performance, discharge, and, remedies. if you cant give me your word of honor, will you give me your...
Post on 29-Mar-2015
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Performance, Discharge, and, Remedies
“If you can’t give me your word of honor, will you give me
your promise?” Samuel Goldwyn,
Hollywood producer
“Everyone complains of his memory, none of his judgment.”
Francois, duc de la Rochefoucauld, French writer
Discharge: Party is discharged when it has no more duties under a contract
Most contracts are discharged by full performance
Sometimes the parties discharge a contract by agreement
Rescind: Terminate contract by mutual agreement
Strict performance: Requires one party to perform its obligations precisely, with no deviation from the contract terms
Substantial performance: Occurs when one party fulfills enough of its contract obligations to warrant payment◦ A party that fails to perform substantially:
Receives nothing on the contract and will only recover the value of the work, if any
Parties to a contract must carry out their obligations in good faith
The difficulty is applying this general rule to:◦ Wide variety of problems that may arise
Generally make contract dates strictly enforceable
Merely including a date for performance does not make time of the essence
When one party breaches a contract, the other party is discharged
Material breach◦ Generally courts will discharge only if a party
committed a material breach Statute of limitations: Will limit the time
within which the injured party may file suit
True impossibility◦ Something has happened making it utterly
impossible to fulfill the promise Generally limited to:
Destruction of the subject matter Death of the promisor in a personal service contract Illegality of the contract
Commercial impracticability ◦ Some event has occurred that neither party
anticipated, making the contract extra-ordinarily difficult and unfair to one party
Frustration of purpose◦ Some event has occurred that neither party
anticipated and the contract now has no value for one party
A remedy is the method a court uses to compensate an injured party
Interest: A legal right in something
Expectation interest◦ Designed to put the injured party in the position
she would have been in had both sides fully performed their obligations Direct damages: Flow directly from the contract Consequential damages: Resulting from the
unique circumstances of this injured party Incidental damages: Minor costs that the injured
party suffers when responding to the breach
Reliance interest◦ Puts the injured party in the position he would
have been in had the parties never entered into a contract
Restitution interest◦ Designed to return to the injured party a benefit
that he has conferred on the other party
Equitable interest◦ When money is not sufficient to help the injured
party: Court may order a transfer of property or may issue
an injunction to prevent a particular action from continuing
◦ Specific performance: Forces both parties to complete the deal
◦ Injunction: Court order that requires someone to do something or to refrain from doing something Preliminary injunction Permanent injunction
Mitigation of damages◦ A party may not recover for damages that could
be avoided with reasonable efforts Mitigate: To keep damages as low as possible
Liquidated damages: Clause stating in advance how much a party must pay it if it breaches◦ A court will generally enforce a liquidated
damages clause if : At the time of creating the contract it was very
difficult to estimate actual damages Liquidated amount is reasonable
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