Contract basics- Damages

When a contract is breached, there are consequences, generally called damages.

How you write your contract can greatly affect how those consequences affect you. But first, you need to understand the types of damages.

A court will generally take one of three approaches to a breach of contract case, all aimed at providing relief for the non-breaching party (the person who did not break their promise).

1. Expectation Damages- to put the non-breaching party in the position it would be if the other party had fulfilled it’s obligation.
2. Reliance Damages- to put the non-breaching party in the position it was in if the contract had never been made- generally reimburses costs from relying on the fact that the contract was in place.
3. Restitution Damages- restores to the party, benefits conferred on the other.

Applied to photography contracts, this might look like the following:

If a photographer provides photos and the client doesn’t pay:

• Expectation damages would be the money the photographer expected to earn (easy enough).
• Reliance damages would be the money the photographer spent on expenses to take the photo (probably not a good choice in this scenario).
• Restitution damages would be the return of the photos (but if they are already published, this is also not a good option)

If a client hires a photographer and the photographer doesn’t follow through:

• Expectation damages might include the cost of hiring another photographer to do the work. If Photographer 1 who breached the contract, was replaced by a more expensive photographer, Photog 1 wouldn’t be liable for the entire cost of Photographer 2, but rather the difference in the cost between the two. Occasionally, on the People’s Court, a wily bride will try to claim expectation damages that includes the entire cost of restaging the wedding because she doesn’t like the photos. That is usually not allowed (but would fall under expectation damages).
• Reliance damages. If a shoot was canceled because of the photographers breach, reliance damages might include any costs related to setting up of the shoot that couldn’t be recovered, such as location fees, talent, travel of the art director, you name it. In an advertising shoot, this could really add up.
• Restitution damages would simply be the amount paid, including expenses and other benefits, to the photographer until the cancellation.

This is an overview, so there are other factors involved. For example, the non-breaching party would have to attempt to mitigate the damages before getting anything. This is called mitigation of damages. In addition, terms that you write into your contract can limit the damages available. This is called remedy limitations (or if it is a specific amount, liquidated damages). But such limitations have to be reasonable.

I have never had to cancel a photo shoot or had a client reject my work. But things happen, accidents happen, people get sick. And photography is subjective. One clients’s “great job” might be another client’s “this is horrible.”

So in order to prevent the possibility of high expectation or reliance damages, I have written a limitation of damages clause into my contract.

It says this:

“The liability of Photographer in relation to any assignment, in any event, shall be limited to the refund of total fee paid to her for the assignment in question.”

Keep in mind that a breach of contract, on either side, is never meant to be a windfall. In fact, courts specifically try to keep it from becoming that. So you can almost never get emotional damages or punitive damages for a breach of contract, unless it is accompanied by a tort like fraud or negligence. You can only get reimbursed for what you lost. Thus it is always best to settle your differences outside of court.

Contract basics- an exchange

While we are all subject to the laws of our city, state, and country, contracts are kind of like laws that two or more people have agreed to create to govern their relationship. You only have to follow the rules if you choose to enter the contract, but then you are bound by law.

More specifically, a contract is an exchange of one or more promises. So it is a promise, but it is also an exchange. For example, a photographer promises to take a photo and let a client use it, and in exchange, the client promises to pay the photographer a certain price.

Seems obvious, but it does have implications. If there is no exchange, there is no contract. If the promise was not voluntary there is no contract (this gets you off the hook if a gun is held to your head, but doesn’t cover the mere fact that the other party has the upper hand).

A contract also has to have something called consideration, an important term. Consideration is that thing that you are exchanging. Both people have to have traded something for a contract to be in place. Otherwise it is a gift. So if client agrees to pay and photographer agrees to shoot, that is an exchange. If photographer agrees to shoot for free (or client wants to give away some money), there is no contract. A one-sided promise can’t be enforced. The benefit of agreeing to shoot for free, is that if you change your mind, you haven’t really broken a contract (there are some exceptions, but that is for another day). They can’t make you shoot for free. Oh yippee!

This also has implications because consideration has to be something that you weren’t already obligated to do. For example, if you promise to abstain from drinking until you are 21, in exchange for college tuition, you might not actually have an enforceable contract. You already had a legal obligation to abstain from drinking until you are 21. So you have not really given anything up.

What do you mean, “one or more promises?”

A contract can still only consist of one promise because sometimes a contract is accepted at the same time it is created. More on offer and acceptance later, but basically if I offer to pay you if you walk my dog, and you walk my dog, you are accepting my offer (and putting the contract into play) at the same time that you are performing your side of the bargain

So imagine this scenario:

• You (a photographer) get a call for a last minute assignment.
• You say you aren’t sure, but you will try to make it.
• Client says: okay, well if you can go great, if not, fine.
• You haven’t made a contract yet. If you don’t go, you have not broken the contract.
• But if you go, you have done two things. You have made a contract and you have performed your part

Let me know if this is interesting, or if I should stick to the Floo Powder posts.