Compensatory damages for breach of contract are designed under the law to place the injured party in as good a monetary position as he/she would have enjoyed if the contract had been performed as promised

    Conditions of compensatory damages in breach of contract

a.       They are limited to actual, provable, direct losses from the breach of contract.

b.      Mitigation of damages requires that the victim of a breach of contract reduce the amount of damages by good faith, best efforts to obtain the equivalent substitute performance.

c.       Substantial Performance: Where one of the parties to contract has almost completed the contract but is unable or unwilling to complete the contract. In that event the other (non-breaching) party can complete the contract in which event the remedy of the non breaching party is the contract price minus reasonable cost of material and labor necessary to complete the contract.

Factors which effect assent:

1.                   Mistake as to the existence of the subject matter; if unknown to the parties, the subject matter of the proposed contract ceases to exist, an acceptance aft the destruction of the subject matter cannot complete the contract.

2.                   Unilateral mistake; ordinarily if you enter into a contract and you do so under a mistake of fact solely on your part (and there has been no fraud or misrepresentation) and the other party is not under any mistake; this will not be grounds for the mistaken party to avoid the contract.

3.                   Duress; the threat of physical violence or criminal prosecution or harm to one’s family members. Contract that is signed under duress is not enforceable.

4.                   Undue Influence; A more insidious form of duress where a person intentionally establishes a position of trust and eventual domination over a weaker persona and then uses that trust and domination to strip the victim of their worldly possessions usually to the detriment of the victim’s natural family heirs.

For a contract to be binding, it usually must involve the exchange of something of value.

1.                   Consideration must be bargained for.

2.                   Forbearance is defined as giving up one’s legal right to do or not to do something the person is legally entitled to do.

3.                   The law does not measure the bargain. The law is not concerned about the adequacy or consideration; only the existence of consideration. The law cannot protect someone (such as the uncle) from making a stupid (from an objective standard) contract.

Rule: Doing what you are already required to do is not sufficient Consideration.

New Rule: If the parties agree to change the terms of an existing contract so that one of the parties is obligated to do something that he or she was not obligated to do under the terms of the existing contract, then that party is entitled to additional compensation for doing something extra that is beyond the terms of the existing contract.

Legally competent parties (no infancy nor incapacity)

Legal incapacity is grounds for avoidance of contract.

Types of legal incapacity:

1.                   Non-age (infancy) in NJ 18 as of January 1, 1973.

2.                   Insanity (temporary and permanent)

3.                   Temporary incapacity by drunkenness and/or drug addiction.

Rules for contract avoidance: Infancy

1.                   Contracts of an infant are voidable at the option of the infant only; the adult is bound to the contract.

2.                   If the infant elect to avoid the contrac; he is released from the contract and has no further liability.

3.                   If the infant avoids the contract, he is entitled to a return of whatever he has paid or delivered to the adult and he must return whatever he received under the contract to the extent the infant still retains the item.

4.                   The method of contract avoidance is called disaffirmance – any conduct on the part of the infant which is inconsistend with the existence of the contract and indicates an intention not to be bound by the contract.

5.                   An infant must disaffirm at any time before attaining the age of majority or within a reasonable time (under the circumstances) after attaining the age of majority.

Necessaries are those items reasonably needed by the incompetent person to sustain their health, safety, welfare or condition in life; must be judged on the facts of each case. If an item is a “necessary” the incompetent person cannot totally avoid the contract but instead must pay only the provable out of pocket expenses of the other contracting party.

means each party has the legal capacity to make a contract. Generally, people are considered to be competent to make contracts if they are over 18 years of age and of sound mind.

1.                   Contracts of a person who has been declared insane by a Court and had a Guardian appointed for them are void (cannot be enforced).

2.                   Someone who is “temporarily insane” suffers from some mental or emotional disturbance but has not been declared insane. Their contracts are “voidable” which means that they can disaffirm within a reasonable time of regaining their capacity but they still will be liable for the out of pocket costs of “necessaries”.

If a person can prove that at the time they agreed to a contract they were unable to understand the nature and effect of the contract due to extreme drunkenness or drugs, then they can disaffirm the contract within a reasonable time after they regain their capacity but they will still be liable for out of pocket costs of “necessaries”.

Contract made for legal purpose

Illegal Contracts are unenforceable. For a contract to be enforceable, it must involve a legal activity. The law does not enforce contracts based on illegal activity. For example, a winner of a poker game usually cannot go into court and enforce an IOU in a state in which that type of gambling is illegal

1.                   Violates sate or federal statute

2.                   Violates public policy

a.       Detrimental to public welfare

b.      Interferes with justice

c.       Interferes with maritial status

d.      Monopolies

e.      Restraint of trade

f.        Restrictive employment covenants

3.                   Unconscionable agreements

a.       Unfair bargaining positions

b.      Unfair terms

c.       Fraud in obtaining contract

Rule: Any contract or conduct which has as its purpose the restraint of trade, unfair competition, price fixing, elimination of competitors etc. is illegal.

