Remedies

Nonmonetary Remedies
1. There are 2 broad branches of remedies available in breach contract situations: monetary
and nonmonetary. The primary nonmonetary remedy for exam purposes is specific
performance, but UCC has a number of other specific nonmonetary remedies for certain
situations involving contracts for the sale of goods
2. Specific Performance: If the legal remedy (money damages) is inadequate, the
nonbreaching party may seek specific performance, which is an order from the court to
the breaching party to perform or face contempt of court charges
a. Exam Tip: Watch for a fact pattern in which a party is seeking to specifically
enforce a contract containing a liquidated damages clause. Such a clause does not
make the legal remedy adequate
b. Available for Land and Rare or Unique Goods: Specific performance is always
available for land sale contracts because all land is unique. It is also available for
goods that are rare or unique at the time performance is due (for example rare
paintings, gasoline in short supply)
i. It it not available for breach of a contract to provide services even if the
services are rare or unique
1. Injunction as Alternate Remedy: A court may enjoin a breaching
employee from working for a competitor throughout the duration
of the contract if the services contracted for are rare or unique
c. Covenant Not To Compete: Most courts will grant an order of specific
performance to enforce a contract not to compete if: (1) the services to be
performed are unique (thus rendering money damages inadequate) and (2) the
covenant is reasonable. To be reasonable:
1. The covenant must be reasonably necessary to protect a
legitimate interest of the person benefited by the covenant
2. The covenant must be reasonable as to its geographic scope and
duration (it cannot be broader than the benefited person’s
customer base and typically cannot be longer than 1 or 2 years)
3. The covenant must not harm the public
d. Equitable Defenses Available: In addition to standard contract defenses, an
action for specific performance is subject to the equitable defenses of:
i. Laches: Claim that P has delayed bringing the action and that the delay
has prejudiced D
ii. Unclean Hands: Claim that the party seeking specific performance is
guilty of wrongdoing in the transaction being sued upon
iii. Sale to a Bona Fide Purchaser: Claim that the subject matter has been
sold to a person who purchased for value and in good faith
3. Nonmonetary Remedies under UCC
a. Buyer’s Nonmonetary Remedies
i. Cancellation: If a buyer rightfully rejects the goods because they don’t
conform to the contract, one of the buyer’s options is to cancel the contract
ii. Buyer’s Right to Replevy Identified Goods
1. On Buyer’s Prepayment: If a buyer has made at least part
payment of the purchase price of goods that have been identified
under a contract and the seller has not delivered the goods, the
buyer may replevy the goods from the seller in 2 circumstances
a. The seller becomes insolvent within 10 days after receiving
the buyer’s first payment, or
b. The goods were purchased for personal, family, or
household purposes
c. In either case, the buyer must tender any unpaid portion of
the purchase price to the seller
2. On Buyer’s Inability to Recover: The buyer may replevy
undelivered, identified goods from the seller if the buyer, after
reasonable effort, is unable to secure adequate substitute goods
iii. Buyer’s Right to Specific Performance: A right closely related to the
buyer’s right to replevy is the right to specific performance where the
goods are unique or in other proper circumstances (i.e., inability to
cover). The court may order specific performance even where the goods
have not yet been identified to the contract by the seller
b. Seller’s Nonmonetary Remedies
i. Seller’s Right to Withhold Goods: If a buyer fails to make a payment
due on or before delivery, the seller may withhold delivery of the goods
1. The seller may also withhold goods when the goods are sold on
credit, and before the goods are delivered the seller discovers that
the buyer is insolvent
a. The seller must deliver the goods if the buyer tenders cash
for their payment
ii. Seller’s Right to Recover Goods
1. Right to Recover from Buyer on Buyer’s Insolvency: If a seller
learns that a buyer received delivery of goods while insolvent, the
seller may reclaim the goods upon demand made within 10 days
after the buyer’s receipt of the goods
a. The 10 day limitation does not apply if a misrepresentation
of solvency has been made in writing to the particular
seller within 3 months before delivery
 2. Right to Recover Shipped or Stored Goods from Bailee
a. On Buyer’s Insolvency: The seller may stop delivery of
goods in the possession of a carrier or other bailee if they
discover that the buyer is insolvent. The seller must deliver
goods if the buyer tenders cash for their payment
b. On Buyer’s Breach: The seller may stop the delivery of
carload, truckload, planeload, or larger shipments of goods
if the buyer breaches the contract or the seller has a right to
withhold performance pending receipt of assurance
3. Seller’s Ability to Force Goods on Buyer Limited: The seller’s
ability to force goods on a buyer is limited to an action for price
when the seller is unable to resell the goods to others at a
reasonable price
c. Right to Demand Assurances: Actions or circumstances that increase the risk of
nonperformance by a party to a contract but don’t clearly indicate that
performance will not be forthcoming may not be treated immediately as an
anticipatory repudiation
i. Instead, if there are reasonable grounds for insecurity with respect to a
party’s performance, the other party may demand in writing assurances
that the performances will be forthcoming at the proper time
1. Until they receive adequate assurance, the party may suspend
their own performance
a. What constitutes an adequate assurance depends on the
facts of the case
2. If proper assurances are not given within a reasonable time (within
30 days after a justified demand for assurances) then they may
treat the contract as repudiated
ii. Exam Tip: Be sure that you understand the difference between
circumstances giving rise to a right to demand assurances and those
