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Legal Concepts in Contracts: Remedies and Damages Explained

Understand the remedies available when contracts are breached, including compensatory, consequential, and punitive damages. Learn about liquidated damages, enforcement, and equitable interests.

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Legal Concepts in Contracts: Remedies and Damages Explained

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  1. CHAPTER 18 Remedies

  2. BUT FIRST SOME ADDITIONAL BUT IMPORTANT DEFINITIONS AND LEGAL CONCEPTS

  3. CONTRACTS THAT VIOLATE A STATUTE ARE ILLEGAL

  4. WHERE A LICENSE IS REQUIRED, NORMALLY, A CONTRACT MADE BY AN UNLICENSED PERSON IS ILLEGAL

  5. CONTRACTS THAT VIOLATE PUBLIC POLICY ARE PROHIBITED

  6. AN EXCULPATORY CLAUSE IS GENERALLY UNENFORCEABLE WHEN IT ATTEMPTS TO EXCLUDE AN INTENTIONAL TORT OR GROSS NEGLIGENCE

  7. AN EXCULPATORY CLAUSE IS GENERALLY UNENFORCEABLE WHEN THE AFFECTED ACTIVITY IS IN THE PUBLIC INTEREST

  8. AN UNCONSCIONABLE CONTRACT IS ONE THAT THE COURT WILL NOT ENFORCE BECAUSE OF FUNDAMENTAL FAIRNESS

  9. A CONTRACT SIGNED BY A MINOR IS VOIDABLE BY THE MINOR

  10. CONTRACTS ENTERED INTO BY MENTALLY IMPAIRED PARTIES ARE VOIDABLE

  11. A CONTRACT ENTERED INTO UNDER DURESS IS VOIDABLE

  12. CONTRACTS WHICH MUST BE IN WRITING • Interest in real estate • Agreements that can not be performed within one year • Promise to pay the debt of another • Promise made by executor of an estate • Promise made in consideration of marriage

  13. WHEN CONTRACTS MAY NOT BE ASSIGNED • When assignment substantially effects obligor’s rights or duties • If forbidden by law • Is precluded by the contract

  14. CONTRACTUAL DUTIES WHICH MAY NOT BE ASSIGNED • Delegation would violate public policy • The contract prohibits delegation • The obligee has a substantial interest in personal performance by the obligor

  15. PERFORMANCE • Strict performance • Substantial performance

  16. GOOD FAITH Every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement.

  17. BREACHING THE CONTRACT • Someone breaches a contract when he fails to perform a duty without a valid excuse.

  18. BREACH When one party breaches a contract, the other party does not have to perform and is discharged from their obligations.

  19. “The flexible powers of a court should enable it to craft a just remedy for almost any breach of contract.”

  20. REMEDY A remedy is the method a court uses to compensate an injured party when a contract is breached.

  21. INTEREST A legal right in something.

  22. IDENTIFYING THE “INTEREST” • Expectation Interest • Reliance Interest • Restitution Interest • Equitable Interest

  23. COMPENSATORY DAMAGES Compensatory damages are to compensate for the breach of the contract.

  24. CONSEQUENTIAL DAMAGES Consequential damages are those resulting from the unique circumstances of this injured party.

  25. INCIDENTAL DAMAGES Incidental damages are the relatively minor costs incurred when the injured party responds to the breach

  26. PUNITIVE DAMAGES Punitive damages are designed to punish someone for reprehensible behavior in breaching a contract.

  27. LIQUIDATED DAMAGES A liquidated damages clause, is a provision stating in advance how much a party must pay it if it breaches.

  28. ENFORCEMENT A court will generally enforce a liquidated damages clause if : (1) at the time of creating the contract it was very difficult to estimate actual damages, and (2) the liquidated amount is reasonable.

  29. SELLER’S REMEDIES When the buyer breaches, if the seller acts in good faith, she will be awarded the difference between the original contract price and the price she was able to obtain in the open market.

  30. BUYER’S REMEDIES When the seller breaches, the buyer will be awarded the difference between the original contract and her cover (replacement) price

  31. OTHER EQUITABLE INTERESTS • Specific Performance • Injunction • Reformation

  32. SPECIAL ISSUES OF DAMAGES • Mitigation of Damages • Nominal Damages

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