Unconscionable Agreements: A court may refuse to enforce a contract that is valid on its face (i.e. satisfies offer and acceptance) where the total substance of the contract is so unfair that it would offend the conscience of the court to enforce the contract. Example: Hidden negative, continuous renewal of contract.

Restrictive Convenants as pertaining to contracts, what sorts are permissible?

These are an exception to the anti-competition rule. A restrictive covenant prohibits an employee who leaves their employer from working for a competitor, or opening their own business for a period of time.

In New Jersey, such agreements will only be enforced on terms that are fair. If the terms are unfair, New Jersey court will “rewrite” the agreement to make it fair. By applying the following standards:

1.                   There must be something unique or of value that is worthy of protection.

2.                   The restraint must be reasonable as to time.

3.                   The restraint must be reasonable as to geographic area of limitation.

Situations where used:

1.                   To prohibit a seller of a business from competing with the business that was sold.

2.                   A trade secret.

3.                   Where the employee develops a personal following of customers while working for the employer.

Not permissible restrictions:

1.                   If it is an unconscionable agreement.

2.                   A parent can not bind a minor child to a pre-injury release of tort claims.

Equitable remedies/Chancery courts for breach of contract

1.       Recession – restore parties to their legal position before the contract was entered into.

2.       Reformation – reform contract due to the writer’s error. In 2007, New Jersey Supreme Court added a new requirement that in every contract there is an implied covenant that the parties will deal in good faith and fair dealings. Where the court determines either mutual or unilateral mistake, the correct remedy is reformation of the contract.

3.       Specific Performance – contract is to be performed pursuant to its terms – monetary damages are not adequate.

4.       Injunction – cease and desist from any activity which results in a breach of contract.

The New Jersey State Court System

When we talk about the New Jersey State Courts, we are describing several different kinds of courts. The courts that make up the New Jersey State Courts are:

1.       Municipal Court

2.       Superior Court of New Jersey

a.       Law Division

                                                               i.      Civil Part

                                                             ii.      Special Civil Part

                                                            iii.      Small Claims Section

                                                           iv.      Landlord/Tenant Section

                                                             v.      Criminal Part

b.      Chancery Division

                                                               i.      Family Part

                                                             ii.      Probate Part

                                                            iii.      General Equity

c.       Tax Court

d.      Appellate Division

3.       New Jersey Supreme Court

The U.S. Constitution is the supreme law of the land in the United States. It creates a federal system of government in which power is shared between the federal government and the state governments. Due to federalism, both the federal government and each of the state governments have their own court systems.

State court judges are selected in a variety of ways, including

·         election,

·         appointment for a given number of years,

·         appointment for life, and

combinations of these methods, e.g., appointment followed by election

·         Cases that deal with the constitutionality of a law;

·         Cases involving the laws and treaties of the U.S.;

·         Ambassadors and public ministers;

·         Disputes between two or more states;

·         Admiralty law, and

Bankruptcy.

·         Most criminal cases, probate (involving wills and estates),

·         Most contract cases, tort cases (personal injuries), family law (marriages, divorces, adoptions), etc.

State courts are the final arbiters of state laws and constitutions. Their interpretation of federal law or the U.S. Constitution may be appealed to the U.S. Supreme Court. The Supreme Court may choose to hear or not to hear such cases.

Congress has created several Article I or legislative courts that do not have full judicial power. Judicial power is the authority to be the final decider in all questions of Constitutional law, all questions of federal law and to hear claims at the core of habeas corpus issues.

Article I courts are U.S. Court of Veterans' Appeals, the U.S. Court of Military Appeals, and the U.S. Tax Court.

Personal when the people involved both live in NJ, or have a place of business in NJ or the events leading to the lawsuit happen in NJ.

Subject matter jurisdiction if the  question is a state one then NJ court has jurisdiction. If it is a federal question then the jurisdiction is in the Federal court.

Statute of limitations

1.       Contracts: 6 years from date of breach of the contract.

2.       Negligence: 2 years from date of injury

3.       Intentional Tort: 1 year from date of wrongful conduct. Infancy or incapacity tolls (stops) the running of the statute of limitations until that person regains their capacity.