constituting anticipatory repudiation. The right to demand assurances
arises when there are reasonable grounds for insecurity - something
makes a party nervous that the other will not perform. Anticipatory
repudiation requires much more than nervousness - there must be clear
indication that the other party is unwilling or unable to perform

Monetary Damages
1. Damages can be recovered only to the extent they can be proved with reasonable
certainty and could not be avoided with reasonable effort
2. Types of Damages
a. Compensatory Damages: The usual goal of damages for breach of contract is to
put the nonbreaching party in the position they would have been in had the
promise been performed
i. Expectation Damages - Standard Measure of Damages: In most cases,
P’s standard measure of damages will be based on the expectation
measure that is sufficient damages for them to buy a substitute
performance
ii. Reliance Damage Measure: If the P’s expectation damages are too
speculative to measure, P may elect to recover those damages they have
suffered based on their reasonable reliance on the contract
1. Reliance damages award the P the cost of their performance
iii. Incidental Damages are most commonly associated contracts for the sale
of goods and typically include expenses reasonably incurred by a buyer
inspection, receipt, transportation, care, and custody of goods rightfully
rejected and other expenses reasonably incident to the seller’s breach
and by the seller in storing, shipping, returning, and reselling the goods
as a result of the buyer’s breach
iv. Consequential Damages are special damages and reflect losses over and
above standard expectation damages. They arise because of the
nonbreaching party’s particular circumstances, and most often they consist
of lost profits
1. These damages may be recovered only if at the time the contract
was made, a reasonable person would have foreseen the
damages as a probable result of the breach
2. To recover, the breaching party must have known or had reason
to know of the special circumstances giving rise to the damages
3. Note: In contracts for the sale of goods, only a buyer may
recover consequential damages
v. Certainty Rule: P must prove that the losses suffered were certain in
their nature and not speculative
1. Traditionally, if the breaching party prevented the nonbreaching
party from setting up a new business, courts would not award lost
profits from the prospective business as damages, because they
were too speculative
2. Modern courts may allow lost profits as damages if they can be
made more certain by observing similar businesses in the area or
other businesses previously owned by the same party
b. Punitive Damages are generally not awarded in contract cases
 c. Nominal Damages (for example $1) may be awarded when a breach is shown but
no actual loss is proven
d. Liquidated Damages: The parties to a contract may stipulate what damages are
to be paid in the event of breach. These liquidated damages must be in an amount
that is reasonable in view of the actual or anticipated harm caused by the breach
i. Requirements for Enforcement: Liquidated damage clauses will be
enforceable if the following 2 requirements are met:
1. Damages for contractual breach are difficult to estimate or
ascertain at the time the contract is formed
2. The amount agreed on is a reasonable forecast of compensatory
damages in the case of breach
a. The test for reasonableness is a comparison between the
amount of damages prospectively probable at the time of
contract formation and the liquidated damages figure
b. If the liquidated damages amount is unreasonable, court
will construe this as a penalty and will not enforce the
provision
ii. Recoverable Even If No Actual Damages: If the above requirements are
met, P will receive the liquidated damages amount. Most courts hold this
is so even if no actual money or pecuniary damages have been suffered
3. Contracts for the Sale of Goods
a. Buyer’s Damages
i. Seller Does Not Deliver or Buyer Rejects/Revokes: If the seller doesn't
deliver or the buyer properly rejects the goods or revokes acceptance of
the goods, the buyer’s basic damages consist of the difference between the
contract price and either (1) the market price or (2) the cost of buying
replacement goods (cover) plus incidental and consequential damages if
any, less expenses saved as a result of the seller’s breach
1. If the buyer chooses to cover measure (the difference between
the contract price and the cost of buying replacement goods) the
buyer must make a reasonable contract for substitute goods in
good faith and without unreasonable delay
2. If the buyer damages by the difference between contract price
and market price, market price usually is determined as of the
time the buyer learns of the breach and at the place of tender
3. Exam Tip: Note that the buyer’s damages are measured as of the
time they learn of the breach, while the seller’s damages are
measured as of the time for delivery

ii. Seller Delivers Nonconforming Goods that Buyer Accepts

 1. Warranty Damages: If the buyer accepts goods that breach
one of the seller’s warranties, the buyer may recover as damages,
loss resulting in the normal course of events from the breach
a. The basic measure of damages in such a case is the
difference between the value of the goods as delivered and
the value they would have had if they had been according
to contract, plus incidental and consequential damages
2. Notice Requirement: To recover damages for any defect as to
accepted goods the buyer must notify the seller of the defect
within a reasonable time after they discover or should have
discovered the defect. Reasonable time is a flexible standard
iii. Seller Anticipatorily Breaches Contract: The measure of damages when
the seller anticipatorily breaches the contract is the difference between the
market price at the time the buyer learned of the breach and the contract
price
iv. Consequential Damages: A seller is liable for consequential damages
arising from their breach if: (1) they had reason to know of the buyer’s
general or particular requirements, or (2) the subsequent loss resulting
from those needs could not reasonably be prevented by cover.
