Part I:

Remedies for Breach of Contract

Principles of Relief

1. Approximation of Damages
-Because specific performance is rarely an option, the best a court can usually do is to try and
determine what monetary reward will approximate the plaintiff’s expectation.
2. Economic Nature of Contract Remedies
-Contract law almost never takes into account non-economic injuries. Damages measured purely by
the extent of the plaintiff’s loss do not generally distinguish between breaches that are inadvertent
and those that are willful and purposeful.
-Because the focus is on rectifying harm and not on sanctioning improper conduct, punitive damages
are not usually available for a breach of contract
3. Moral Dimension of Contract Remedies
-A contractual promise means nothing more than a commitment either to perform or to pay
compensation for not performing.
-However, there are some rules of contract law that have particular or stricter application where a
breach is willful or has an immoral dimension, and there are various ways in which the court or
jury’s disapprobation of the breacher can be reflected in the disposition of the case.
Ex. Shifting burden of proof onto defendant, giving jury leeway in deciding damages
4. The Economic Concept of Efficient Breach
-A breach of contract is said to be efficient if the defendant’s cost to perform would exceed the
benefit that performance would give to both parties. It satisfies the criterion of economic efficiency
in that it makes the defendant better off without making the plaintiff worse off.

Enforcement of Damage Awards

1. Writ of Execution
-If judgment is obtained and defendant doesn’t pay, a clerk of the court can call on a sheriff to find,
seize, and sell property owned by the defendant to satisfy the judgment.
-A judgment itself is merely a finding of liability. If a defendant fails to satisfy it, and no assets can be
found to execute upon, the plaintiff may never see her money.

Types of Damages

1. Expectation Damages (General K Damages)

Goal: place the promisee in the position promisee would have been in had the contract been performed.
A. Calculating Expectation Damages
I. Formula
-First part counts up the plaintiff’s losses caused by the breach, and the other deducts any
gains or recoupments she has made as a result of termination of the contract.
-Damages = Loss in value caused by the defendant’s nonperformance + Any other loss
(includes consequential and incidental damages) – Any cost or loss avoided by not having to
perform.
B. Types of Expectation Damages
I. Substitute Transactions
-Damages are based on the loss incurred as a result of having to make the substitute
contract
-UCC §2.712: expresses buyer’s damages as the difference between the repurchase price
and the contract price.
 Hypo: Ren contracts for 28 hours of voice training from Stimpy for $1,500. As a result
of Stimpy’s breach, Ren has to make a substitute transaction for $1,800. Ren’s damages
are $300.
II. Substitute Transactions (to Not Do So or to Fail to Do So Reasonably)
-Damages are measured by a comparison between the contract price and the market value
of a substitute.
-UCC §2.713: allows the buyer the difference between the market value and the contract-as-
written as damages when there is no mitigation
-UCC §2.708(1): does the same for seller
Hypo (to Not Do So): Ren decides not to find a replacement teacher. If the price of the
original contract with Stimpy is $1,500 and the market value of equivalent instruction is
$1,600, Ren is entitled to $100 from Stimpy.
Hypo (to Fail To Do So Reasonably): Following Stimpy’s breach from the $1,500
contract, Ren hires a substitute teacher for $1,800. If the market value for equivalent
instruction is $1,600, her damages will be confined to $100
III. Service Transactions (lost income cannot be recouped)
-Damages may be equivalent of the full value of the expected performance
Hypo: Stimpy enters into an employment contract with Ren to work in a blue cheese
mine for six months for the total expected earnings of $5. Ren breaches and Stimpy
can’t find another job. Stimpy recovers entire expectation ($5) under the contract.
IV. Lost Income but Saved Costs Transactions
-Damages are measured by deducting savings from expected returns
Hypo: Stimpy has to hire a banjoist for $500 to play the banjo during Ren’s vocal
lessons and is able to avoid doing so as a result of Ren’s breach. Since this is an expense
Stimpy would have had to have paid under the original contract, the court will deduct it
from his expected profit for the breach.
Hypo 2: Same scenario, only Stimpy can’t get out of his contract with the banjoist and is
forced to pay him the $500. Under this scenario, Stimpy would not recover these
particular costs as a result of Ren’s breach.
C. Distinction Between Direct and Consequential Damages
I. Direct Damages
-Direct damages are generally the difference between the value of the performance received
and the value of the performance promised as measured by contract.
