$$$$ TYPES OF MONETARY DAMAGES $$$$$
[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.
Construction: before work
begins: Profit
During: profit and cost to date
• 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.
• 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.
• 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.