Particular needs must be made known to the seller, but general
requirements usually need not be
1. Goods for Resale: If the buyer is in the business of reselling the
goods, the seller is deemed to have knowledge of the resale
2. Goods Necessary for Manufacturing: If a seller knows that the
goods they provide are to be used in the manufacturing process,
they should know that their breach would cause a disruption in
production leading to a loss of profits
b. Seller’s Damages
i. Where a Buyer Repudiates or Refuses to Accept Conforming Goods
1. The code provides 3 measures for damages for when the buyer
wrongfully repudiates or refuses to accept conforming goods. In
addition incidental damages (for example costs of shipping,
storing, reselling) the seller can:
a. Resell the goods and recover the difference between the
contract price and the resale price
b. Recover the difference between the market price (measured
as of the time and at the place of delivery) and the contract
price, or
c. If the above measures are inadequate because the seller
could’ve made an additional sale, recover under a lost
 profits measure the difference between the contract price
and the cost to the seller
ii. Exam Tip: Other damages measures will never be adequate if the seller is
a lost volume seller. To determine whether the lost profits measure is
appropriate, look at the seller’s supply. If the seller’s supply of goods is
unlimited (they can obtain all the goods they can sell) then they are a lost
volume seller and the lost profits measure can be used. If the supply is
limited (they cannot obtain all the goods they can sell as with the sale of a
unique item) the lost profits measure cannot be used and one of the other
2 measures must be used instead
iii. Where a Buyer Accepted Goods - Action for Price: The seller may
maintain an action against the buyer for the full contract price if:
1. The buyer has accepted the goods and has not paid OR has not
accepted the goods AND the seller is unable to resell them at a
reasonable price, or
2. If the goods have been lost or damaged at a time the risk of loss
was on the buyer
4. Contract’s for the Sale of Land: The standard measure of damages for breach of land
sale contracts is the difference between the contract price and the fair market value of the
land
5. Employment Contracts: If an employment contract, check to see whether the breach
was by the employer or the employee
a. Breach by Employer: Irrespective of when the breach occurs, the standard
measure of the employee’s damages is the full contract price (although damages
may be reduced if the employee fails to mitigate)
b. Breach by Employee: If an employee materially breaches an employment
contract, the employer is entitled to recover the cost of replacing the employee
(the wages the employer must pay to a replacement employee minus the
breaching employee’s wages)
i. The breaching employee may offset money owed for work done to date
c. Employment at Will: When employment is at will, it may be terminated at any
time for any reason. Thus termination of at will employment by either party does
not result in breach. A position characterized as permanent creates an
employment at will relationship
6. Construction Contracts:
a. If a construction contract is breached by the owner, the builder will be entitled
to profits that would have resulted from the contract plus any costs expended
i. If the contract is breached after construction is completed, the measure is
the full contract price plus interest
b. If the contract is breached by the builder, the owner is entitled to the cost of
completion plus reasonable compensation for the delay
 i. Most courts allow the builder to offset or recover for work performed to
date to avoid unjust enrichment of the owner
ii. If the breach is only late performance, the owner is entitled to damages
incurred because of late performance
c. Restoration and Economic Waste: Usually when a building contract is not
properly performed, the owner is entitled to the cost of fixing the defect
i. However, unless there is special significance attached to use of a particular
item (for example the owner is the CEO of the particular brand of copper
pipe specified) and that significance is communicated to the builder, a
court will not order a remedy that results in undue economic waste
ii. Courts are split on the result when a party contracts to restore property
and willfully refuses to do so because it is much more costly than any
diminution in value of the property
7. Contracts Calling for Installment Payments: If a contract calls for payments in
installments and a payment is not made, there is only a partial breach
a. The aggrieved party is limited to recovering only the missed payment, not the
entire price. However, the contract may include an acceleration clause making
the entire amount due on any late payment, in which case the aggrieved party may
recover the entire amount