-They are designed to put the injured party in the position they would occupy if the other
party delivered the performance promised in the contract, rather than punish the non-
performing party
Ex. Hawkins v. McGee
Hawkins (P) underwent surgery to repair scar tissue on his hand resulting from burns
he sustained from contact with an electrical wire. Dr. McGee (D) gave Hawkins a 100%
guarantee that he would be able to repair the scar tissue by grafting skin from his chest
to his hand. The surgery was unsuccessful and Hawkins was left with a hairy hand. At
trial, Hawkins sought damages for breach of contract due to McGee’s failure to perform
including pain and suffering.
-P was entitled to expectancy damages plus incidental losses resulting from the
breach. Expectancy damages are damages sufficient to put the P in the position he
would have been if the contract had been performed.
-P was not entitled to damages for pain and suffering because he would still have
endured them had the procedure been successful. P is entitled to the difference
between what he sought – a perfect hand, and what he received – a hairy hand. P was
also entitled to incidental losses resulting from the breach.
II. Consequential Damages (Special Damages)
-Include loss of product and loss of profit or revenue and may be recovered if it is
determined such damages were reasonably foreseeable or "within the contemplation of
the parties" at the time of the contract.
 Hypo: Assume Ren was trying to take voice lessons from Stimpy so that he could
compete in a singing competition with a $5,000 reward to the winner. Providing that
Ren can somehow prove he would have won the competition had the contract been
completed (suppose experts could testify that Ren’s raw vocal talent is mesmerizing),
Ren might be able to recover that $5,000 in addition to direct damages
Ex. Nurse v. Barns
P alleged that D had agreed to let him use certain iron mills for 10 pounds for a period
of six months. P relied on the contract and incurred expenses in preparation of using
the mills. D breached the agreement and P sued and was awarded 500 pounds by the
jury. D appealed.
-P wins. Special damages are recoverable in a suit for breach of contract. P was
awarded compensation for the expenses he had incurred in reliance on the contract.
D. Limitations on Expectation Recovery
I. Foreseeability
a. Overview
-Damages are foreseeable when, at the time of making the contract, the party who
ultimately breached reasonably should have realized that those damages would be a
likely consequence of breach.
-Unless the breaching party would have reason to know that her breach will have an
impact beyond the simple deprivation of the immediate contract performance, it is not
fair to hold her accountable for the consequential losses
-Foreseeability is gauged at the time of contracting, not the time of breach.
Ex. Hadley v. Baxendale
-The owners of a mill deliver a broken mill-shaft to a carrier for shipment to the
manufacturer so it could be used as a model for a new one. There was a delay in
the shipment. Because this was the mill’s only shaft, the delay idled the mill for
longer than necessary. Owners sued for the profit they lost for not being able to
operate the machinery. The court recognized that the delay directly caused the lost
profits, but declined to award those profits as damages.
-They found the carrier was not responsible for that loss because they were not
told that the mill owners only had one shaft and would have to shut down if a
breach occurred.
-UCC §2.715: it breaks down damages into Direct and Special Damages
Ex. Hector Martinez & Co. v. Southern Pacific Transp. Co.
-D delivered a dragline a month late. P sued for the fair rental value of the dragline
for the period it was delayed. The trial court dismissed the claim. P appeals. Trial
court’s decision is reversed. Suggested that D was liable to P for the rental cost of
the dragline for the period of the delay.
-The dragline has use value. It was being purchased to be used, not to be sold. It
is foreseeable that if its delivery is delayed, the plaintiff will have to rent a
replacement. Furthermore, even though it was also a possibility that the plaintiff
was purchasing the dragline to sell it, the plaintiff need not prove that their
injury was “the most foreseeable of all possible harms”.
b. General Damages
-Damages that arise naturally, in the ordinary course. Include all easily imaginable
direct damages, and all consequential damages that should be obvious to the breacher
at the time of contracting without any special or particular knowledge of the other
party’s circumstances.
Hypo: Ren contracts with Stimpy to fix the hole in the roof of his doghouse on the
day that the damage occurred. Stimpy breaches by not showing. Stimpy is
responsible for any replacement expenses and also for interior damage if it rains
before the hole is fixed (which could occur naturally from this fact set)
c. Special Damages
 -Unusual damages that are recoverable if the loss is of a nature and approximate extent
that could be conceived as a probability. Doesn’t require the breacher to foresee the
exact loss with great precision or specificity.
