LAW 122 Chapter Notes - Chapter 12: Specific Performance

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15 Apr 2012
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Chapter 12: Contractual Remedies
One or more remedies may be available if a contract is breached. Refer to Figure 12.1
pg 258.
DAMAGES
In the vast majority of cases, the remedy for a breach of contract is damages.
oDamages: is an award of money that is intended to cure a wrongful event, such as a
breach of contract.
The nature of the remedy needs to be stressed. Expect in rare cases, the plaintiff is not
entitled to receive the exact thing that it expected to get under the agreement. Only
entitled to monetary value of that thing.
E.g. if I agree to sell my car to you, but later break my promise after you have
paid the price, you are probably not entitled to get the car itself, but are
entitled to the monetary value of that car.
There are several reasons why courts usually award only monetary damages for a breach
of contract.
i. The courts of law historically did not have the power to force a defendant to do
anything other than pay money.
ii. Contracts traditionally were seen as commercial (profitable) arrangements b/t
business people. Today $$ is the only thing that matters in the business
world.
iii. Especially in the business world, it would often be inconvenient to award
something other than monetary damages. (ex. on pg 276)
Expectation Damages
There are many different measures of relief, or ways in which the courts can calculate the
amount of money that the plaintiff is entitled to recover from the defendant.
The most common measure of relief in contract law is expectation damages.
oExpectation Damages: represent the monetary value of the benefit that the plaintiff
expected to receive under the contract.
Are forward-looking b/c they are intended to place the plaintiff in the position
that they expected to be in after the contract was properly performed.
Consider the difference b/t compensatory damages; which are backward-looking (chpt3)
and expectation damages:
Backward-looking damages are easily justified. They allow the plaintiff to
recover the value of something. E.g. favourable reputation or a broken leg, that
it previously enjoyed, but lost as a result of the defendant’s wrongful act.
Forward-looking damages go further – allows the plaintiff to recover the value
of something that is never previously enjoyed, but merely expected to receive
under the contract with the defendant. Expectation damages therefore 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 the promise.
Refer to Figure 12.2 Calculations of Expectation Damages pg. 276
E.g. suppose you agree to pay $5,000 for a computer that is really worth
$7,000. You expect to make a profit of $2,000. However, if the vendor breaches
the contract by refusing to deliver the computer, and if you have not yet paid
the price, you are entitled to receive the $2,000. And if you paid the entire price
($5,000) before the breach, you will be entitled to $7,000 cash. In either event,
you are entitled to enjoy the $2,000 profit.
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Chapter 12: Contractual Remedies
In some situations, however, the exercise is much more difficult. We will consider five issues:
i. Difficulty of Calculation:
oExpectation damages are usually available even if they are very difficult to
calculate. E.g. In one famous case, the defendant breached a contract by
depriving the plaintiff of an opportunity to win a beauty contest. While the
plaintiff’s actual chance of winning the contest was highly estimation, the court
awarded expectation damages based on its best guess as to how she would
have fared in the competition.
oIn contrast, if the calculation of the plaintiff’s loss is not only difficult, but
entirely estimation, a court will not award damages – court of law is not a place
for wild guesses.
ii. Cost of Cure or Loss of Value:
oSometimes it is difficult to decide exactly what the plaintiff expected to
receive from the defendant – there may be a question as to whether the
plaintiff expected to receive a service or the value of the end-product of
that service.
oE.g. Case Brief 12.1: Plaintiff rented a piece of land to the defendant for
$105,000. The defendant operated a sand and gravel mine, but is required
to level the land at the end of the lease. However, the defendant left huge
craters on the property – cost $60,000 to fill the holes, but the land only
worth $12,000 if leveled. The plaintiff claimed expectation damages should
be measured by cost of cure ($60,000 to fix the land), but defendant said it
should be measured by loss of value ($12,000). The court agreed with the
plaintiff – thus awarded him $60,000.
oHowever, judges usually refuse to award damages on a “cost of cure” basis
if the difference b/t the cost of cure and the benefits of the cure is
reasonably large. – Swimming Pool E.g. pg 278.
iii. Intangible Loss:
oExpectation damages are difficult to calculate when the plaintiff suffers an
intangible loss as a result of the defendant’s breach.
oIntangible Loss: is a loss that does not have any apparent (clear) economic
value. E.g. the anger, frustration, or disappointment that may occur when a
promise is broken.
oHistorically, the courts refuse to award damages for intangible losses – the
courts did not traditionally feel comfortable assigning dollar figures to personal
emotions.
oRecently, the courts have started to recognize that “peace of mind” is one of
the things that a person may expect to receive under a contract.
Damages may be available if, contrary to the plaintiff’s expectation, the
defendant performed the contract in a way that caused distress.
E.g. Awarded expectation damages for a ruined holiday
However, the courts refuse to award damages for the humiliation or
unhappiness a person may feel as a result of being unfairly fired from a
job.
iv. Remoteness:
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