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Chapter 12

ch. 12 -Contractual Remedies.docx

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Law and Business
LAW 122
Theresa Miedema

Chapter 12 – Contractual Remedies - One of more remedies may be available if a contract is breached - The innocent party usually enjoys the option to discharge the agreement if breach substantially eliminates the expected benefit of the contract (Chapter 11) - Other remedies may be available, whether or not contract is discharged Damages - In most cases, the remedy for a beach of contract is damages - Damages is an award of money that is intended to cure a wrongful event, such as a breach of contract o Except in rare cases, the plaintiff is not entitled to receive the exact thing (the performance) that they expected to get under the agreement, but only the monetary value of that thing  Ex. agree to sell car to you, but later break my promise after you paid the price, you are probably not entitled to get the car itself, but you are entitled to the monetary value of that car - Reasons for rule: o Courts historically didn’t have the authority to compel defendant to do anything other than pay money o Contracts traditionally were seen as commercial arrangements between business people o The only thing that matters in the business world is money, so there is no need to award any other type of remedy o It would often be inconvenient to award something other than monetary damages Expectation damages - There are many measures of relief, or ways in which the court can calc. the amount of money that the plaintiff is entitled to receive from the defendant - Most common measure of relief is expectation damages - represent the monetary value of the benefit that the plaintiff expected to receive under the contract - “Give me what I expected to get!” - Expectation damages are forward-looking b/c they are intended to place the plaintiff in the position that they expected to be after the contract was properly performed o In contrast, compensatory damages in tort law are back-ward-looking b/c they are intended to place the plaintiff in the position that they were in before the defendant acted wrongfully  Forward-looking damages allow the plaintiff to recover the value of something it never previously enjoyed but expected to receive under their contract with defendant  Expectation damages provide an assurance that if a promise is not actually fulfilled, the innocent party will at least be able to recover the monetary value of that promise - Expectation damages = value of benefit plaintiff expected to receive under the contract – value of costs it expected it to occur o Difference between how much plaintiff expected to have at the end of contract and how much plaintiff actually has after defendant’s breach o You be the Judge pg. 290 - Issues for expectation damages: o Difficulty of calculation – are usually available even if they are diff. to calculate  Awarded even if calc. is imprecise • Ex. damages for lost chance to win a beauty contest – court awarded damages based on its best guess s how she would have done in competition  Not awarded if calc. is entirely speculative – ex. Value of treasure is supposedly sunken ship o “Cost of cure” or “loss of value” – sometimes difficult to decide exactly what the plaintiff expected to receive from the defendant – there may be a question are to whether the plaintiff expected to receive a service or the value of the end product of that service  Pg. 292 Groves v John Case – plaintiff rents piece of land from defendant for $105,000 who operates sand and gravel mind on property, also to level ground at end of lease, defendant leaves huge craters for economic reasons, it would have cost $60,000 to level the land (receipt of service itself - cost of restoration), but even if land levelled it would be worth $12,000 (receipt of value of service’s end product – value added to land if restoration occurs)  Cost of cure damages – cost of service – awarded if reason is legitimate for wanting restoration – if plaintiff has a legitimate interest in having the work done or if plaintiff has actually already spent money curing the defendant’s defective performance – Ex. plaintiff claimed $60,000 and won • Judges usually refuse to award damages on this if unreasonably large  Loss of value damages – value of end product – if unreasonable discrepancy between cost and value – Ex. defendant claimed $12,000 o Alternative performance – as a general rule, expectation damages allow the plaintiff to fully recover the anticipated benefits of the contract, but difficulty may arise if contract allowed defendant to perform in a variety of ways, some of which involved more or less benefits to plaintiff  Pg. 292 Case Brief 12.1 – contract allows employer to terminate employment by: any time, without notice, if employee acts in a manner detrimental to company’s reputation OR any time after 18 months, by giving 3 months notice –After 18 months OWB broke agreement on that Hamilton acted dishonestly, Hamilton sued for breach of contract. • Damages are calculated on the basis of the least onerous option – “the minimum acceptable performance” o Intangible losses and emotional distress – difficult to calc. when the plaintiff suffers an intangible loss as a result of the defendant’s breach  Intangible loss – a loss that doesn’t have any apparent economic value. Ex. the anger, frustration, sadness or disappointment that may occur when a promise is broken – losses are real, but don’t carry a price in the marketplace • Damages for emotional distress traditionally denied – difficult to asses value, contracts are commercial arrangements for money not feelings • Now courts began to recognize that “peace of mind” is one of the things that a person may expect to receive under a contract – relief may be available if the defendant performed the contract in a way that disappointed the plaintiff’s expectations and causes distress – supreme court of Canada decided that intangible losses generally should be treated the same way as other losses Limitations – remoteness & mitigation: o Remoteness – plaintiff can’t recover expectation damages for every loss that they suffer after the defendant’s breach – the lost must have been caused by the breach.  Loss must not be remote from the breach – a loss is remote if it would be unfair to hold the defendant legally responsible for it – a loss is not remote if the defendant either should have known or actually did know that it was the sort of loss that might occur if the contract was breached  Test: • Liability may be imposed if a reasonable person would have known the plaintiff’s loss might result a breach – true even if the plaintiff didn’t draw the defendant’s attention to that possibility • OR if the defendant actually knew the plaintiff’s loss might result from the breach – true even if a reasonable person wouldn’t have normally expected such a loss o Remoteness is a principle of fairness – it’s applied to the time when the parties created their contract, not the time when the defendant committed the breach, or court hears case o Mitigation of damages – plaintiff can’t recover damages for a loss that it unreasonable failed to mitigate – occurs when the plaintiff takes steps to minimize the losses flowing from the defendant’s breach  Duty to mitigate: • Plaintiff isn’t required to mitigate, but it fails to do so, unable to recover damages for losses that could have been mitigated • Plaintiff responsible only for taking reasonable steps to mitigate a loss • Damages are denied only to the extent that the plaintiff unreasonably failed to mitigate – although the plaintiff didn’t take any steps toward mitigation, you are still entitled to damages
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