-If, however, there is no basis for the breacher to expect the loss at all, then he should
not be held liable for the loss
Hypo: Let’s say that, right under the hole in the roof, Ren has an expensive and
unmovable shrine devoted to Powdered Toast Man. If Stimpy did not know or have
reason to know of the shrine at the time he entered the contract, he cannot be held
liable for the damage. If, however, Stimpy had knowledge that Ren had some sort
of valuable object in his home, Stimpy might be held liable for the damage done to
the shrine.
II. Certainty
a. Overview
-If plaintiff is unable to show on the preponderance of the evidence the fact and extent
of her loss, she will not be able to recover damages.
-The evidence must be sufficient to persuade the fact finder that the loss is more likely
to have occurred than not, and must give the fact finder enough basis for calculating a
monetary reward
-Reasonable certainty involves two inquiries: 1.) whether the plaintiff has proved injury
and 2.) If injury is shown, whether the plaintiff has provided sufficient evidence to
enable the fact finder to determine the amount of loss
-As a general rule, the more clearly the plaintiff can demonstrate injury, the greater
effort the court will make to come up with some kind of compensation figure.
Ex. Chicago Coliseum Club v. Dempsey
P and D made a contract to put on a boxing match. D repudiated, having made a
contract to fight someone else at the same time. P sued for an injunction in Indiana
to keep him from training or taking part in the fight. P subsequently sued in Cook
County, Illinois for various damages, including damages from loss of profits,
expenses incurred prior to the contract signing, the costs of the action in Indiana,
and expenses incurred between the signing of the contract and the date of the
breach.
-The court advocates a reliance measure of damages for P, arguing that lost
profits are too uncertain, expenses incurred before the signing of the contract
were speculative, and the costs of the attempted injunction against Dempsey
were incurred at the plaintiff’s own risk.
III. Mitigation
a. Overview
-If the plaintiff has, through bad faith or unreasonable action (or inaction) aggravated
her damages, the defendant is not held responsible for the increase in those damages.
(She can still get the original damages, though)
-Must be an element of fault in plaintiff’s conduct. Plaintiff’s behavior in reacting to the
breach must be dishonest, opportunistic, vindictive, or that it so deviated from would
be expected, that it failed to conform to the community standards of rationality.
b. Reasonability Test (for Determining Duty to Mitigate)
-Restatement Second §350: losses are not recoverable if the plaintiff could have
avoided them without “undue risk, burden, or humiliation.”
-Conversely, plaintiff isn’t expected to mitigate if that action places her in a situation of
“undue risk, burden, or humiliation.” She is not expected to take heroic or exhaustive
action to keep damages at a minimum. Additionally, the plaintiff cannot be expected to
explore every conceivable possibility of avoiding loss or to try methods that reasonably
appear to be futile.
c. Types of Mitigation
i. Substitute Transaction as Mitigation
-If a substitute transaction is entered, the earnings from that transaction must be
deducted from plaintiff’s damages
 -Plaintiff must make reasonable and good faith efforts to find an equivalent
replacement at the most economic price. If plaintiff can, by exercising due
diligence, find an adequate substitute at a lower price than the one she entered
into, she will not recover the full cost of the substitute transaction.
-If the only substitute available is better than the contract performance, then the
court is likely to award the cost of it to the victim, even though it might give her
more than her expectation under the contract.
Ex. Shirley Parker v. Twentieth Century Fox
-Actress to appear in Bloomer Girl, which is not produced, but studio offers her
another role in Big Country, and she declines it.
-When a contract is for personal services, P is not required to accept any
position substantially different from, or inferior to, the one contracted for in
order to mitigate damages. It is not always clear whether or not work is
inferior, which forces the court to calculate imponderables. Measure of
recovery for a wrongfully discharged employee equals the amount of salary
agreed upon for the period of service, less the amount which the employer
affirmatively proves the employee has earned or with reasonable effort
might have earned from other employment.
ii. “Lost Volume” Situation
-If plaintiff is a manufacturer and a buyer breaches, and then the plaintiff sells
something the next day, plaintiff’s damages against defendant won’t be offset by the
second sale as mitigation of the breach
-There are 3 elements in proving that a “lost volume” scenario exists. First, seller must
establish it had excess capacity. Second, the additional sale would have been
profitable. And third, it must have been likely that plaintiff would have made the sale
even if buyer had not breached.
