Contract basics- Damages

14 07 2008

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.

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6 10 2009
Wedding photography disaster- protect yourself « Photo Blawg

[…] photographers, the lesson is that an important element of your contract is a determination of what happens if something goes wrong.  Disasters happen. Car accidents and family emergencies happen. Even good equipement, on rare […]

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