Liquidated Damages and Specific Performance

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Liquidated Damages and Other Agreed Remedies
(1) The purpose of contract remedies is to
compensate the injured party, not to punish the
breaching party. Wassermans v. Township of
Middletown
(2) Have the contracting parties included a
contract term that provides for a remedy in the
event of breach? If so, what is the meaning of
that term, and to what extent are their agreed
remedies enforced as written, or, alternatively,
limited by (1) or by other contract law
principles (e.g., unconscionability, conflicts
with public policy)?
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Liquidated Damages and Other Agreed Remedies
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Liquidated Damages and Other Agreed Remedies
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Liquidated Damages and Other Agreed Remedies
Whats going on?
Parties cannot use their agreement to evade the
policy against punitive remedies in contract
law Recall the efficient breach hypothesis a
party should be entitled to breach if it can
breach, pay damages (satisfying the expectation
of the nonbreaching party), and still be better
off Is the nonbreaching party using the agreed
enforcement term to obtain the expected value of
the deal that the parties bargained for, or is
the agreed enforcement term being used to get a
better deal from the plaintiff? Does the agreed
remedy clause coerce a party into performing a
contract that it might rationally conclude it
should breach?
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Liquidated Damages and Other Agreed Remedies

• Specific performance of a contract is available
  as a remedy IF
• The Jurisdictional hurdle SP is an equitable
  remedy The plaintiffs remedies at law are
  inadequate (the subject matter of the contract
  is unique damages would not adequately
  compensate the plaintiffs expectancy AND
• Equity supports granting the remedy sought.
  Factors include
• Ability of the court to supervise performance
  (since failure to comply would constitute
  contempt). Definiteness? Does the contract
  supply standards that the court may apply?
• Equitable limitations pltf must have clean
  hands court will engage in balancing the
  hardships
• Requiring mandatory performance (do this) can
  be more problematic than requiring negative
  performance (dont do that)
• Special problems affect employment contracts (sp
  is disfavored), real estate contracts (land is
  almost always unique)

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Specific Performance
Lets go to the videotape!
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Specific Performance
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Specific Performance
If Dell Computer sues Microsoft for breach of
contract, alleging that Microsoft supplied Dell
with a defective operating system for
installation on Dell computers sold to consumers,
what should Dells remedy be? Damages, or
specific performance?