REMEDIES

• A breach of contract terms occurs when a

party fails to perform either fully or
adequately the obligations provided in the
contract.
• In the event of breach, the
nonbreachingand performing party may be
provided relief for the breaching party’s
failure to perform its obligations.
DAMAGES

• Damages are generally designed to compensate the non-

breaching party for the benefit of its bargain.
• Damages may be
 direct (actual),
 consequential,
 punitive,
 nominal.
 Let’s see the difference between direct damages and consequential
damages:

Normally, when there is a breach of contract, the non-breaching party is

entitled to recover damages from the breaching party as compensation
for the harm suffered as a result of the breach.
If not otherwise specified, these damages generally consist of all losses
that would be the reasonably foreseeable consequences of the breach.

They can be divided into two broad categories: “direct damages” and
“consequential damages.”
 A good working definition of direct damage is damage that
immediately results from a breach (think of these damages as
the first domino to fall as a result of the breach of contract). 
 Consequential damages can be summed up as damages that
do not flow directly and immediately from the breach.
 An example:
Let’s think a coal-fired power plant owner hiring a service provider
to operate and maintain its coal yard and related equipment.
If the operate and maintain provider breaches the contract (e.g.
due to poor maintenance), causing damages to the coal
conveyors and thus forcing a shutdown of one of the boilers due to
a lack of fuel, the damages to the coal conveyers would be direct
and the damages (lost revenues) resulting from the shutdown of
the boiler would be consequential.
 Another example of a breach of contract would be a toy store
contracting with a department store to deliver a specified
number of dolls by the end of November. When the toy store has
not delivered the specified number of dolls as agreed, it is a
breach of contract. 
 The direct damages are the initial costs the department store
initially paid to the toy company. The consequential damages
are the costs the department store had to pay to hire a new
manufacturer to finish what the toy store failed to do. The
department store can sue for both consequential and direct
damages. 
Punitive Damages:
Damages awarded, not to compensate the victim for established
loss, but to punish the breaching party and make an example of
him and ensure deterrence.
Punitive damages go beyond compensating the aggrieved party
and are specifically designed to punish defendants whose conduct
is considered grossly negligent or intentional. They are also called
exemplary damages.
One of the most famous punitive damage cases in the United
States occurred in 1992.
 Stella Liebeck of New Mexico was badly injured with second and
third-degree burns when a cup of coffee she purchased at a
McDonald’s drive-through spilled on her lap after her grandson
stopped the car she was sitting in so that she could add sugar
and cream.
 Liebeck spent eight days in the hospital and then reportedly
asked McDonald’s for $20,000 to cover her medical bills. The fast-
food chain refused, prompting Liebeck to sue.
 During the discovery phase of the litigation, it emerged that
McDonald's had faced over 700 similar claims in the 10 years
leading to Liebeck’s incident. Those claims suggested that the
company was aware of the dangers linked to the high
temperatures of its coffee. It was also revealed that rival firms, as
well as people at home, served coffee at cooler temperatures.
 In the end, Liebeck was awarded $200,000 in compensatory
damages—later cut to $160,000 after the jury determined that
she was responsible for 20% of the spill—and $2.7 million in
punitive damages—later reduced to $480,000 to cap Liebeck's
award at three times what she won for compensatory damages.
McDonald's was forced to pay and responded by lowering the
temperatures of its coffees.
Nominal Damages:
 Nominal damages refer to a damage award issued by a court
when a legal wrong has occurred, but where there was no
actual financial loss as a result of that legal wrong.
 Typically, when a nominal damage award is used, the plaintiff will
be awarded $1 or $2.
Liquidated Damages

 At the time of contracting, the parties may wish to avoid disputes and
uncertainty
over damages if a breach should occur in the future. They may include a term in
the
contract itself that seeks to fix in advance the amount of damages to be paid if
a
breach occurs. Such “agreed damages” provisions are referred to as liquidated
damages clauses.
 Liquidated damages clauses can be enforceable
i) if the clause was fairly bargained,
ii) was a genuine attempt to forecast probable loss, and
iii) is not disproportionate to the actual loss ultimately suffered.

