• 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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