Essentials of Business Law
and the Legal Environment, 10th edition
by Richard A. Mann
& Barry S. Roberts
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Topics Covered Chapter 18:
Contract Remedies
A. Monetary Damages
B. Remedies in Equity
C. Restitution
D. Limitations on Remedies
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Compensatory Damages

Contract damages placing the injured party in
as good a position as he would have held
had the other party performed; equals loss of
value minus cost avoided plus incidental
damages plus consequential damages.
– Loss of Value – value of promised performance
minus value of actual performance
– Cost Avoided – loss or costs the injured party
avoids by not having to perform
– Incidental Damages – arise directly out of a
breach Consequential Damages – not arising
directly out of a breach but arising as a
foreseeable result of the breach
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Other Damages
Nominal Damages – a small sum
awarded where a contract has been
breached but the loss is negligible or
unproved.
 Reliance Damages – contract
damages placing the injured party in
as good a position as she would have
been in had the contract not been
made.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Damages for Misrepresentation




Benefit-of-the-Bargain Damages –
difference between the value of the
fraudulent party's performance as
represented and the value the defrauded
party received.
Out-of-Pocket Damages – difference
between the value given and the value
received.
Punitive Damages – are generally not
recoverable for breach of contract.
Liquidated Damages – reasonable
damages agreed to in advance by the
parties to a contract.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Limitations on Damages



Foreseeability of Damages – potential loss
that the party now in default had reason to
know of when the contract was made.
Certainty of Damages – damages are not
recoverable beyond an amount that can be
established with reasonable certainty.
Mitigation of Damages – injured party may
not recover damages for loss he could have
avoided by reasonable effort.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Remedies in Equity
Availability – only where there is no
adequate remedy at law.
 Types:

– Specific Performance – court decree
ordering breaching party to render promised
performance.
– Injunction – court order prohibiting a party
from doing a specific act.
– Reformation – court order correcting a
written contract to conform with the original
intent of the contracting parties.
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Restitution
Restoration of injured party to position
she was in before the contract was
made.
 Available to:

– Party Injured by Breach – if other party
breaches the contract by nonperformance
or repudiation
– Party in Default – for any benefit
conferred in excess of the loss caused by
the breach
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Restitution
Statute of Frauds – if a contract is
unenforceable because of the statute
of frauds, a party may recover the
benefits conferred on the other party in
reliance on the contract.
 Voidable Contracts – a party who has
avoided a contract is entitled to
restitution for any benefit conferred on
the other party.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Limitations on Remedies


Election of Remedies – if remedies are not
inconsistent, a party injured by a breach of
contract may seek more than one
Loss of Power of Avoidance – a party with
the power to avoid a contract may lose that
power by:
– affirming the contract
– delaying unreasonably in exercising the power of
avoidance
– being subordinate to intervening rights of 3rd
parties
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Contract Remedies
Has the contract been breached?
No
No Remedy
Yes
Are legal remedies adequate?
No
Equitable Remedies may
be available
No
Legal Remedies are
available
Yes
Is there a provision for
reasonable liquidated damages?
Yes
Recovery of liquidated damages
Compensatory
Damages
Reliance
Damages
Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.
Restitution