Contracts

Damages, reformation, RESCISSION, restitution, and SPECIFIC PERFORMANCE are the basic remedies available for breach of contract.

Damages The term damages signifies a sum of money awarded as a compensation for injury caused by a breach of contract. The type of breach governs the extent of the damages to be awarded.

Failure to perform The measure of damages in breach-of-contract cases is the sum that would be necessary to recompense the injured party for the amount of losses incurred through breach of contract. The injured party should be placed in the position that he or she would have occupied if the contract had been performed, and they are entitled to receive the benefit of the bargain, the net gain that would have accrued to them under the contract. The injured party is not, however, to be put in a better position than he or she would have occupied had performance taken place.

Damages for anticipatory repudiation are ordinarily assessed as of the scheduled performance dates that are fixed by the breached contract. The measure of damages for the breach of an installment contract is determined at the time each installment is due.

When the parties have included a LIQUIDATED DAMAGES clause in a contract, it generally will be enforced. Such clause is a prior agreement by the parties as to the measure of damages upon breach. Additional damages may not be claimed.

Partial performance When the defendant has failed to complete performance of an agreement according to its terms, the plaintiff may recover such damages as will compensate him or her to the same extent as though the contract had been completely performed. The customary measure of damages is the reasonable expense of completion. Completion refers to a fulfillment of the same work, if possible, which does not involve unreasonable economic waste. The injured party is not automatically entitled to recover the difference between the contract price and the amount it would cost to have the work completed when a contract is breached after partial performance; he or she will be entitled to recover that amount only if completion is actually accomplished at a greater cost.

A provision in a building contract that allows the owner, in the event of a default by the contractor, to complete the job and to deduct the expenses from the contract price does not preclude the owner's recovering damages also where the contractor intentionally leaves the work undone. A plaintiff may also recover the monetary value of materials that are lost through a breach of contract.

A plaintiff contractor who subsequently performs the work upon breach of a contract will ordinarily recover the reasonable value of the labor and materials that he or she has furnished, with the contract price used as a guideline. The award may not properly exceed the benefit that the owner received in the properly completed work, and it will be reduced by the amount of damages that the owner incurs as a result of the contractor's failure to complete performance of the contractual obligation. If the value of the work performed exceeds the contract price, the contractor will not receive the excess.

Where a contract for the performance of services exists with payment to be made in installments, and the obligation to pay for each installment constitutes an independent promise, the individual who is entitled to payment may recover only the installments that are due when the suit is brought.

Defective performance Damages for defective performance of a contractual agreement are measured by calculating the difference in value between what is actually tendered and what is required as performance under the agreement. If the performance tendered is either of no value or unsuitable for the purpose that the contract contemplated, the proper measure of damages is the sum that is necessary to repair the defect. If a defect can be easily remedied through repairs, the measure of damages is the price of the repairs performed.

Generally, the total contract price may not be recovered for substantial performance. If the plaintiff furnished materials for items that were manufactured for the plaintiff in such a manner as to be rendered worthless, the proper measure of damages ordinarily has been held to be the discrepancy between the contract price and the market price of such items if they had been manufactured according to the contract terms.

When a building or construction contract is defectively performed, the proper measure of damages is the difference between the value of the property with the defective work, and its value had there been strict compliance with the contract. Where the contractor deliberately deviates from the contractual agreement, but there has been no substantial performance, damages are determined by the actual expense of reconstructing the building according to the terms of the contract.

Delay in performance The loss precipitated by the wrongful delay of the performance of a contract is calculated by fixing the rental or use of the property or interest as a result of the loss incurred through increased material and labor expenses, as distinguished from what the value would have been had the contract been performed on time.

Reformation Reformation is an equitable remedy that is applied when the written agreement does not correspond to the contract that was actually formed by the parties, as a result of fraud or mutual mistake in drafting the original document. Quasi-contractual relief for the reasonable value of services rendered is also available, although it applies only when there is no enforceable contract.

Rescission Rescission terminates the contract, and the parties are restored to the position of never having entered into the contract in the first place.

Restitution Restitution is a remedy that is designed to restore the injured party to the position that they occupied prior to the formation of the contract.

Specific Performance Specific performance is an equitable remedy by which a contracting party is required to execute, as nearly as practicable, a promised performance when monetary damages would be inadequate to compensate for the breach. A contract to sell land is specifically enforceable because land is considered to be unique and not compensable by money. In addition, property that has sentimental value, as well as antique, heirloom, or one-of-a-kind articles, are viewed as unique, and therefore it would be impossible to estimate damages. A personal-service contract or an employment contract, however, cannot be specifically enforced because the THIRTEENTH AMENDMENT to the U.S. Constitution prohibits SLAVERY. If, however, the contract proscribes a person from performing some act, breach of that negative covenant may be specifically enforced.