Chapter 18 Law Summary:

Monetary Damages

Compensatory Damagescontract damages placing the injured party in a position as good as the one he would have held had the other party performed; equals loss of value minus loss avoided by injured party plus incidental damages plus consequential damages

• Loss of Valuevalue of promised performance minus value of actual performance
• Cost Avoidedloss or costs the injured party avoids by not having to perform
• Incidental Damagesdamages arising directly out of a breach of contract
• Consequential Damagesdamages not arising directly out of a breach but arising as a foreseeable result of the breach

Nominal Damagesa small sum awarded when a contract has been breached but the loss is negligible or unproved

Reliance Damagescontract damages placing the injured party in as good a position as she would have been in had the contract not been made

Punitive Damagesare generallynotrecoverable for breach of contract

Liquidated Damagesreasonable damages agreed to in advance by the parties to a contract

Limitations on Damages

• Foreseeability of Damagespotential loss that the party now in default had reason to know of when the contract was made
• Certainty of Damagesdamages are not recoverable beyond an amount that can be established with reasonable certainty
• Mitigation of Damagesinjured party may not recover damages for loss he could have avoided by reasonable effort

Remedies in Equity

Availabilityonly in cases in which there is no adequate remedy at law

Types

• Specific Performancecourt decree ordering breaching party to render promised performance
• Injunctioncourt order prohibiting a party from doing a specific act
• Reformationcourt order correcting a written contract to conform with the original intent of the contracting parties

Restitution

Definition of Restitutionrestoration of the injured party to the position she was in before the contract was made

Availability

• Party Injured by Breachif the other party totally breaches the contract by nonperformance or repudiation
• Party in Defaultfor any benefit conferred in excess of the loss caused by the breach of the party in default
• Statute of Fraudswhere a contract is unenforceable because of the statute of frauds, a party may recover the benefits conferred on the other party in performance of the contract
• Voidable Contractsa party who has rightfully avoided a contract is entitled to restitution for any benefit conferred on the other party but generally must return any benefit that he has received under the contract

Limitations on Remedies

Election of Remediesif remedies are not inconsistent, a party injured by a breach of contract may seek more than one

Loss of Power of Avoidancea 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 subordinated to the intervening rights of third parties

Remedies For Misrepresentation

Restitutionthe law of restitution allows rescission (avoidance) of the contract and, when appropriate, restitution

Contract Remediesinclude affirmation with damages, rescission, reformation, and warranty

Tort Damagesdepending on the State and the type of misrepresentation, tort damages may be either (1) benefit-of-the bargain damages (difference between the value of the fraudulent party's performance as represented and the value the defrauded party received) or (2) out-pocket damages (difference between the value given and the value received)

Questions:

Answer the following questions below by referring to the chapter 18 law summary above andAI-generatedanswers are not allowed.

1) Katie Smith agreed in writing to write, direct, and produce a promotional motion picture about craft beer production for the Michigan Craft Beer Association ("MCBA"). As part of the contract, the MCBA agreed to give Katie a screen credit stating: "A Film by Katie Smith." The MCBA breached the contract when it failed to include the agreed-upon screen credit for Katie. Katie sued the MCBA seeking specific performance to make the MCBA add screen credit as stated in the contract.

1. 1. Is an equitable remedy proper for Katie's claim? Why or why not?
2. Are monetary damages a proper remedy for Katie's claim? Why or why not?

Note: Your response to each should be in detail and should incorporate the relevant law as outlined in the Chapter 18 law above.

2) Jill agreed to build a house for Sam. The contract price of the house was $300,000 and it was to be completed by October 31st. Sam wanted to ensure that the house would be completed on time and was concerned that if it were not, he would be unable to calculate how much he lost from the delay. At the time of the contract, Sam and Jill agreed to include a liquidated damages clause.

Review about liquidated damages and then write a paragraph or two that answer the following:

• What are liquidated damages and when are they allowed?
• Write your own example of a reasonable liquidated damages clause for the building contract.
• Write your own example of an unreasonable liquidated damages clause for the building contract.
• Explain why your examples are reasonable/unreasonable.