1
Chapter 16
Breach of Contract and Remedies
VI. Answers to Critical Legal Thinking Cases
16.1 Liquidated Damages
Yes, the liquidated damage clause is enforceable and 845 UN Limited Partnership (845 UN) may keep the
$8 million down payments paid by Cem Uzan and Hakan Uzan for condominiums to be built by 845 UN
as liquidated damages because of their breach of the contract. A liquidated damages clause is a clause in a
contract that stipulates the damages that will be paid by a breaching party. Here, there was a liquidated
damage clause in the contract between the builder and the buyers that permitted the builder to keep the
16.2 Specific Performance
Yes, C&H can recover the liquidated damages from Sun Ship. Contracts are contracts because they
contain enforceable promises, and absent some overriding public policy, those promises are to be
enforced. Here there was a liquidated damage clause entered into by two experienced businesses. They
could have each assessed the value of the risk in this case. C&H faced an uncertain loss if Sun Ship did
content to take the risk of the contract turning out in a particular way, a contracting party should not be
released from the contract in the face of no misrepresentations or other want of fair dealing. Here, Sun
Ship agreed to pay liquidated damages of a fixed amount after assessing its risks. Merely because the
other party, C&H, figured out a way to have its sugar transferred from Hawaii to the processing plants in
Court of Appeals for the Ninth Circuit)
16.3 Damages
Yes, Microform materially breached its contract with Hawaiian Telephone. When a contract provides for
a definite time for performance, failure to meet the deadline is a material breach of the contract. In this
2
Hawaiian Telephone. Hawaiian Telephone Co. v. Microform Data Systems Inc., 829 F.2d 919, 1987 U.S.
App. Lexis 13425 (United States Court of Appeals for the Ninth Circuit)
16.4 Damages
project into various components and testified as to separate costs to complete each part. The court also
held that where the nonbreaching party maintained a long-term lease for equipment used on the project
and such equipment was left idle due to the breach, consequential damages were appropriate. Moreover,
because a nonbreaching party is under a duty to use reasonable means to avoid loss and damage,
16.5 Specific Performance
Yes, an order of specific performance is an appropriate remedy in this case. Specific performance may be
decreed where the goods are unique or in other circumstances where money damages do not adequately
compensate the plaintiff. In this case, the court found that the uniqueness of Claiborne’s cosmetics line,
diligent fashion, all purchase orders placed by Claiborne in accordance with the contract. Liz Claiborne,
Inc. v. Avon Products, Inc., 141 A.D.2d 329, 530 N.Y.S.2d 425, 1988 N.Y. App. Div. Lexis 6423
(Supreme Court of New York)
16.6 Injunction
effect and intent as enjoining Baker herself; she would be deprived of her livelihood and pressured to
return to Beverly Glen. Moreover, Beverly Glen has an adequate remedy by way of damages; an
injunction adds nothing to Beverly Glen’s recovery other than to coerce Baker to honor her contract.
Accordingly, the court affirmed the order of the trial court denying injunctive relief. Beverly Glen Music,
2729 (Court of Appeal of California)
VII. Answer to Ethics Case
16.7 Ethics Case
3
Narvaez and her insurance company Gallant. Gallant paid its insurance limits of $20,000 and left its
insured, Narvaez, responsible for the remainder. If Gallant had originally settled the case for the policy
limit of $20,000, Narvaez would not have been liable for damages. The appellate court stated: “Where an
insurer is pursued for its refusal to settle a claim, ‘bad faith’ lies in an insurer’s failure to give at least
consideration her interests as while as its interests in deciding whether to settle the case. Here, Gallant
ignored the interests of Narvaez when it refused to settle the case for $20,000, as recommended by many
of its executive and expert employees. O’Neill v. Gallant Insurance Company, 769 N.E.2d 100, 2002 Ill.
App. Lexis 311 (Appellate Court of Illinois, 2002)