contract performance

7/28/2019 Contract performance

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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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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.




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.




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




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.




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.

contract performance

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