Remedies and Third-Party Rights: every key term you need (+ practice quiz)
25 flashcard terms for Contracts Topic 8, written to match the course framework. Study them here, then drill them as interactive flashcards, or test yourself with the 15-question quiz — free, no account needed.
The default contract remedy, placing the injured party where full performance would have, measured by loss in value plus other losses minus costs and loss avoided.
Reliance interest
A measure reimbursing expenditures made in reliance on the promise, used where expectation is too speculative or where estoppel supplies the ground of enforcement.
Restitution interest
A measure stripping the breaching party of benefits conferred, available even where the contract would have been a losing one for the plaintiff.
Hawkins v. McGee
The hairy hand case awarding the difference between the promised perfect hand and the hand resulting from surgery, illustrating expectation rather than out-of-pocket recovery.
Cost of completion measure
Damages equal to the price of finishing or correcting defective work, the normal construction remedy unless it is grossly disproportionate to the loss in value.
Diminution in value measure
Damages equal to the difference between the value of the property as promised and as delivered, used where completion cost would produce economic waste.
Peevyhouse v. Garland Coal
A controversial decision limiting a landowner to the small diminution in value rather than the far greater cost of the promised restorative grading.
Certainty requirement
Damages must be proved with reasonable certainty, which is why lost profits of a new venture with no track record are frequently denied.
Foreseeability of damages
Consequential losses are recoverable only if they arose naturally from the breach or were within the contemplation of both parties when the contract was made.
Hadley v. Baxendale
A mill owner could not recover profits lost during a delayed shaft delivery, because the carrier had no notice that the mill would stand idle without it.
Mitigation of damages
The injured party may not recover losses it could have avoided by reasonable effort, though the burden of proving avoidable loss rests on the breaching party.
Rockingham County v. Luten Bridge Co.
A builder that kept constructing a bridge after the county cancelled could recover only its costs to the date of repudiation plus lost profit, not the wasted later work.
Parker v. Twentieth Century-Fox
An actress need not mitigate by taking employment that is different or inferior, so refusing a western in place of a musical did not reduce her recovery.
Incidental damages
Reasonable costs of dealing with the breach, such as inspecting, transporting, storing, or arranging substitute goods and services after the other side defaults.
Consequential damages
Losses beyond the value of the performance itself, such as lost profits or injury to person or property, subject to foreseeability, certainty, and mitigation limits.
Liquidated damages clause
An agreed damages figure enforceable where actual harm was difficult to estimate at contracting and the amount is a reasonable forecast, rather than an in terrorem penalty.
Penalty clause
An agreed sum disproportionate to any anticipated or actual loss, which courts refuse to enforce because it coerces performance rather than compensating for its loss.
Specific performance
An equitable order compelling performance, granted where damages are inadequate as with land or unique goods, provided the terms are definite and supervision is feasible.
Cover under UCC 2-712
A buyer's good-faith purchase of substitute goods without unreasonable delay, recovering the difference between the cover price and the contract price plus incidental and consequential loss.
Market damages under UCC 2-713
A buyer who does not cover may recover the difference between the market price at the time it learned of the breach and the contract price, less expenses saved.
Lost volume seller
A seller with capacity to supply both the breaching buyer and the resale purchaser recovers its lost profit, since resale did not truly replace the broken deal.
Intended beneficiary
A third party whose benefit the promisee intended and who may enforce the promise, classified traditionally as a creditor beneficiary or a donee beneficiary.
Incidental beneficiary
A third party who happens to gain from performance without any intent to benefit her, and who accordingly acquires no right to enforce the contract.
Lawrence v. Fox
The foundational case allowing a creditor of the promisee to sue the promisor directly on a promise made for the creditor's benefit.
Assignment and delegation
Rights may be assigned and duties delegated unless the contract forbids it or the change would materially alter risk; the delegating party remains liable absent a novation.