Types of Contractsd that Statute of Frauds applies to

Contracts Required to be in writing and signed:

1.       Any contract of an Administrator or Executor of an estate to pay a debt.

2.       Any contract involving an interest in Real property.

3.       A lease of Real property for a term of 1 year or more.

4.       A contract to answer for the debt or default of another person. Exception: Main Purpose Rule:  When the main purpose of a promise to answer for another’s debt or default is to receive a personal benefit that promise need not be in writing.

5.       A contact of long duration which cannot possibly be performed within one year from the date the contract is signed.

6.       Any contract for the sale of personal property having a total contract price of $500 or more. Exception: Securities, Cars, Boats, Planes, Custom made or specially manufactured goods having a value of $5000 or more.

7.       A real estate broker’s listing contract in which an owner of Real property authorizes the broker to sell, lease or exchange the real property on the owner’s behalf.

Statute of Fraud Rules:

1.       If more than one section of the statute of frauds is involved, all sections must be satisfied or else the contract is unenforceable.

2.       Any signed, written memo will be sufficient as long as it contains the basic terms of the transaction.

Part performance eliminates the necessity for a written agreement under the statute of frauds. Any contract for the sale of personal property having a total contract price of $500 or more.

If you place an oral order for goods in the amount of $1000 and the seller fails to deliver the goods, you cannot sue the seller because the contract was not in writing and it was not signed by the seller.

•If you make a contract to purchase land, the contract is not in writing and the seller decides to sell the land to someone else, you will not win in a lawsuit against the seller. Although you can file the lawsuit, the seller's defense that the contract was in violation of the Statute of Frauds will prevail.

•If you orally agree with a customer that you will perform a service worth $1000 for the customer more than a year from the date of the agreement, you cannot enforce the agreement against the customer. The lawsuit will be barred by the Statute of Frauds

The Parole Evidence Rule Exceptions

Exceptions to the Rule:

1.       Parol evidence may be introduced to prove contract defenses.

2.       Or to prove an error in writing of the agreement.

3.       Or the meaning of a provision in the contract which is vague or ambiguous.

• Fraud
• Wrongful Interference with Contract
• Wrongful interference with prospective Business Advantage
• Unlawful Competiont/Antiturst

Five required tests of fraud:

1.                   A knowing and intentional misstatement or concealment of a material fact made to someone who reasonably relies upon the misstatement and changes their position.

2.                   To suffer damage or detriment.

3.                   Misrepresentation: An unknowing or unintentional misstatement or concealment.

4.                   Scienter: Intent – The difference between fraud and misrepresentation.

5.                   Rule: Silence when there is a duty to speak is fraud; ie willful concealment.

Defenses

Chaucery

1.                   Equitable Estoppel; a person can be barred from obtaining relief in court if it can be proven that the person seeking relief from the court may have caused the problem by their own actions or inaction., such as unreasonable delay, which conduct contributed to the damages or relief being sought in the suit now brought against the other party.

2.                   Unclean hands

3.                   Unconscionable Agreement

Defenses Law Division

1.                   Laches

2.                   Statute of Limitation

3.                   Release

4.                   Novation

5.                   Bankruptcy

6.                   Payment or Performance

7.                   Accord and Satisfaction

8.                   Statute of Frauds

9.                   Lack of Consideration

10.               Illegality

11.               Fraud or Misrepresentation

12.               Incapacity

13.               Duress and Mutual Mistake

14.               Anticipatory Breach

15.               Waiver

a.        Conduct indicating an intention to forego or surrender the benefit of the condition or a term in the contract before performance is completed

b.      Waiver after breach is an election to continue the contract instead of termination due to breach.

c.       Waiver may be retracted at any time provided other party has not changed their position in reliance upon time waiver, to their detriment-if so, waiving party will be stopped to retract the waiver.

16.               Impossibility - true impossibility excuses performance. Additional hardship or mere impracticability does not excuse performance.

17.               Wilful Prevention - where one party to the contract intentionally prevents the happening of a condition or performance by the other party, non performance by the other party is excused.

Discharge of Contract

1.       Payment

2.       Performance

3.       Release

4.       Novation

5.       Accord and Satisfaction

a.       There is an unliquidatd debty (amount of contract has not been agreed to in advance)

b.      Genuine dispute as to amount owed

c.       Agreement to settle – amount owed is agreed (the accord)

d.      Agreed – amount is paid (the satisfaction)

6.       Laches – An equitable time bar. A person can be barred from filing suit if they have delayed too long under the circumstances to the prejudice of the other person to the contract.

7.       Bankruptcy: A federal law which subject to certain rules, regulations and procedures discharges a person from their contracts when they are insolvent (has more liabilities than assets).