Special Remedies

• Author: Franklin G. Snyder, Mark Edwin Burge
• Pages: 543-565

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UNIT 26: SPECIAL REMEDIES 543

Unit 26

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REMEDIES

Part Four

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Special Remedies

FOCUS OF THIS UNIT

Having covered the “big three” principal measures of damages in American

contract law (expectancy, reliance, and restitution), along with the limitations on

such damages (foreseeability, Avoidability, and certainty), we now turn our attention

to what we here categorize as “special remedies.” The two remedies covered in this

unit are, as you will see, more narrowly available than the big three, but they are an

integral part of the toolkit of the practicing lawyer who must understand when they

are and are not in play.

Specific Performance. One type of special remedy that you have heard of

elsewhere by this point is specific performance. This remedy is the particular

contract-law application of the broader power of courts to issue injunctions—orders

compelling specific action or non-action by a party, generally issued under threat of

contempt for non-compliance. You may have encountered injunctive relief (or at least

references to it) in other law school classes. An order of specific performance compels

a party to do what the party promised. In a contract to buy land or goods that qualify

as truly “unique,” for example, a court can order the breaching seller to perform the

deal. In much of the world, this judicially-managed remedy is preferred and is used

frequently. For common-law jurisdictions like the United States, specific performance

is disfavored and applicable only in certain qualifying situations. Be aware that some

courts discussing specific performance do so with little or no use of the term “specific

performance.” If, however, a court is evaluating a party’s request for an injunction

and the injunction is one that would order a breaching party to perform its

contractual obligations, then the underlying issue is one of specific performance.

Sections 357 through 369 of the Restatement (Second) of Contracts provides

some substantial detail on when specific performance is and is not available, and this

unit addresses some of those highlights. In Uniform Commercial Code cases, specific

performance is sometimes available for buyers and sellers when the other side

breaches. The sellers’ specific performance remedy is under section 2-709, which is

entitled “Action for the Price.” This provision does not raise many of the concerns of

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544 CHAPTER VIII: REMEDIES

other types of specific performance because a buyer’s breach is usually a simply

failure to pay money. As you should know by now, the common-law system has

absolutely no qualms about awarding money damages. For buyers, the specific

performance remedy is more narrowly tailored, and section 2-716 (“Buyer's Right to

Specific Performance or Replevin”) mimics many of the restrictions included in the

Restatement, such as by reference to “unique” goods. Finally, considering that

countries with a civil law system do not disfavor specific performance nearly as much

as common-law jurisdictions, it should come as no surprise that the CISG provides

for the remedy of specific performance. Article 62 gives the seller an action for the

price very much like UCC section 2-709. Article 46(1) provides that a buyer generally

may require the seller to perform his obligations unless the buyer has resorted to an

“inconsistent” remedy.

Liquidated Damages. Can parties contractually agree in advance what their

damages will be in the event of breach? The answer to that question is a definite and

unequivocal . . . sometimes. Damages agreed to in advance are known as liquidated

damages, and they are the second special remedy that we will cover in this unit. The

term “liquidated” does not mean that the party is awarded water. As used in this

context, liquidated refers to a claim being reduced to a specific amount, as opposed to

a claim that is “unliquidated” and not yet known.

1

If a contract term provides for

liquidated damages that function as a “penalty” imposed on the breaching party,

American courts will refuse to enforce the clause.

Section 356 of the Restatement (Second) of Contracts describes the well-

established rules on when liquidated damages provisions are enforceable. The

amount chosen by the parties must be a reasonable estimate of anticipated or

difficult-to-prove losses. For sale-of-goods contracts, Uniform Commercial Coe section

2-718 generally tracks the common-law restrictions on liquidated damages, though it

also contains a “statutory liquidated damages” rule that is available as a remedy

under some specified circumstances. The UCC allows a party to retain some or all of

a prepaid deposit following the other side’s breach, even where the contract does not

provide for liquidated damages. The CISG, for its part, does not address the question

of liquidated damages, either by sanctioning them or restricting them. Such silence

raises the possibility that a court will apply its own local law on the matter, even

where otherwise applying the CISG.

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1

[You have probably heard the word “liquid” used in the same sense in other contexts, such as

“liquid assets” (cash and things can be quickly and easily turned into cash) or “liquidity crises” for

banks (that is, having plenty of assets but not enough cash to pay bills. Thus, “liquidating” in this

sense means turning an unquantified legal right into a specific sum of cash. —Eds.]