2. Reliance Damages (Reimbursement)
Goal: place promisee back in same position as if the promise had never been made. In other words, to
refund the wasted money spent by non-breaching party
A. Distinction Between Essential and Incidental Reliance
I. Essential Reliance
a. Overview
-When a loss or expense is incurred in performing an obligation under the contract
-If plaintiff cannot prove that she would have made a profit on the contract had it been
fully performed, he cannot claim a loss of profit.
b. Reliance for Losing Contracts
-What happens when non-breaching party would lose on K and has spent money in
reliance on the contract?
-If defendant can prove that the plaintiff would have suffered a loss in the event of
complete performance, the plaintiff’s reliance damages should be cut back to bring his
recovery into line with his expectations. The best approach to do this is to reduce the
recovery proportionally to the expected loss.
Hypo: Bob agrees to build house for dave for the price of 100,000. Bob begins work
and realizes it will cost him 120,000 to complete. After bob has spent 90,000, david
breaches. What result?
1.)determine how much plaintiff would have lost had K been completed
($20,000)
2.) determine total expenses for performance on contract ($120,000)
3.) determine % of the total costs the plaintiff has already incurred
(100,000/120,000=75%)
4.) multiply projected loss in $ by % of costs already expended and subtracted
from plaintiff’s reliance damages (20,000 x 75%=15,000,
90,000 – 15,000=$75,000)
II. Incidental Reliance
 -When a loss or expense is incurred as a consequence of the contract for the purpose of
enjoying or taking advantage of the benefit expected from that contract.
-A loss or expense incurred in anticipation of the contract, but before it is actually formed, is
usually not included in incidental reliance damages, but there are exceptions.
-essentially, it is an expenditure that is wasted as a result of the breach in contract
-Incidental reliance is recoverable only if the defendant foresaw or reasonably should have
foreseen the possibility of the loss or expenditure being incurred, and both the amount and
the nature of the loss were reasonable.
Hypo: Ren enters into a lease with Stimpy for the purpose of opening a log store. At the
time of signing the contract, Ren paid a deposit of $5,000 (essential reliance). After
contracting but before the breach, Ren also spent $1,000 on flyers (incidental reliance)
that say “Everyone loves a log! It’s better than bad--it’s good!” which he planned to
distribute to advertise the opening of the store. Since Stimpy would have reason to
foresee that Ren would want to advertise for the opening of his store, Ren is entitled to
both the essential ($5,000) and incidental damages ($1,000)
Ex. Anglia Television LTD. V. Reed
P made preparations to produce a play for TV. P contracted with D to star in the
production. D agreed to come to England and be available from September 9-October
11. D repudiated the contract and informed P that he was booked for another play and
would not be available for P’s film. P sued D and sought wasted expenditure but not lost
profits. The trial court allowed P to recover all of its damages from both before and
after D repudiated the contract and D appealed.
-A plaintiff is not limited only to expenditures incurred after the formation of the
contract in a claim for wasted expenditure from a breach of contract.
-Court held that if the expenditures incurred before the parties entered into the
contract were reasonably within the contemplation of the parties as likely to be
wasted if the contract were to be broken, that expenditure is recoverable. The court
held that in this case D knew or should have known that if he repudiated the contract,
fees incurred for directors and other expenses would be wasted.
3. Restitution Damages (Disgorgement)
Goal: place promisor back in the position he or she would have been in had the promise not been made.
Breaching party must return wrongful gain to plaintiff
A. Overview
-Restitution exists on the notion that the breach ended the life of the contract, so the defendant
is no longer justified in retaining the benefit of any performance that the plaintiff rendered to
her under it, and the value of that performance unjustly enriches her
-Restitution is based on the value of what has been done for the owner, commonly measured by
the market value of the service. Includes the cost of performance AND the value of the plaintiff’s
labor
-Under restitution, the contract is in effect cancelled and parties give back what they received
I. Restitution for Non-Breaching Party
-The injured party is entitled to restitution for any benefit conferred onto the breaching
party by way of part performance or reliance
-The injured party has no right to restitution if he has performed all of his duties under
the contract and no performance by the other party remains due other than payment of
a definite sum of money for that performance. (breaching party has no benefit)
Ex. Bush v. Canfield
Canfield sells wheat to Bush for 14K, 5K of which Bush puts down for a deposit.
