Chapter 10

REMEDIES

ChapterScope

This chapter deals with the different remedies that are available to the nonbreaching and breaching parties to a contract. Key concepts:

• Equitable relief: The equitable remedies of specific performance (an order to render a promised performance) or an injunction (an order to refrain from doing something) will be directed by the court where certain requirements are fulfilled. Most importantly, it must be the case that money damages would be an inadequate remedy.
  • Remedies at law (money damages): Ordinarily, however, in contracts cases the remedy will not be equitable. Instead, the remedy will consist of money damages. There are three main measures of money damages in contracts cases:
    • Expectation damages: “Expectation” damages are the most common remedy. They attempt to put the plaintiff in the position she would have been had the defendant performed. The plaintiff is awarded: (1) the out-of-pocket costs she has incurred; plus (2) the profit which she would have made had the contract been completed.
      • Reasonable certainty: Expectation damages may only be recovered if the plaintiff proves them with “reasonable certainty.” When the plaintiff can’t do so, one of the two other measures (reliance and restitution) will be used instead.
    • Reliance damages: “Reliance” damages attempt to put the plaintiff in as good a position as she was in prior to the making of the contract. This is done by allowing the plaintiff to recover her out-of-pocket expenditures incurred in performing the contract.
      • When used: Reliance damages are most commonly awarded when expectation damages are too speculative to be proved with reasonable certainty. (Example: The contract relates to a newly-formed business, and because of the newness we cannot say how much the business would have earned had D not breached.)
    • Restitution: “Restitution” damages attempt to prevent the unjust enrichment of the defendant by returning to a plaintiff who has partially performed the value of the performance he has rendered to the defendant.
      • When used: Restitution damages are sometimes awarded when a contract is discharged for various reasons (e.g., impossibility). They are also suitable where expectation damages are too uncertain to be awarded and reliance damages would not adequately compensate the plaintiff.