contract performance
TRANSCRIPT
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Copyright 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.
Chapter 10: Contract Performance,
Breach, and Remedies
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Copyright 2009 South-Western Legal Studies in Business,
a part of South-Western Cengage Learning.2
Introduction
How does a party know when his or herobligations under the contract are at anend?
A party may be discharged from a validcontract by:
A condition occurring or not occurring.
Full performance or material breach by theother party.
Agreement of the parties.
Operation of law.
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1: Performance and Discharge
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Performance and Discharge
Conditions: Possible future event, the
occurrence or nonoccurrence ofwhich will trigger the performance of a
legal obligation or terminate an
existing obligation under a contract.
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Conditions
Types of Conditions:
Conditions Precedent.
Conditions Subsequent.
Conditions Concurrent.
Express.
Implied in Fact.
Implied in Law.
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Discharge by Performance
The contract comes to an endwhen both parties fulfill theirrespective duties by performing theacts they have promised.
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Types of Performance
Complete Performance.
Substantial Performance (minorbreach).
Case 10.1J acobs & Young v. Kent
(1921). Performance to the Satisfaction of
Another.
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Breach of Contract
Breach of Contract - the
nonperformance of a contractual
duty.
Material breach occurs when there
has been a failure of consideration. Discharges the non breaching party
from the contract.
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In a minor breach:
Duty to perform is not excused and
Non-breaching party must resumeperformance of the contractualobligations undertaken.
Non-breaching party may sue fordamages.
Time For Performance: if none, stated, areasonable time is implied.
Breach of Contract
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Anticipatory Repudiation
Before performance is due, one party
refuses to carry out the responsibilities of
the contract.
Treated as a present, material breach, and
non-breaching party may immediately
bring suit for damages, and look for a newcontract.
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Discharge by Agreement
Discharge by Rescission.
Discharge by Novation:
Previous obligation.All parties agree to new contract.
Extinguishment of old obligations.
New Contract Formed. Discharge by Substituted Agreement.
Accord and Satisfaction.
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Discharge by Operation of Law
Alteration of The Contract.
Statutes of Limitations.
Bankruptcy.
Impossibility or Impracticability.
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Impossibility or Impracticabilityof Performance
Objective Impossibility of Performance.
Death or incapacitation prior toperformance;
Destruction of the Subject Matter; or
Illegality in performance. Temporary Impossibility.
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Impossibility or Impracticabilityof Performance
Commercial Impracticability.
Key: Circumstances not foreseeable. Case 10.2 Facto v. Pantagis (2007).
Frustration of Purpose.
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2: Breach of Contract andRemedies
Damages.
Rescission and Restitution.
Specific Performance.
Reformation.
Recovery Based on Quasi Contract.
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Damages
Compensatory Damagesdirect losses.
Sale of Goods: difference between contract and market
price. Sale of Land: specific performance.
Construction Contracts: varies.
Consequential (Special) Damagesforeseeable
losses. Breaching party is aware or should be aware, cause the
injury party additional loss.
Case 10.3Hadley v. Baxendale (1854).
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Damages
Punitive Damagespunish or deter future
conduct.
Generally not available for mere breach of
contract.
Usually tort (e.g., fraud) is also involved.
Nominal Damagesno financial loss. Defendant is liable but only a technical injury.
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Mitigation of Damages
When breach of contract occurs, the
innocent injured party is held to a duty to
reduce the damages that he or she
suffered.
Duty owed depends on the nature of the
contract.
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Liquidated Damages v. Penalty
Liquidated Damages.
A contract provides a specific amount to be
paid as damages in the event of future defaultor breach of contract.
Penalty.
Specify a certain amount to be paid in theevent of a default or breach of contract andare designed to penalize the breaching party.
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Rescission and Restitution
Rescission.
A remedy whereby a contract is canceled and the
parties are restored to the original positions that
they occupied prior to the transactions.
Restitution.
Both parties must return goods, property, or
money previously conveyed. Note: Rescission does not always call for
restitution. Restitution is called for in some
cases not involving rescission.
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Specific Performance
Equitable remedy calling for the
performance of the act promised in the
contract in following types of contracts:
Land. Case 10.4 Stainbrook v. Low(2006).
Scarce; or
Not available remedy in contracts for
personal services.
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Reformation
Equitable remedy allowing a contract to be
reformed, or rewritten to reflect the parties
true intentions.
Available when an agreement is
imperfectly expressed in writing, or in oral
covenants and covenants not to compete.
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Concept Summary
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Election of Remedies
Doctrine created to prevent double
recovery.
Nonbreaching party must choose which
remedy to pursue.
UCC rejects election of remedies.
Cumulative in nature and include all the
available remedies for breach of contract.
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Waiver of Breach
A pattern of conduct that waives a number
of successive breaches will operate as a
continued waiver.
Nonbreaching party can still recover
damages, but contract is not terminated.
Nonbreaching party should give notice to
the breaching party that full performance
will be required in the future.
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C i ht 2009 S th W t L l St di i B i 26
Contract ProvisionsLimiting Remedies
Exculpatory clauses.
Provisions stating that no damages can be
recovered.
Limitation of liability clauses.
Provisions that affect the availability of certain
remedies.