Market price falls to 11K, and Canfield doesn’t deliver. Bush wants 5K in restitution
damages. Canfield: “I saved you 3K by not performing – so I only owe 2K.”
-Bush wins. Breaching party cannot sue “on the contract” for expectation
damages. Damages are based on value at the scheduled time and place of
delivery. Expectancy damages are not used.
Ex. Vines v. Orchard Hills
 P placed a down payment of $7,880 on a $78,800 condominium that was being sold
by D. Contract stipulated that D would retain down payment as liquidated damages
in case of default. P was then transferred to New Jersey and decided not to
complete the transaction for the real estate. P explained the circumstances to D but
D refused to refund the down payment.
-A defaulting party has the right to seek restitution. A party whose breach is not
willful can bring a claim to recover money paid that unjustly enrich the seller.
The breaching party must satisfy his burden of proof that the other party has
acquired a net gain in order for a claim for unjust enrichment to be sustained.
-Vines had the burden of proof in showing that the liquidated damages clause
was invalid and unenforceable, or that the seller’s damages were substantially
less than the amount of liquidated damages. The court held that the case be
remanded for the plaintiff to substantiate his claim.
II. Restitution in Favor of Party in Breach
-If a party justifiably refuses to perform on the ground that his remaining duties of
performance have been discharged by the other party's breach, the party in breach is
entitled to restitution for any benefit that he has conferred by way of part performance
or reliance in excess of the loss that he has caused by his own breach.
-To the extent that, under the manifested assent of the parties, a party's performance is
to be retained in the case of breach, that party is not entitled to restitution if the value
of the performance as liquidated damages is reasonable in the light of the anticipated or
actual loss caused by the breach and the difficulties of proof of loss
Ex. Britton v. Turner
Laborer agrees to work for a year, then quits after partial performance and sues for
payment for work done.
-P is entitled to restitution for any work done, minus the cost of completion and
any other damages. P cannot recover more than the original contract price,
otherwise breach is being rewarded. Essentially expectancy damages, since non-
breaching party is getting exactly what he would have received had the contract
been performed. But law is: breaching party can sue for restitution, just not
expectation.
B. Implied Contracts
-Implied agreements between two or more parties in situations wherein a contract is not
formed by traditional means.
I. Implied-In-Law Contract (quasi contract)
-A fictional contract created by courts for equitable, not contractual purposes. A quasi-
contract is not an actual contract, but is a legal substitute for a contract formed to
impose equity between two parties.
-The concept of a quasi-contract is that of a contract that should have been formed,
even though in actuality it was not.
-It is used when a court finds it appropriate to create an obligation upon a non-
contracting party to avoid injustice and to ensure fairness. It is invoked in
circumstances of unjust enrichment, and is connected with the concept of restitution.
-The defendant's liability under quasi-contract is equal to the value of the benefit
conferred by the plaintiff. The value is the fair market value of the benefit and not
necessarily the subjective value that the defendant enjoys.
Ex. Cotnam v. Wisdom
Surgeon finds unconscious, injured party in street, attempts to save his life but does
not succeed. Seeks payment for services.
-Plaintiff may recover, in quasi-contract, the reasonable market value of his
services even if services were ultimately worthless since patient died. In
emergencies assumption is that person would have contracted for the care had
he been able.
Ex. Martin v. Little, Brown & Co.
P sent a letter to D telling them that one of their books had been plagiarized. When
 D sued the third party infringer, P demanded compensation for his help. D sent him
$200, but he sued for one-third of the D’s recovery in the infringement suit and for
intentional infliction of mental distress based on D’s threat to countersue him. T.C.
ruled that there had been no contract made and that P could not recover for
quantum meruit because he had acted as a “volunteer”. T.C. dismissed the
intentional infliction of mental distress claim.
-In order to construe an implied comtract, an intention to pay on the part of D
must be reasonably inferable. In absence of a contract, restitution is only
available when one has been “unjustly enriched at the expense of another”.
Volunteers generally have no right to restitution.
-T.C. finds that the plaintiff was a volunteer. Therefore, the defendant book
company may have been enriched, but not unjustly. The plaintiff’s benefit was
given more in the nature of a gift.
