Ch 12

Fundamentals of Business Fundamentals of Business LawLaw

Summarized Cases, 8th Ed., and Excerpted Cases, 2nd Ed.

ROGER LeROY MILLERInstitute for University Studies

Arlington, Texas

GAYLORD A. JENTZHerbert D. Kelleher Emeritus Professor in Business Law

University of Texas at Austin

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning.

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Learning ObjectivesLearning Objectives• What is the difference between compensatory and

consequential damages? What are nominal damages and when do courts award them?

• 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?

• When do courts grant specific performance as a remedy?

• What is the rationale underlying the doctrine of election of remedies?


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Types of DamagesTypes of Damages• Compensatory Damages:

– Compensates injured party (Plaintiff).– Plaintiff must prove actual damages

caused by breach. Amount:• Generally: difference between Defendant’s

promised performance and actual.• Sale of Goods: difference between the

contract price and market.• Sale of Land/Construction Contracts.


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Types of DamagesTypes of Damages• Consequential (Special) Damages

– Foreseeable damages that result from breach of contract.

– Caused by other than breach of contract.• Punitive (Exemplary) Damages.

– Deter wrongdoer; set example.• Nominal Damages.


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Types of DamagesTypes of Damages• Mitigation of Damages.

– Injured party has a legal duty to mitigate damages.

– CASE 12.1 Hanson v. Boeder (North Dakota, 2007).


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Types of DamagesTypes of Damages• Liquidated Damages vs. Penalties.

– Liquidated: fixed, certain dollar amount agreed to by parties, paid in the event of breach. LD’s are enforceable.

– Penalty: designed to penalize a party. Generally not enforceable.


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Equitable RemediesEquitable Remedies• Rescission: cancel or undo a contract.

– Available for fraud, mistake, duress and failure of consideration.

• Restitution: recapture the benefit conferred on the defendant that has unjustly enriched her. – Parties must return goods, property or money.


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Equitable RemediesEquitable Remedies• Specific Performance.

– Sale of Land. CASE 12.2 Stainbrook v. Low (Indiana, 2006).

• Reformation: court re-writes the contract to reflect parties’ true intentions.


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• Plaintiff must show:– Benefit was conferred on the other party.– Party conferring benefit expected to be

paid.– Party seeking recovery did not volunteer.– Retaining benefit without payment would

be unjust enrichment.

Recovery Based on Recovery Based on Quasi ContractQuasi Contract


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RemediesRemedies


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Contract Provisions Contract Provisions Limiting RemediesLimiting Remedies

• Exculpatory Clauses or Limitations of liability clauses.

• CASE 12.3 Lucier v. Williams (2004).


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Election of RemediesElection of Remedies• Nonbreaching party usually has several

remedies available.• Purpose is to prevent double recovery.

Ch 12

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Transcript of Ch 12