fora partyto recover resultof a breachof contract, damages, damagesmust be the foreseeable the consequential partymust haveknown at the time the contract was formed that special and the breaching partyto incuradditionallosson that would causethe nonbreaching circumstances existed breachof the contract.Also calledspecial damages. party.Usually awardedin not awardedto punishthe breaching 3. Punitivedomoges-Damages an actionfor breachof contractunlessa tort is involved. small in amount (suchas one dollar)that are awardedwhen a 4. Nominal domoges-Damages that the Awardedonly to establish breachhas occurred but no actualinjuryhas been suffered. defendantactedwrongfully. in that 5. Liquidoteddomoges-Darnages may be specified a contractas the amount to be paid providing partyin the eventthe contractis breached the future.Clauses in to the nonbreaching were difficultto estimateat the time the for liquidated damages enforcedif the damages are to lf is was formed and if the amount stipulated reasonable. the amount is construed contract be a penalty, clausewill not be enforced. the

Rescission and Restitution (Seepages 372-373.)

to and the partiesare restored the l. Rescission-A remedywherebya contractis canceled when fraud,a mistake, Available that they occupiedpriorto the transaction. originalpositions partymust give prompt noticeof is The rescinding duress, failureof consideration present. or party. the rescission the breaching to to both partiesmust make restitution eachother by a 2. Restitution-When contractis rescinded, prevents unjust the Restitution or conveyed. returning goods,property, funds previously the enrichment the parties. of

Performance Specific (See pages 373-375.)

Thisremedy of An equitableremedycallingfor the performance the act promisedin the contract. for as contracts the saleof unique is available only in special situations-such those involving Specific remedy. goodsor land-and when monetarydamages would be an inadequate performance not available a remedyfor breached for services. is as contracts personal to to or An equitableremedyallowinga contract be "reformed," rewritten, reflectthe parties'true in when an agreement imperfectly is expressed writing. intentions. Available

Reformation (Seepage375.)

58I EItrEETE

BREACH REMEDIES AND

Based Recovery on QuasiContract (Seepages 375-377.)

theoryimposedby the courtsto obtainjusticeand preventunjustenrichmentin a An equitable situationin which no enforceable contractexists. The partyseekingrecovery must show the following: t. A benefitwas conferred the other party. on 2. The partyconferring benefitdid so with the expectation being paid. the of 3. The benefitwas not volunteered. 4. Retaining benefitwithout payingfor it would resultin the unjustenrichmentof the party the receiving benefit. the CONTRACT DOCTRINES RELATING REMEDIES TO

Provisions Contract LimitingRemedies (Seepages 377-378.)

A contractmay providethat no damages(or only a limitedamount of damages) can be recovered liability fraudulentor intentionalinjury in the eventthe contractis breached. Clauses excluding for liability negligence for may be enforcedif or for illegalactscannotbe enforced. Clauses excluding power.Underthe UniformCommercial both partieshold roughlyequal bargaining Code (UCC), remediesmay be limited in contracts the saleof goods. for partymust chooseone remedyfrom those A common law doctrineunderwhich a nonbreaching Thisdoctrineprevents remedies cumulative the are for available. double recovery. Underthe UCC, for breachof a contract the saleof goods.

of Election Remedies (Seepage379.)

,-;,:';1;t.; -,t
for Answters the even-numberedquestionsin this Far Reviewsection can be found on this text's occomponyingWeb site ot wrrvw.cengage.com/blaw/blt. Se/ecf"Chapter t5" ond click on "For Review." damages and consequential damages? What are nominal damages, and behveencompensatory I What is the difference danages? when do courtsawardnon-rinal How are damages computeddiffermeasure compensatory of damages when a contractis breached? 2 What is the standard ently in constructioncontracts? is and 5 Under what circumstances the remedyof rescission restitutionavaiiable? as 4 When do courtsgrant specificperformance a remedy? 5 What is the rationaleunderlyingthe doctrineof electionof remedies?

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scENARros cAsE AND pRoBtEMs HVIoTHETrcAr
her expected financingof the paystlie deposit, but because the $90,000balancelalls through,she breaches contract.'lwo weekslater,Carnacksellsthe houseand lot to Balkovafor her back,but Carnack Willard demands $10,000 $105,000. refuses, claiming that Willard's breachand the contractterms Discuss who is correct. entitle him to keeo the deposit.

Damages. Carnackcontracts sell his houseand to E5"t Liquidated lot to Willard for $100,000. The termsof the contractcall lor price asa deposit Willard to pay l0 percentof the purchase towardthe purchase price, or asa down payment.The terms further stipulatethat should the buyer breachthe contract, Willard Carnackwill retain the depositasliquidateddamages.