II. Implied-In-Fact Contract
-A contract agreed by non-verbal conduct, rather than by explicit words. It is founded
upon a meeting of minds embodied from the conduct of the parties showing, in the light
of the surrounding circumstances, their tacit understanding of an agreement. Although
the parties have not exchanged words of agreement, their actions may indicate that an
agreement existed anyway.
Hypo: When a patient goes to a doctor's appointment, his actions indicate he
intends to receive treatment in exchange for paying reasonable/fair doctor's fees.
Likewise, by seeing the patient, the doctor's actions indicate he intends to treat the
patient in exchange for payment of the bill. Therefore, it seems that a contract
actually existed between the doctor and the patient, even though nobody spoke any
words of agreement. (They both agreed to the same essential terms, and acted in
accordance with that agreement.)

***Difference between Reliance and Restitution***

-Reliance and restitution are alternative remedies to expectation for when a contract is breached
-If plaintiff cannot recover expectation damages either because she cannot prove them or because
she has a negative expectation, she can still recover in either reliance or restitution
-Reliance is aimed at the recovery of wasted expenses, while restitution is designed to restore the
value of a benefit that the defendant has unjustly retained
4. Equitable Remedies
A. Specific Performance
I. Overview
-An order of the court which requires a party to perform a specific act, usually what is
stated in a contract.
-Orders of specific performance are granted when damages are not an adequate remedy.
Such orders are discretionary, as with all equitable remedies, so the availability of this
remedy will depend on whether it is appropriate in the circumstances of the case.
-Most common examples: unique property that cannot be substituted for on the market,
cases in which damages would be very difficult to prove with reasonable certainty, and
cases in which the defendant is financially incapable of satisfying a money judgment.
II. Determining Factors for Specific Remedies
a. Efficiency
-It is usually more efficient for courts to reward monetary damages.
-It is only when there is no reasonable possibility of acquiring a substitute (land is
usually considered unique and irreplaceable) or no reasonable prospect of being able to
collect a monetary award that specific performance becomes an appropriate remedy.
Ex. Advertising Corp. v. S&M Enterprises
Advertising agency rented out a building that faced an exit ramp of a tunnel and
was therefore visible to traffic using the ramp. Lessor breached contract.
Advertising agency sued for specific performance claiming the exposure to the wall
of the busy off-ramp made it unique. Court rejected this claim, stating that
 uniqueness must be judged in light of the difficulty or ease of measuring the cost of
a substitute having the unique qualities of the leased property. Since the agency
had subleased the space, the court ruled that the lease was reliably quantifiable.
There is a much stronger argument for specific performance when the information
available to assess the financial loss resulting from the breach is scanty or unreliable,
leading to a high degree of uncertainty.
b. Involuntary Servitude
-Courts shy away from requiring a person to perform any act under specific
performance, as that would be tantamount to slavery.
c. Balance of Equities and Hardships Between Parties
-Special circumstances exist when the hardships of the breaching party outweigh the
plaintiff’s entitlement to her “benefit of the bargain”
Ex. Kilarjian v. Vastola
Kilarjians bought Vastola’s house. The Vastolas breach because Mrs. Vastola was
suffering from a progressive neurological disorder which disabled her and made it
very difficult for the Vastolas to move. Court rules in favor of the Vastolas because
it would be unjust to evict an ill woman from her home.
d. Practicality of Enforcement
-If performance involves something more than the mere delivery or conveyance of
property or documents, problems of supervision may result. Performance by defendant
may require judicial monitoring to ensure that a reluctant defendant does not provide a
grudging performance that falls below the reasonable standards under the contract.
Courts will not always refuse to supervise, but it is an important consideration to weigh
against the appropriateness of granting specific performance
e. Vague Orders
-Specific performance will not be decreed unless the contract is definite enough to form
the basis of a clear order
f. Partial Remedies
-In the proper circumstances, a court has the discretion to order specific performance
of part of the contract in combination with an award of monetary damages for the
remainder
B. Injunctions
I. Overview
-A court order that either compels the defendant to perform a specified act (mandatory) or
prohibits the defendant from performing a specified act (prohibitory)
a. Mandatory Injunctions
-A court order compelling defendant to render the performance that he promised
in the contract. Really just an order for specific performance
b. Prohibitory Injunctions
-A court order that prohibits the breaching party from doing certain acts.
-May be helpful to a plaintiff where it is not aimed directly at conduct in violation of
the contract, but instead strikes at the defendant’s motivation to breach. (Ex.
