Special Remedies

AuthorFranklin G. Snyder, Mark Edwin Burge
Unit 26
Part Four
Special Remedies
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 injunctionsorders
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
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.
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.
[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.]

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