8. Avoidable Damages (Mitigation): Under the common law, the nonbreaching party
cannot recover damages that could have been avoided with reasonable effort. They
must refrain from piling up losses after they receive notice of the breach. They must not
incur further expenditures or costs, and they must make reasonable efforts to cut down
their losses by procuring a substitute performance at a fair price
a. Should they not do so, they will not be allowed to recover those damages that
might have been avoided by such mitigation after the breach. A party may
recover the expenses of litigation
b. Georgia Distinction: Unlike some jurisdictions, Georgia does not require
mitigation of damages in lease contracts
c. Employment Contracts: If the breaching employer can prove that a comparable
job in the same locale was available, then contract damages against that breaching
employer for lost wages will be reduced by the wages that P would have received
from that comparable job
d. Manufacturing Contracts: In a contract to manufacture goods, if the person for
whom the goods are being manufactured breaches, the manufacturer is under a
duty to mitigate by not continuing work after the breach
i. However, if the facts are such that completion of the manufacturing
project will decrease rather than increase damages, the manufacturer has a
right to continue
 e. Construction Contracts: A builder does not owe a duty to avoid the
consequences of an owner’s breach by securing other work, but does have a duty
to mitigate by not continuing work after the breach
i. If completion will decreases damages, it will be allowed
f. Contracts for Sale of Goods: Under the UCC, the rule of mitigation generally
does not apply. An injured buyer is not required to cover, and an injured seller is
not required to resell
i. Market damages are always available if the buyer doesn't cover or the
seller does not resell
ii. Recall: The seller generally cannot bring an action against the buyer for
the full contract price unless the goods cannot be resold at a reasonable
price or were damaged or lost when the risk of loss was on the buyer
iii. Exam Tip: Keep in mind the duty to mitigate only reduces a recovery, it
does not prohibit recovery. If a fact pattern shows a clear breach and P
does not attempt to mitigate damages, they can recover for the breach, but
the recovery will be reduced by the damages that would have been
avoided by mitigation
Restitution
1. Restitution is based on preventing unjust enrichment when one has conferred a benefit
on another without gratuitous intent. It can provide a remedy when a contract exists and
has been breached AND when a contract is unenforceable AND when no contractual
relationships exists all between the parties
2. Terminology: When a contract is unenforceable or no contract between the parties
exists, an action to recover restitutionary damages often is referred to as to an action for
an implied in law contract, an action in quasi-contract, or an action for quantum
meruit
3. Measure of Damages: Generally, the measure of restitution is the value of the benefit
conferred. Although this is usually based on the benefit received by the defendant (for
example, the increase in value of the defendant’s property or the value of the goods
received), recovery may also be measured by the “detriment” suffered by the plaintiff (for
example, the reasonable value of the work performed or the services rendered) if the
benefits are difficult to measure or the “benefit” measure would achieve an unfair result
4. Specific Applications
a. When Contract Breached: When a contract has been breached and the
nonbreaching party hasn’t fully performed, they may choose to cancel the
contract and sue for restitution to prevent unjust enrichment. Note that if the
plaintiff has fully performed, they are limited to their damages under the
contract. This may be less than they would’ve received in a restitutionary action,
because a restitutionary remedy isn’t limited to the contract price
i. Losing Contracts: A restitutionary remedy often is desirable in the case
of a “losing” contract (a contract in which the actual value of the services
 or goods to be provided under the contract is higher than the contract
price), because normal contract expectation damages or reliance damages
would be for a lesser amount
ii. Breach by Plaintiff: Under some circumstances, a plaintiff may seek
restitution even though the plaintiff is the party who breached. If the
breach was intentional, some courts won’t grant the breaching party
restitution; modern courts, however, will permit restitutionary recovery
but limit it to the contract price less damages incurred as a result of the
breach
iii. Restitution of Advance Payments or Deposit If Buyer of Goods
Breaches: If the buyer has paid part of the purchase price in advance and
then breaches the contract, they can usually recover some of the payments.