Eliminating breaching party’s ability to enter into a more advantageous contract
during the same time period as the original contract)
-A court will not enjoin the defendant’s conduct unless the plaintiff can show that
the less intrusive legal remedy of damages in inadequate
-Additionally, the plaintiff’s rights under the contract must outweigh and hardship
that the injunction might impose on the defendant, and problems of supervising the
order, and any harm to the rights of the innocent third parties or the public
interest.
5. Liquidated Damages
Goal: Allows parties to settle in advance what damages will be due in the event of a breach.
A. Overview
-Even if the breach causes the plaintiff greater loss than that provided, the plaintiff’s recovery is
limited to the amount agreed upon in the liquidated damages clause.
 -A liquidated damages clause can cover both parties or just one party. If liquidated damages
clause covers breach by only one party, a breach by the other will require proof of damages in
the usual way.
B. Advantages for Liquidating Damages
I. Efficiency
-If a liquidated damage clause is implemented into a contract, it is easier and more
efficient to obtain relief if a breach occurs, especially if the transaction involves a venture
that is speculative.
II. Bypasses Normal Considerations
-Plaintiff avoids the problem of establishing foreseeability, mitigation, and certainty.
III. Foreseeability for Defendants
-Defendant has a predetermined liability so that she can better predict the cost of breaching.
C. Disadvantages for Liquidating Damages
I. Unreliable Forecast of Probable Loss
-Pretty much impossible to forecast precisely what the actual losses would be. If the
outcome of the transaction is uncertain or speculative, reasonably accurate prediction of
the impact of breach becomes more unlikely.
II. Liquidated Damages as Penalty
a. Overview
-A party will sometimes set liquidated damages in such a way as to make breaching too
costly for the other party. This is called imposing a penalty.
-Courts refuse to enforce liquidated damage clauses that have the effect of imposing a
penalty on the breaching party.
b. Dueling Policies Behind Refusal to Enforce
-Policy of freedom of contract wants to enforce the parties’ agreement on damages,
even if it provides for relief that goes beyond actual loss.
-Policy of confining contractual relief to economic compensation dictates that a
provision that goes beyond that should not be enforced.
-Also an issue of fairness.
D. Determining Validity of the Clause
I. Anticipated Harm (Evaluation of Liquidated Damages as at Time of Contracting)
-To decide the reasonableness of anticipation of harm, court must consider two factors:
1.) Expected difficulty of proving loss.
2.) Whether the estimate of harm was a genuine attempt to predict likely loss.
-The more uncertain and speculative the damages, the less rigorous the court will be in
examining the reliability of the pre-estimate.
-Conversely, if anticipated damages are relatively mechanical and routine, the parties are
held to a stricter standard in trying to estimate them.
-Courts primarily concerned over whether estimation of potential damages was genuine
II. Actual Harm (Comparison Between Anticipated and Actual Loss)
-Although the comparison between anticipated and actual loss may be of secondary
importance when evidence of genuine estimation is strong, courts won’t be oblivious to a
substantial discrepancy between the damages as agreed and as actually suffered.
-When it is possible to prove actual damages, courts balk at enforcing agreed damages that
clearly and substantially exceed plaintiff’s loss.
-When it is impossible to prove actual damages, the issue falls away.
-Useful Diagram (p. 685 E&E)
 Part II:
Formation of Contract

Assent

1. Overview
-Mutual assent is the basis of contract. Means that each party must intend to enter the contract and
must agree with the other to do so on mutually acceptable terms.
-Courts can only enforce intentions that are communicated: employed outward signals such as
words and actions that are observed and given meaning and interpreted by another.
-Communication can be fouled up in many ways: utteror’s thinking may be confused or fuzzy, a poor
choice of words or actions may obscure intent, a manifestation of intent may be perceived
differently or misconstrued by the person to who it is addressed, or there might be secret
reservations or deviousness on the part of one of the parties
2. Objective Test
A. General Principles
I. Overview
-For a contract to be made and to be valid, both a “reasonable person” and the offeree in
question would need to understand offeror’s conduct as an acceptance.
-If agreement is apparent through the manifestations of assent, reasonably interpreted, a
contract is formed on the terms reflected in the manifestation
-The court’s focus on the manifestation of intent is not absolute. Evidence of a party’s state
of mind may sometimes be helpful in determining or giving context to words or conduct,
provided that the subjective evidence is credible and compatible with the overt behavior.
