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Chapter 15

BU231 Chapter 15

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Wilfrid Laurier University
Keith Masterman

1 READING NOTES CHAPTER 15- Remedies for Breach Apart from treating contracts as discharged, aggrieved parties may seek other remedies to compensate for harm caused by breach of contract, typically damages. However other remedies are available when damage is insufficient. Types of Remedies • Damages • Equitable Remedies o Specific Performance, Injunction, Rescission • Quantum Meruit $Damages$ (Pre-Midterm) • These are the primary remedy in contract • Note: There are different calculations for damages in contract than for tort as well as limitations on when you need to sue by • The purpose of an award of damages o Aims to place injured party in same position as if contract had been completed o Intended only to compensate injured party for loss caused by failure to perform, not to punish liable party o Simple fact is that liability acts as an economic deterrent o Additional intangible costs of a decision to break a contract include the risk of ruining good relations or damaging your reputation • Mitigation of Damages o Parties that have suffered a loss as a result of breach are expected to do what they can to mitigate the extent of the loss o An aggrieved party can only recover losses resulting from the breach that they could not avoid by acting reasonably  Eg. Employee suing for wrongful dismissal should show that they made every reasonable effort to find alternative employment • Prerequisites for an Award of Damages o To qualify for recovery, damages arising from breach must ‘flow naturally from the breach’ o Losses resulting from breach must be within foreseeable limits of what parties would have expected as a likely consequence of failure to perform  Eg. If a carrier is not informed of the vital nature of a delivery to a production company, then they are not responsible for damages if the company must suspend operations o Should be considered from vantage of when contract is signed, not when contract is breached 2 Common Law Damages • Expectation Damages o Should a court include in its damages for breach an amount equal to the expected profits on the aborted transaction?  Yes, because damages are intended to put the innocent party into the position they would’ve been in had the contract been satisfied o Unlike tort, you don’t have to prove losses o Expectation damages are an amount awarded for breach of contract based on expected profits  “How good do you expect life to be?”  Opportunity costs of making a similar contract with a different promisor are an important reason for using expectation loss as a measure for damages  Why do we need expectation damages? • If a contract breaker were liable to pay only compensation for out of pocket expenses of the other party, they could ignore their obligations very often with little cost o Contracts of Sale  If seller has limited supply and the buyer breaches, then the buyer is liable for damages of initial profit as well as the expenses (and potential) losses in order for seller to find another buyer  Works the same way if seller breaches • Consequential Damages o In a sense, consequential damages are one step removed from immediate effects of breach  Eg. “If you don’t deliver that part to me on time or I’m gonna sue you because I need to deliver to another company by Monday or they’ll sue me” • Owe potential profits rather than the extra cost of buying the ice cream elsewhere • Same applies for defective goods • General Damages o Non-economic losses o Describes an estimated amount that a court may award over and above specific losses that can’t be quantified  Eg. Plastic surgeon who botches a nose- job • Specific Damages o Just like the name, these are specific damages such as the expenses incurred as one party tried to perform contract • Reliance Damages o If a consultant enters a contract and begins work before the client cancels the contract they are entitled to expectation damages if they can’t get another consulting opportunity 3 o If they are able to find another opportu
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