Ch 12

Fundamentals of Business Law

Summarized Cases, 8th Ed., and Excerpted Cases, 2nd Ed.

ROGER LeROY MILLER Institute for University Studies Arlington, Texas

GAYLORD A. JENTZ Herbert D. Kelleher Emeritus Professor in Business Law University of Texas at Austin

Learning Objectives • What is the difference between compensatory and consequential damages? What are nominal damages and when do courts award them?

• What is the standard measure of compensatory damages when a contract is breached? How are damages computed differently in construction contracts?

• Under what circumstances is the remedy of rescission and restitution available?

• When do courts grant specific performance as a remedy?

• What is the rationale underlying the doctrine of election of remedies?

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Types of Damages • Compensatory Damages: – Compensates injured party (Plaintiff).

– Plaintiff must prove actual damages caused by breach. Amount: • Generally: difference between Defendant’s promised performance and actual.

• Sale of Goods: difference between the contract price and market.

• Sale of Land/Construction Contracts.

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Types of Damages • Consequential (Special) Damages – Foreseeable damages that result from breach of contract.

– Caused by other than breach of contract.

• Punitive (Exemplary) Damages.

– Deter wrongdoer; set example.

• Nominal Damages.

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Types of Damages • Mitigation of Damages.

– Injured party has a legal duty to mitigate damages.

– CASE 12.1 Hanson v. Boeder (North Dakota, 2007).

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Types of Damages • Liquidated Damages vs. Penalties.

– Liquidated: fixed, certain dollar amount agreed to by parties, paid in the event of breach. LD’s are enforceable.

– Penalty: designed to penalize a party.

Generally not enforceable.

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Equitable Remedies • Rescission: cancel or undo a contract.

– Available for fraud, mistake, duress and failure of consideration.

• Restitution: recapture the benefit conferred on the defendant that has unjustly enriched her.

– Parties must return goods, property or money.

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Equitable Remedies • Specific Performance.

– Sale of Land. CASE 12.2 Stainbrook v.

Low (Indiana, 2006).

• Reformation: court re-writes the contract to reflect parties’ true intentions.

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Recovery Based on Quasi Contract • Plaintiff must show: – Benefit was conferred on the other party.

– Party conferring benefit expected to be paid.

– Party seeking recovery did not volunteer.

– Retaining benefit without payment would be unjust enrichment.

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Remedies

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Contract Provisions Limiting Remedies • Exculpatory Clauses or Limitations of liability clauses.

• CASE 12.3 Lucier v. Williams (2004).

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Election of Remedies • Nonbreaching party usually has several remedies available.

• Purpose is to prevent double recovery.

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