-In the absence of compelling contrary indications, however, assent is legally sufficient if
each party, by the deliberate use of words or conduct, manifested agreement to be
contractually bound.
B. Policies (for Solving Communication Disputes)
-Assent Policy: dictates that contractual obligation should not be imposed on a person who
did not agree to be bound.
-Protecting Reliance Policy: Promises must be relied upon if there is to be any confidence in
the system of commercial exchange.
-The assent policy must be tempered by the goal of protecting the expectations of one who
reasonably relied on the appearance of assent.
C. Objective Test Factors
I. Legal Standards for Determining Objectivity of Assent
-Courts are not concerned with what the words or actions did mean to either party during
the “offer,” but how they should have been understood if interpreted reasonably, in the
context of the transaction, by a person with the knowledge and attributes of the party to
whom they were directed.
-Objective Test is aimed at balancing the requirement of assent with the protection of
reasonably reliance. (See Policy section above)
Hypo: Penny borrowed money from George in the past, but never repaid the loan. One
day she again asks George to lend her $50. George, tired of Penny’s sponging, says
sarcastically, “Yes, and you’ll repay it like you did last time!” It does not matter that
George thought he was saying “No,” or that Penny (who is an idiot) thought that he was
saying “Yes, and you can take your time about repaying me.” The real issue is how
Penny, acting reasonably, should have understood the response.
II. The Evidentiary Aspect
 -An objective standard must focus on objective evidence to establish contractual intent.
Some examples: a signature in writing, spoken words, or behavior pertinent to the
transaction.
-Subjective evidence is often of questionable value. A court may admit subjective testimony
as having some role in explaining the meaning of the manifestation but it is not likely to be
given weight unless it can be reconciled with the objective evidence or else explains why
the objective evidence should be discounted.
III. The Relationship between Objective and Subjective Elements
-When parties disagree on the meanings of their words and actions, the intent must be
decided by the factfinder. The resolution of ambiquity, obscurity, and miscommunication is
accomplished by an evaluation of observable, external signals used by the parties to
communicate intent.
-If it is clear that they made a contract, the focus of inquiry is on the question of what terms
were agreed. The external standard is used because an inquiry into what each party had in
mind is neither efficient nor fair. It would place too heavy an emphasis on unreliable
evidence and fails to protect reasonable reliance on words or conduct.
IV. Lack of Serious Intent
-Might be meant as a joke or otherwise not a serious offer. Just depends on the context and
the facts presented. If P could reasonably take the offer as a serious offer, then court will
hold defendant to that offer.
Ex. Embry v. Hargadine, McKittrick Dry Goods Co.
A meeting occurres wherein P said that he would seek work elsewhere unless his
contract was renewed. Hargadine’s president, McKittrick, told P ‘Go ahead, you’re all
right. Get your men out and don’t let that worry you.’ Embry remained with the
company until he was fired on February 15th. P sued.
-To form a valid contract there must be a meeting of the minds and both parties must
agree to the same thing in the same sense. If a man conducts himself such that a
reasonable person would believe that he was assenting to the terms proposed by
another party, and that other party upon that belief enters into the contract, that
man would be equally bound whether or not he had actual subjective intent.
-If what D said would have been taken by a reasonable man to be an employment
contract, and P understood it as such, it constituted a valid contract of employment
for the ensuing year. McKittrick’s subjective intent was not relevant.
Ex. Lucy v. Zehmer
One evening after several drinks, D wrote a contract on a restaurant bill in which he
agreed to sell his farm to P for $50,000. D later insisted that he had been intoxicated
and thought the matter was a joke, not realizing that P had been serious. P claimed that
he was not intoxicated and believed that D was also sober. D testified that he was
already “high as a Georgia pine” when he began drinking with P. He claimed that he was
merely bluffing to try to get D to admit that he did not actually have $50,000. P brought
suit for specific performance when D refused to complete the transaction.
-The court looks to the objective, outward expression of a person and not to their
secret and unexpressed subjective intent. The test is whether a reasonable person
would conclude that the party’s words and actions constituted an offer.
-In this case D’s acts and words could be reasonably interpreted by P as an offer to sell
his farm. The parties discussed the matter for over forty minutes, addressed the issue
of examination of title, and both D and his wife signed the agreement.
3. Manifestation of Assent
I.