$$$$  TYPES OF MONETARY DAMAGES  $$$$$

[4325]

 

Remedy:  relief to an innocent party- either or both in equity or law.

 

     A breach of contract entitles the non-breaching party to sue for money damages. There are four basic types of money damages available in a breach of contract action:

 

     Compensatory Damages: 4325.02 Damages which compensate the non-breaching party for the injuries or losses actually sustained as a result of the breach. These are direct losses and costs. (look at the detail below)

 

            Compensatory damages are calculated as follows:

 

The value of the performance as promised (less)

 

    The value of the performance actually rendered (less)

 

    The value of any loss avoided, or mitigated, by the non-breaching party (plus)

 

+     Incidental damages by the non-breaching party (equals)

 

=     Compensatory damages.

 

 

     Incidental Damages: Expenses or costs that are caused by the breach of contract, such as the costs incurred in obtaining performance from another source.

 

 

     Market Value” Damages: In cases involving contracts for the sale of goods or, in most states, land, compensatory damages generally equal the difference between the contract price of the goods or land and the fair market price at the time the goods or title to the land was to be delivered.

 

Goods:  usually the difference between the contract price and market price.

 

Land:  specific performance, else contract price less market

 

Construction: before work begins: Profit

                     During:  profit and cost to date

                     After: contract price plus interest

 

     Consequential Damages: Damages resulting indirectly from the breach which were reasonably foreseeable to the breaching party at the time the breach occurred. These are indirect and foreseeable costs (special damages).  This is the Hadley v. Baxendale case, a watershed case dealing with forseeability.

 

     Punitive Damages: Damages designed to punish a wrongdoer and to deter similar conduct in the future. Such damages are generally not recoverable in breach of contract actions, unless the breaching party’s actions give rise to a separate tort claim.  These are usually in Tort type of cases, and this is where many PI attorneys “take it on the chin.”

 

     Nominal Damages: Damages awarded to the non­breaching party when only a “technical” injury occurred resulting in no actual damages.  Here, for example, the value of the contract has decreased and the person can buy cheaper elsewhere despite the nondelivery.  It recognizes wrongdoing, but usually a nominal amount, such as $1.00.

 

 

MITIGATION, LIQUIDATED DAMAGES,

AND PENALTIES

 

     Mitigation of Damages: In most situations, when a breach of contract occurs, the non-breaching party has a duty to take whatever action is reasonable to minimize the damages caused by the breach.

 

     For example, in most instances, people who are fired by their employer, regardless of the reason, have a duty to find a new job. Likewise, buyers of goods have a duty to take reasonable steps to locate replacement goods.

 

Also, landlords have a duty to lease if you break your contract, although the tenant is still liable for any excess damages due to reletting.

 

     Liquidated Damages: Many contracts contain provisions specifying a sum certain of money to be paid by the breaching party in the event that he or she fails to perform as required by the contract. Generally speaking, the liquidated damages are based on a reasonable estimate of the value of the promised performance.

       Liquidated= sum certain    Unliquated= uncertain amount

 

     Penalties: By contrast, a penalty provision specifies a sum certain of money, bearing no reasonable relationship to the value of performance, to be paid by the breaching party in the event of default or breach. Penalty provisions are rarely enforceable.

 


EQUITABLE REMEDIES

 

 

     In addition to the foregoing types of money damages, there are several equitable (i.e., non-damage) remedies available.

 

     Rescission: Canceling a contract and returning the parties to their pre-contract position.

 

     Restitution: 4325.07 Returning goods, property, or money previously transferred in order to restore the non-breaching party to his or her pre-contract position.  In other words, the plaintiff “recaptures” any benefit the Defendant has received. Usually tied in with the rescission. For example, someone paid someone in advance to do a job.  The person hired decides to move to another state.  The hired person rescinds the contract with the person who hired them and returns the money paid in advance.

