• What is the difference between
compensatory damages and
consequential damages? What are
nominal damages, and when do
courts award nominal damages? 
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• What is the standard measure of
compensatory damages when a
contract is breached? How are
damages computed differently in
construction contracts?
• Under what circumstances is the
remedy of rescission and restitution
available? 
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• When do courts grant specific
performance as a remedy?
• What is a limitation-of-liability
clause, and when will courts enforce
it?
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• Most Common Remedies:
–Damages.
–Rescission and Restitution.
–Specific Performance.
–Reformation.
–Recovery Based on Quasi Contract.
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• Compensatory Damages—designed to
compensate nonbreaching party for
loss of the bargain.
–Damages actually sustained (out-ofpocket), directly arising from breach.
–Standard Measure: difference between
value of promised performance and
value of actual performance. 
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• Compensatory Damages (cont’d).
–Incidental Damages: expenses cause
directly by breach of contract.
–Measurement of Damages:
• Sale of Goods: difference between
contract and market price.
• Sale of Land: specific performance.
• Construction Contracts.
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• Measurement of Damages for
Construction Contracts: varies (below).
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• Consequential (Special) Damages—
foreseeable losses.
–Breaching party is aware or should be
aware, cause the injury party additional
loss.
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• Punitive Damages—punish or deter
future conduct.
–Generally not available for mere
breach of contract. Usually tort (e.g.,
fraud) is also involved.
• Nominal Damages—no financial loss.
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• Mitigation of Damages.
–When breach of contract occurs, the
innocent injured party is held to a duty
to reduce the damages that he or she
suffered.
–Duty owed depends on the nature of
the contract.
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• Liquidated Damages Versus Penalties.
–Liquidated Damages: specific amount
agreed to be paid as damages in the event of
future breach.
–Penalties: designed to penalize, generally
unenforceable.
– CASE 16.1 B-Sharp Musical Productions,
Inc. v. Haber (2010). Why was this
liquidated damages, and not a penalty?
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• Liquidated Damages Versus Penalties.
• Enforceability (cont’d).
–Court asks two questions:
• When contract was entered into, was it
apparent damages would be difficult to
estimate in the event of a breach?
• Was the amount set as damages a
reasonable estimate and not excessive?
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• Sometimes damages are inadequate
remedy.
• Court can create equitable remedies:
Rescission and Restitution.
–Rescission: remedy whereby a contract
is canceled and the parties are
restored to the original positions that
they occupied prior to the
transactions. 
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• Rescission and Restitution.
–Restitution: both parties must return
goods, property, or money previously
conveyed.
–Note: Rescission does not always call
for restitution. Restitution is called for
in some cases not involving rescission.
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• Specific Performance.
–Equitable remedy calling for the
performance of the act promised in
the contract.
–Provides remedy in cases involving:
• Sale of Land. CASE 16.2 Stainbrook v. Low
(2006). Why was specific performance an
appropriate remedy in this case?
• Contracts for Personal Services.
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• Reformation:
–Equitable remedy allowing a contract
to be reformed, or rewritten to reflect
the parties true intentions.
–Available when an agreement is
imperfectly expressed in writing. 
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• Reformation (cont’d).
–When Fraud or Mutual Mistake is
Present. Reformation is used often in
cases dealing with fraud or mistake.
–CASE 16.3 Drake v. Hance (2009).
Was this really a mutual mistake?
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• When Quasi Contract is Used.
–Arises when no contract actually exists.
Remedy created by courts to obtain
justice and prevent unjust enrichment.
–Party conferring benefit can recover in
quantum meruit (“as much as she
deserves”). 
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• When Quasi Contract is Used (cont’d).
–When no contract exists.
–When a contract exists but is
unenforceable.
–Partially performing party can recover
value of services when contract is
unenforceable.
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• Requirements of Quasi Contract.
–Benefit was conferred to the other party.
–Party conferring benefit reasonably
expected to be paid.
–The benefit was not volunteered.
–Receiving benefit without paying for it
would result in unjust enrichment.
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• Exculpatory and Limitation of
Liability clauses.
• UCC Allows Sales Contracts to Limit
Remedies.
• Enforceability of Limitation-ofLiability Clauses: depends on type of
breach excused by provision.
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