Question

Remedies in a contractual dispute seems like it would be easy. What types of damages can a party recover? Find a case and take a look at the damages a party is asking for. Summarize the dispute and the type of damages sought. Is the party looking for the benefit of the bargain or money to complete work done? Is what the party asking for "fair"?

Answer 1

There are a few different legal remedies a party may consider when another party has allegedly breached its contractual obligation, including lawsuits and arbitration. However, sometimes a monetary remedy doesn't quite make the plaintiff whole, which is the goal of any civil remedy.

Courts can order defendants in contract disputes to actually perform the contractual duties as originally agreed if it is determined that money alone cannot resolve the issue. This is called specific performance

Specific Performance: Overview

Specific performance is a specialized remedy used by courts when no other remedy (such as money) will adequately compensate the other party. If a legal remedy will put the injured party in the position he or she would have enjoyed had the contract been fully performed, then the court will use that option instead. The most common reason courts grant specific performance is that the subject of the contract is unique, when it's not merely a matter of money or where the true amount of damages is unclear. When a contract is for the sale of a unique property, for instance, mere money damages may not remedy the purchaser's situation.

Specific Performance and 'Replevin'

The term replevin -- commonly referred to as "claim and delivery" -- refers to a legal action in which actual property (not its monetary value) must be transferred to the plaintiff in a dispute. It is similar to specific performance and often used interchangeably in statutes. For instance, the UCC states that a buyer "has a right of replevin for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing..."

In other words, a court may order specific performance in the form of replevin (transfer of actual goods) as a remedy in a contractual dispute when cash damages are not sufficient.

When is Specific Performance Ordered?

Courts will enforce specific performance only if the underlying contract was fair and equitable. Other commodities that courts have found to support specific performance include works of art, custom-made products, and goods in short supply. Nearly all states have adopted the Uniform Commercial Code (UCC), which addresses specific performance. For example, California law states that specific performance may be compelled if:

1. Specific performance would otherwise be an appropriate remedy; ?and

2. The agreed counterperformance has been substantially performed or its concurrent or future performance is assured or, if the court deems necessary, can be secured to the satisfaction of the court.

As you can see, an order for specific performance is largely left up to the discretion of the courts. The second requirement is meant to ensure that the other party (the plaintiff) also has performed or will perform its obligations as specified by the contract.

Damages are monetary awards and can include:

1) Compensatory Damages: These are damages for a monetary amount that is intended to compensate the non-breaching party for losses that result from the breach. The aim is to "make the injured party whole again". There are two types of compensatory damages:

• Expectation Damages: These are damages that are intended to cover what the injured party expected to receive from the contract. Calculations are usually straightforward as they are based on the contract itself or market values.
• Consequential Damages: These are intended to reimburse the injured party for indirect damages other than contractual loss; for example, loss of business profits due to an undelivered machine. In order to recover, the injuries must "flow from the breach," i.e. be a direct result of the breach, and be reasonably foreseeable to both parties when they entered into the contract.

2) Liquidation Damages: Damages that are specifically stated in the contract. These are available when damages may be hard to foresee and must be a fair estimate of what damages might be if there is a breach. Both parties determine what would be an appropriate amount during contract negotiations.

3) Punitive Damages: These are damages that are intend to punish the breaching party and to deter him or her from committing any future breaches. They are rarely awarded in contract cases, though they may be available in some fraud or tort cases that overlap with contract law.

4) Nominal Damages: These are damages that are awarded when the injured plaintiff does not actually incur a monetary loss, but the judge wants to show that the winning party was in the right. These are typically rarely awarded in contract cases because breaches of contract usually involve some sort of loss to one party, however they might be awarded in tort cases that cross over with a breach of contract case.

5) Restitution: These are not really legal damages per se, but rather are an equitable remedy awarded to prevent the breaching party from being unjustly enriched. For example, if one party has delivered goods but the other party has failed to pay, the party that delivered the goods may be entitled to restitution, i.e. the cost of the delivered goods, in order to prevent the unjust enrichment.

What Other Remedies Are Available If There Has Been a Breach of Contract?

Relief for contract breaches can come in two forms: legal damages, which are the monetary awards discussed above, and equitable remedies.

Equitable remedies are typically awarded when monetary damages will not properly remedy the situation. They involve the court ordering the parties to act or to refrain from acting. Types of equitable remedies include:

• Specific Performance: A court decree that requires the breaching party to perform their part of the bargain indicated in the contract. For example, if one party has paid for a delivery of goods, but the other party did not ship them, a specific performance decree might require the goods to be properly delivered.
• Contract Rescission: The former contract which is the subject of dispute is "rescinded" (cancelled), and a new one may be formed to meet the parties’ needs. This is a remedy typically given when both parties agree to cancel the contract or if the contract was created through fraud.
• Contract Reformation: The former contract is rewritten with the new contract reflecting the parties’ true intent. Reformation requires a valid contract to begin with and often is used the parties had a mistaken understanding when forming the contract.