American Contract Law for a Global Age, 2017a

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 wellestablished
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.]
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544 CHAPTER VIII: REMEDIES