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Business Law Ch 12

Summary of slides for Chapter 12 of Fundamentals of Business Law

QuestionAnswer
What are the four broad categories of damages? Compensatory, consequential, punitive, and nominal
What are compensatory damages? Damages that compensate the nonbreaching party for loss of the bargain; Covers out-of-pocket costs directly arising from the breach
What the standard measure of compensatory damages? the difference between value of promised performance and value of actual performance
For the sale of goods, how are damages measured for compensatory damages? the difference between contract and market price
For the sale of land, how are damages measured for compensatory damages? through specific performance
For construction contracts, how are damages measured for compensatory damages? depends on who commits the breach and when it occurs (see exhibit 12.1)
If an owner breaches a contract before construction has begun, what is the measurement of damages? the profits (contract price less cost of materials and labor)
If an owner breaches a contract during construction, what is the measurement of damages? the profits plus costs incurred up to time of breach
If an owner breaches a contract after construction is completed, what is the measurement of damages? the full contract price, plus interest
If a contractor breaches a contract before the construction has begun, what is the measurement of damages? the cost in excess of contract price to complete work
If a contractor breaches a contract before the construction is completed, what is the measurement of damages? generally all costs incurred by the owner to complete
What are consequential damages? forseeable losses
Who should be aware of the additional loss in the case of consequential damages? The breaching party is aware or should be aware
If a business needs a good by Monday or it will lose $10,000 in operating cost and the shipper accepts this, are they liable for delay? Yes
If a business needs a good by Monday or it will lose $10,000 in operating cost and the shipper DOES NOT know this, are they liable for delay? No
What are punitive damages? damages to deter the wrongdoer and set an example
What are nominal damages? no actual damage occured; price set very low as a technical injury
What are mitigation of damages? when breach of contract occurs, the injured (innocent) party is held to a duty to reduce the damages that they suffered
What is the duty owed for mitigation of damages? depends on the nature of the contract
What are liquidated damages? specific amount agreed to be paid as damages in the event of a future breach
Where are liquidated damages stated? in a clause in contract
What are penalties? designed to penalize
Are liquidated damages enforceable? yes
Are penalties enforceable? generally not
What are the two questions a court asks to determine if a clause was liquidated damages or penalties? "when the contract was entered, was it apparent damages would be difficult to estimate in event of a breach?" ; "Was the amount set as damages a reasonable estimate and not excessive?"
If damages are difficult to estimate in case of a breach AND the amount set as damages was a reasonable estimate, is the clause enforceable? Yes
If damages are easy to estimate in case of a breach and/or the amount set as damages is excessive, is the clause enforceable? No
What are equitable remedies? Something besides money damages
When are equitable remedies rewarded? when money damages are inadequate for the situation
What are 4 specific types of equitable remedies the court can create? rescission, restitution, specific performance, and reformation
What is rescission in terms of equitable remedies? remedy where a contract is canceled and the parties are restored to their original positions that they occupied prior to the transactions
What is restitution in terms of equitable remedies? both parties must return goods, property, or money previously conveyed
Does rescission always call for restitution? Not always
Does restitution always call for rescission? Not always
What is specific performance in terms of equitable remedies? remedy calling for the performance of the act promised in the contract
In what types of subject matter does specific performance provide remedy? Sale of Land or contracts for personal services
What is reformation in terms of equitable remedies? remedy allowing a contract to be reformed, or rewritten to reflect the parties true intentions
When is reformation allowed as an equitable remedy? when an agreement is imperfectly expressed in writing; used when fraud or mutual mistake occurs
What is a quasi contract? no actual contract exists, but the court will create one in the interests of fairness and justice
When is a quasi contract granted? when one party has performed in good faith and the other has been unjustly enriched
True/False: The non-breaching party is the party seeking recovery. True
In order to recover on a quasi-contract, what must the party seeking recovery show? party conferred a benefit onto the other party; party conferred the benefit with reasonable expectation of payment; party did not volunteer in performing; party receiving benefit would be unjustly enriched by retaining benefit w/o payment
Are exculpatory clauses enforceable? No
Are Limitation of Liability contracts enforceable? Sometimes
When is a limitation of liability clause allowed? when the subject matter isn't too broad
What is the UCC? uniform commercial commission
Does the UCC allow sales contracts to limit remedies? Yes
Can the UCC enforce limitation of liability clauses? Depends on the type of breach excused by provision
What type of damages are available to nonbreaching parties? compensatory, consequential, punitive, nominal, liquidated
Besides damages, what are the other three types of remedies available to nonbreaching parties? rescission and restitution, specific performance, and reformation
Created by: fredrickss