Class Notes (807,356)
Canada (492,721)
Law (658)
Law 2101 (575)
Lecture 15

Law 2101 Lecture 15: Breach of Contract and Remedies

7 Pages
Unlock Document

Western University
Law 2101
Mysty Sybil Clapton

Breach of Contract and Remedies Two Kinds of Remedies for Breach of Contract: • Specific Performance/Injunctions • Damages (more common) – monetary damages Specific Performance • An order of the court compelling the party in breach to perform his or her part of the contract (actually do what they agreed to do) • Uncommon, because it is forcing someone to act in a certain way • If the breaching party fails to perform, the person can face fines or jail time for failing to follow the orders of the court • Awarded only in exceptional cases where damages are an inadequate remedy (e.g., a contract for the sale of real estate where the real estate is unique in some way) • Even in “unique” cases, specific performance is not always given • For the most part when we are contracting for “things”, the courts expect us to go out and mitigate our remedies; find a replacement and minimize your damages as best you can • Purchase and sale of real estate: more value was seen in the land itself, damages would not suffice, and therefore the remedy was specific performance (not money) • Only given when the subject matter of the contract is unique Warner Brothers v. Nelson [1937] K.B. • Betty Davis signed a contract with Warner Bros. before she became famous • This contract provided that: she would render her acting services exclusively to Warner Bros (she can only work for Warner Bros. on screen or on stage) • Also, she agrees only to work for Warner Bros. • She later found the contract to be unfair/she is being underpaid, and so she fled to the UK to work – makes more money here • Sue her for specific performance • Warner Brothers wanted the English Court to order specific performance to stop her • Issue: Is Specific Performance the proper remedy? Can we force her back to the US to work for Warner Bros.? Judgment: Damages vs. Specific Performance Warner Brothers v. Nelson [1937] K.B. • Betty Davis’ talents are unique • Damages are thus inadequate – having Betty Davis a sum to make them whole again was an inadequate remedy because her talents were so specific and unique • Damages flowing from the breach would be difficult to measure Specific Performance Limitation • If you are dealing with a contract for personal service or work, requiring diligence and close contact between the parties, the court will not order specific performance • If they order specific performance, they have to monitor the activity according to the contract; they don’t want to do this • The courts will order the breaching party to not work for anyone else for a reasonable period of time • They will not enforce a positive undertaking, but they will enforce a negative undertaking o In this case, ordered Betty Davis to not perform for anyone else as a stage actress for a 3 year period Result: • The court ordered Betty Davis not to work for anyone other than Warner Brothers for three years • She could work in other jobs that did not require her to use her acting skills • She may want to return to the employ of Warner Brothers, but the court refused to force her to do so Golden Nugget 1. The Courts will not order specific performance in a contract for personal service. 2. The courts will order the breaching party not to work for anyone else in the chosen field provided the breaching party would be able to support themselves in another occupation (Detroit Lions v Dublinski) Damages (the loses you have accumulated under the contract because it wasn’t performed) 1. Expectation Damages 2. Gain-based Damages 3. Issues of Consequential Loss/Remoteness 4. Intangible Losses 5. Punitive Damages Expectation Damages (most common type of remedy) • where a party to a contract suffers loss as a result of a breach by the other party, he or she will be entitled to an award of damages • compensating an innocent party • expect the losses – what have they lost on the lack of performance? “the usual measure in contract cases is the sum of money that will put the plaintiff in as good a position she would have been in had the contract been performed. That is the ruling principle. It is a just principle” -See Sally Wertheim v. Chicoutimi Pulp Company • forward looking; what do we expect to get The Measure of Expectation Damages A v. B A and B are bound by a contract whereby A promises to pay B $5,000 for B’s collection of antique toys and B promises to sell her collection of antique toys to A for $5,000. Before A pays the $5,000, B discovers that the collection is worth $10,000 on the market. B changes her mind and refuses to sell her collection of antique toys. A sues B for breach of contract. What are A’s damages? • If B had not breached the contract, A would be the owner of a collection of antique toys worth $10,000 • But if B had not breached the contract, A would have been obligated to pay $5,000 for the collection • Therefore, A’s damages are $5,000 A v. B Expectation Damages = Expected benefits under the contract $10,000 minus Expected costs under the contract $5,000 Therefore, A’s damages are $5,000 C v. D D agreed to sell a diamond ring to C for $5,000. D refused to deliver the ring to C because D had received an offer from E to purchase the ring for $7,500 which is now market price. If C is successful in her action for breach of contract, to what amount of damages is she entitled? C v. D Expectation damages = Expected benefits under the contract $7,500 minus Expected costs under the contract $5,000 Therefore, C’s damages are $2,500. F v. G G agreed to sell a piano to F for $3,000. G refused to deliver the piano despite the fact that the piano was really only worth $1,000. If F is successful in his action for breach of contract, to what amount of damages is he entitled? F v. G Expectation damages = Expected benefits under the contract $1,000 minus Expected costs under the contract $3,000 Therefore, F has no expectation damages. But he will be entitled to nominal damages. • Nominal damages: Nominal damages are a small amount of money awarded to a plaintiff in a lawsuit to show he/she was right but has suffered no significant losses. Nominal damages are awarded to vindicate a right or claim of the plaintiff, giving the plaintiff, in effect, a moral victory. Difficult Situation Peevyhouse v. Garland Coal and Mining Company (Supr. Ct. Okla. 1963) • Peevyhouse leased part of their farm to Garland Co. for five years • Under the lease, Garland Co. would be able to get coal and Peevyhouse would be entitled to a share of the royalties (they would pay a sum to the Peevyhouse farm for the duration of the lease) • When they were done extracting the coal, they didn’t put the land back in its original position (even though they said they would) • Garland Co. performed all required actions under the contract except filling in the pits • The cost of performance of filling in the pits was $30,000 • The decrease in value of the property whether they filled the land or not was $300 • The farm was worth approximately $3,500 • Issue: What is the proper measure of expectation damages? • The court was split (5-4) Decision #1 Peevyhouse v. Garland Coal and Mining Company (Supr. Ct. Okla. 1963) • Peevyhouse should be awarded $300 • No rational property owner would spend so much money to only raise the property value by $300 • The “remedial work” provisions (flattening of the land)of the contract, including the clause requiring Garland Co. to fill in the pits, were secondary provisions – second to the actual extraction part of the contract • To order the company to pay the full $30,000 would be akin to punishment rather than compensating the innocent party Decision #2 Peevyhouse v. Garland Coal and Mining Company (Supr. Ct. Okla. 1963) • The correct amount to award is $30,000 • The court should only be concerned with what the parties agreed to do under the contract • Which decision is correct? Gain-Based Damages? • Until recently, innocent party limited to compensation, which is usually measured by what the innocent party expected to receive under the contract. • In exceptional circumstances, innocent party might get damages measured by defendant’s gain. • This measure of damages is known as Disgorgement damages. o Rather than compensating for the loses, we should calculate the gains t
More Less

Related notes for Law 2101

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.