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Chapter 15 Remedies for a Breach.docx

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Department
Accounting
Course
ACTG 2P40
Professor
P.Maloney
Semester
Fall

Description
Chapter 15 Remedies for Breach In the event of a Breach there are 3 types of Remedies 1) Damages 2) Equitable remedies – specific performance, injunction, rescission 3) Quantum Merit  What can a party sue for in the event of a breach?  Damages are the most common type of remedy for a breach – Damages is a Common Law remedy 1. Damages  In the most general senses Damages are an award given by the court against the breaching party for the amount of money lost by the innocent party  Damages are meant to put the parties in the contract in the position they would have been in had the contract been fully performed  To get damages you must prove 1) That the party actually breached the contract 2) That you actually sustained damages from the breach ( if no loss then can not sue for damages – comes down to evidence ) a) Rules that Relate to Damages i) Duty to Mitigate Damages ( cut losses )  In the event of a breach the duty to mitigate damages is the responsibility on the innocent party to take all reasonable efforts to try and cut their losses that result from the breach – if they do not mitigate then they will not get the damages remedy  The aggrieved party must take all „REASONABLE EFFORT‟ – just to what is reasonable  If the aggrieved party is able to mitigate all damages as a result of the breach then they are not able to sue or receive any remedy  If the aggrieved party does not take any reasonable effort to mitigate damages and can not prove to the court – they will in fact be punished and the courts would lower the damages  Market demand has a direct relationship with mitigation ii) Remoteness of Loss  The damages that the aggrieved party is seeking remedy for must have naturally flowed from the Breach - very similar to the „Proximate Cause Test‟  The more space and time between the breach and damages sustained the less likely the aggrieved party will obtain remedy – the less space and time between the breach and damages the more likely will get remedy  Depends on remoteness (b)Types of Damages i) Nominal Damages  Nominal damages are damages awarded in the event where the party proves the breach of a contract but fails to prove a loss from the breach – courts will award $1 – a symbolic gesture ii) Liquidated Damages  Liquidated damages are predetermined damage by the partied themselves in the event of a certain breach – the parties determine the amount that will be awarded in the event of a certain breach  The parties will have a „Liquidated Damages Clause‟ set into the contract  BUT – courts will only uphold a liquidated damages clause if the predetermined estimate constitute a reasonable estimate – close to market value or real value of damage  If the estimate is not reasonable the courts will not uphold the clause  Higher estimates look more like a penalty clause to scare iii) General Damages  Damages that are estimated amounts established by the courts that will be awarded over and above a specific losses – when courts are forced to pick an amount for general damages due to someone with pain and suffering, emotional suffering – things that do not have a quantitive face iv) Expectation Damages  Damages awarded for the loss of the expected profit resulting from the breach  Being awarded the profit that would have been made v) Consequential Damages ( related contracts )  Damages that are one step away from the breach – deals with the remoteness of loss  It depends on wh
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