Summary of slides for Chapter 12 of Fundamentals of Business Law
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| What are the four broad categories of damages? | Compensatory, consequential, punitive, and nominal
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| 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
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| What the standard measure of compensatory damages? | the difference between value of promised performance and value of actual performance
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| For the sale of goods, how are damages measured for compensatory damages? | the difference between contract and market price
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| For the sale of land, how are damages measured for compensatory damages? | through specific performance
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| For construction contracts, how are damages measured for compensatory damages? | depends on who commits the breach and when it occurs (see exhibit 12.1)
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| 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)
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| If an owner breaches a contract during construction, what is the measurement of damages? | the profits plus costs incurred up to time of breach
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| If an owner breaches a contract after construction is completed, what is the measurement of damages? | the full contract price, plus interest
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| 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
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| 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
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| What are consequential damages? | forseeable losses
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| Who should be aware of the additional loss in the case of consequential damages? | The breaching party is aware or should be aware
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| 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
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| 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
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| What are punitive damages? | damages to deter the wrongdoer and set an example
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| What are nominal damages? | no actual damage occured; price set very low as a technical injury
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| 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
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| What is the duty owed for mitigation of damages? | depends on the nature of the contract
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| What are liquidated damages? | specific amount agreed to be paid as damages in the event of a future breach
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| Where are liquidated damages stated? | in a clause in contract
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| What are penalties? | designed to penalize
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| Are liquidated damages enforceable? | yes
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| Are penalties enforceable? | generally not
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| 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?"
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| 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
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| 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
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| What are equitable remedies? | Something besides money damages
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| When are equitable remedies rewarded? | when money damages are inadequate for the situation
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| What are 4 specific types of equitable remedies the court can create? | rescission, restitution, specific performance, and reformation
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| 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
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| What is restitution in terms of equitable remedies? | both parties must return goods, property, or money previously conveyed
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| Does rescission always call for restitution? | Not always
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| Does restitution always call for rescission? | Not always
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| What is specific performance in terms of equitable remedies? | remedy calling for the performance of the act promised in the contract
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| In what types of subject matter does specific performance provide remedy? | Sale of Land or contracts for personal services
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| What is reformation in terms of equitable remedies? | remedy allowing a contract to be reformed, or rewritten to reflect the parties true intentions
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| When is reformation allowed as an equitable remedy? | when an agreement is imperfectly expressed in writing; used when fraud or mutual mistake occurs
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| What is a quasi contract? | no actual contract exists, but the court will create one in the interests of fairness and justice
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| When is a quasi contract granted? | when one party has performed in good faith and the other has been unjustly enriched
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| True/False: The non-breaching party is the party seeking recovery. | True
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| 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
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| Are exculpatory clauses enforceable? | No
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| Are Limitation of Liability contracts enforceable? | Sometimes
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| When is a limitation of liability clause allowed? | when the subject matter isn't too broad
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| What is the UCC? | uniform commercial commission
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| Does the UCC allow sales contracts to limit remedies? | Yes
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| Can the UCC enforce limitation of liability clauses? | Depends on the type of breach excused by provision
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| What type of damages are available to nonbreaching parties? | compensatory, consequential, punitive, nominal, liquidated
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| Besides damages, what are the other three types of remedies available to nonbreaching parties? | rescission and restitution, specific performance, and reformation
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