If the clause fails to meet these standards, it is generally treated as

a penalty and is unenforceable.
 If the clause fails to meet these standards, it is generally treated
as a penalty and is unenforceable.
 So the downside to a liquidated damages clause is that it is not
always enforceable. If the estimate is ultimately way too high
compared to the actual harm the injured party incurred, the
court will not enforce the clause. The court’s decision would be
based on the fact that the amount is more of a penalty than an
amount to make the injured party whole.
 An example of liquidated damages can be found in a case
wherein a basketball coach breached his contract with his
university employer to take an identical position at a higher
paygrade.
 In April of 2008, Gene Ford and Kent State University (KSU)
entered into an employment contract that would make Ford the
head men’s basketball coach at the school. It was agreed that
Ford would work at KSU for four years, with the option of an
additional year, for a total of five years.
The contract contained a liquidated damages clause which
stated:
“Gene A. Ford recognizes that his promise to work for the University
for the entire term of this four (4) year contract is of the essence of
this contract with the University. Gene A. Ford also recognizes that
the University is making a highly valuable investment in his
continued employment by entering into this contract and its
investment would be lost were he to resign or otherwise terminate
his employment with the University prior to the expiration of this
Contract. Accordingly, he will pay to the University as liquidated
damages an amount equal to his base and supplemental salary,
multiplied by the number of years (or portion(s) thereof) remaining
on the contract.”
Two years later, Ford and KSU renegotiated the contract. A new
agreement was drafted, employing Ford for a five-year term, at a
higher salary, which paid him an additional $100,000 on top of the
$200,000 he was already earning. In March of 2011, however, Ford
left KSU and accepted the same position at another school,
Bradley University, and for a whopping increase of $400,000 in his
annual salary. KSU filed a civil lawsuit against Ford for breaching his
contract. 
Ford argued that the liquidated damages clause was nothing more
than a deterrent meant to stop him from accepting employment
elsewhere. Ultimately, the trial court granted summary judgment in KSU’s
favor. Ford then appealed to the Eleventh Appellate District in Portage
County, Ohio, however the Court of Appeals ultimately affirmed the
lower court’s decision, saying:
“As discussed extensively above, there was justification for seeking
liquidated damages to compensate for Kent State’s losses, and, thus,
there was a valid compensatory purpose for including the clause. While
there was some testimony the clause would deter Ford from leaving, this
would be true of liquidated damages clauses in almost every contract,
since an award of damages deters a breach. It appears that at least
some losses were contemplated prior to the inclusion of this provision in
the contract. Given all of the circumstances and facts in this case, and
the consideration of the factors above, we cannot find that the
liquidated damages clause was a penalty.”
 SPECIFIC PERFORMANCE
 The non-breaching party may seek a court order to force the
breaching party to perform in accordance with contract terms.
This remedy is generally granted in situations where money
damages are inadequate as a remedy.
 Civil courts will order specific performance in cases where
monetary compensation may not be the most equitable remedy.
The term applies specifically to cases of a contract breach. In
these cases, the burden of proof is on the plaintiff to show he is not
made «whole» by monetary damage awards alone. Instead, the
court will order the defendant to do what he has promised to do in
the contract. These cases are unusual, as most of the time
monetary damages satisfy the plaintiff's case equitably.
Example:
 When a contract is for the sale of a unique property, for instance,
mere money damages may not remedy the purchaser's
situation.
 The goods must be unique, otherwise monetary compensation
will apply. In the case of real estate transactions, the exact
property is completely unique and the contract and price apply
only to that specific property.
 Another example: if a buyer purchases a famous art sculpture at
auction, and does not receive the sculpture, the buyer may not
be made whole by the return of his money, because there is only
one such sculpture in the world for him to buy. Therefore a civil
court may order the auction house to provide him with his
sculpture or face penalty.
 ____________________ may be granted by the court in cases of
breach of contract where damages would be inadequate
compensation. The effect of the order would be that the party in
breach must perform their obligations under the contract.