Unless the seller can prove greater damages, they may keep advance
payments totaling 20% of the purchase price or $500, whichever is less.
The balance must be returned to the buyer. If there is a valid liquidated
damages clause, the seller need refund only the excess of the buyer’s
payments over the amount of liquidated damages
iv. Exam Tip: Generally when there is a breaching party attempting to collect
on a partially performed contract, you should consider (1) substantial
performance, (2) divisibility, and (3) restitution - in that order. You must
read the call of the question and each answer choice carefully and you
must be able to regroup when your expected answer isn't one of the
choices
b. When Contract Unenforceable - Quasi-Contract Remedy: Restitution may be
available in a quasi-contract action when a contract was made but is
unenforceable and unjust enrichment would result otherwise (for example a
celebrity is hired to sign autographs and is paid, but dies before they perform, the
other party has a restitution action to recover the payment
c. When No Contract Involved - Quasi-Contract Remedy: Restitution may also
be available in a quasi-contract action when there is no contractual relationship
between the parties if:
i. P has conferred a benefit on the D by rendering services or expending
properties
ii. P conferred the benefit with the reasonable expectation of being
compensated for its value
iii. D knew or had reason to know of P’s expectation, AND
iv. D would be unjustly enriched if they were allowed to retain the benefit
without compensating the P
d. Exam Tip: Always keep the quasi-contract remedy in the back of your mind.
Look first for a valid contract allowing the plaintiff relief. But if there is no
 valid contract, quasi-contract may provide a remedy if the plaintiff suffered a loss
or rendered services
Recission
1. Recission is a remedy whereby the original contract is considered voidable and
rescinded. The parties are left as though a contract had never been made.
2. Grounds: The grounds for rescission must have occurred either before or at the time the
contract was formed. The grounds are:
a. Mutual mistake of a material fact
b. Unilateral mistake if the other party knew or should have known of the
mistake
c. Unilateral mistake if hardship by the mistaken party is so extreme it outweighs the
other party’s expectations under the contract
d. Misrepresentation of fact or law by either party as to a material factor in the
negotiations that was relied upon, AND
e. Other grounds such as duress, undue influence, illegality, lack of capacity, and
failure of consideration
3. Defenses: Generally all equitable defenses (including laches and unclean hands) are
available in a rescission action. Note: P’s negligence is not a defense
Reformation
1. Reformation is the remedy whereby the writing setting forth the agreement between the
parties is changed so that it conforms to the original intent of the parties
2. Grounds
a. Mistake: To reform a contract because of mistake, there must be:
i. An agreement between the parties
ii. An agreement to put the agreement in writing, and
iii. A variance between the original agreement and the writing
b. Misrepresentation: If a writing is inaccurate because of a misrepresentation, P
can choose between reformation and avoidance
i. To qualify for reformation, the misrepresentation must relate to the content
or the legal effect of the record
ii. Misrepresentation as to the subject matter of the agreement aren't grounds
for reformation (rescission and damages are the proper remedy for that)
3. Negligence Does Not Bar Reformation: Failure to read the record of the agreement
doesn’t preclude a party from obtaining reformation. In nearly every case in which the
record does not reflect the agreement, either one or both parties failed to read it
4. Clear and Convincing Evidence Standard: The variance between the antecedent
agreement and the writing must be established by clear and convincing evidence
5. Parol Evidence Rule and SoF Do Not Apply: The parol evidence rule is not applied in
reformation actions. Likewise the majority rule is that the SoF does not apply - but many
courts will deny reformation if it would add land to the contract without complying with
the SoF
 6. Defenses: In addition to the general equitable defenses, the existence of a bona fide
purchaser for value is also a defense to reformation. Also, reformation is not permitted
if the rights of third parties will be unfairly affected
Statute of Limitations under UCC
1. For sale contracts, the UCC provides a 4-year SoL. The parties may shorten the period
by agreement to no less than one year, but they cannot lengthen it
2. Accrual of Action: The statutory period begins to run when a party can bring suit - when
the breach occurs. The period beings to run regardless of whether the aggrieved party
knows about the breach
3. Breach of Warranty Actions: For a breach of warranty action, the breach occurs and the
limitations period begins to run upon delivery of the goods. This is true even if the buyer
doesn't discover the breach until much later
a. Warranty Extends to Future Performance: If there is an express warranty that
explicitly extends to future performance of the goods, the 4-year period doesn’t
begin to run until the buyer should’ve discovered the breach
b. Implied Warranties Breached on Delivery: Because implied warranties cannot
explicitly extend to future performed, they are breached, if at all, upon delivery