 

     Specific Performance4325.08: Requiring the breaching party to perform exactly as called for in the contract.  This is what the Plaintiff would most often like, but it is rarely granted unless:

 

      This remedy is usually granted only when money damages would be an inadequate remedy and the subject matter of the contract is unique (e.g., contract to purchase an original Picasso, a particular tract of real property, or the services of a uniquely talented person).

 

     Reformation: A remedy allowing the contract to be re­written to reflect the true intent of the parties.  In other words, errors in the original contract.

 

     This remedy is typically limited to cases of fraud or mutual mistake.

 

 

 


RECOVERY BASED ON QUASI-CONTRACT

 

 

     Quasi-contract: An equitable remedy available to prevent one party from being unjustly enriched at the other party’s expense.  Also known as recovery under quantum meruit (something for something).

 

     As a general principle, equity requires that when one party confers something of value or other benefit, the other party must pay a reasonable value (in money or other valuable goods or services) for it.

 

     Quasi-contractual recovery is particularly useful when one party has partially performed under a contract that subsequently becomes unenforceable.

 

     The party seeking to recover in quasi-contract must show that:

 

(1)   A benefit was conferred on the other party;

 

(2)   The conferring party expected to be paid or otherwise compensated for the benefit conferred;

 

(3)   The conferring party did not voluntarily confer benefits for which he or she would not be paid; and

 

(4)   Retaining the benefit without paying for it would unjustly enrich the party receiving the benefit.

 


ELECTION OF REMEDIES

 

 

     In many cases, a nonbreaching party has many remedies available. However the one satisfaction rule prohibits an injured plaintiff from recovering more than the full measure of her damages or the full vindication of her rights at common law. As a consequence, a plaintiff who has succeeded at trial on more than one theory of remedy must elect which remedy or remedies she will receive.  In other words, sue to rescind OR sue  for damages.

 

 

     However, because the doctrine of election of remedies sometimes produces harsh results, the U.C.C. expressly rejects the doctrine in cases regarding a contract for the sale of goods. U.C.C. remedies are, thus, cumulative. More on this later!!

 

 

WAIVER OF BREACH

 

 

     Where the nonbreaching party knowingly accepts incomplete or defective performance from the breaching party, the nonbreaching party has waived her right to complete and proper performance.

 

     A waiving party cannot sue for breach as to the performance accepted.

 

     As a general rule, a waiving party’s acceptance of sub-par performance in one instance does not waive her right to demand full and proper performance thereafter.

 

     However, if a reasonable person would conclude that similar defective performance in the future will be acceptable, because of the nonbreaching party’s pattern of conduct, successive breaches will be excused unless the nonbreaching party gives the breaching party notice that full and proper performance will be demanded in the future.  This is normally expressly noted (written) in the contract.

 

 

 

LIMITATIONS ON REMEDIES

 

 

     A contract may include provisions stating (1) that no damages can be recovered for certain types of breaches or (2) that damages will be limited to a maximum amount or (3) that any breach will result in damages in a pre-determined amount.

 

>     Exculpatory Clause: A contractual provision pre­cluding damages for certain types of breaches.

 

      A related type of clause provides that the only remedy for breach is replacement, repair, or refund of the consideration paid by the nonbreaching party.

 

     Limitation-of-Liability Clause: A contractual pro­vision expressly limiting the damages recoverable for certain types of breaches to an agreed amount. However, if the nonbreaching party’s damages are less than the limit, then her actual damages, rather than the limit, will control.

 

Ø     Liquidated Damages Clause: In order to avoid the time and expense necessary to determine the extent of a non-breaching party’s actual damages, and/or to provide the parties with better predictability, some contracts expressly provide for a fixed amount of damages in the event of a breach.

 

Note: the limitations enforceability will depend on whether the clause(s) is:

Ø     Fraudulent

Ø     Whether there is intentional injury

Ø     Whether it is an illegal act and/or violation of law

      

Can negligence waivers be enforced?

Maybe: depends if both sides have approximately equal bargaining power.  For example: Ford and GM.