Term
| What is discharge by performance? |
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Definition
A party may be discharged from a valid contract by:
- a condition occuring, or not occuring
- full performance or material breach by the other party.
- agreement of the parties
- operation of law.
Tender- unconditional offer to perform by a party who is ready willing and able to do so: Ie: tendering money
Party who tenders has done everything possible to execute K, if other party refuses to perform than its a breach |
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Term
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Definition
| A possible future event, the occurence or nonoccurence of which will trigger the performance of a legal obligation or terminate existing obligation under a contract. |
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Term
| What is an unconditional contract? |
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Definition
| If you give me a ride to a train station, I give you 10 dollars. |
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Term
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Definition
| You agree to buy my car if your mechanic inspects it and pronounces it sound. if its not sound, no K, if its sound, then we are obligated. |
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Term
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Definition
| You promise to mow my lawn if it doesnt rain. saturday morning; if it rains, no K, if it doesnt rain, we are obligated. |
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Term
| What is complete performance? |
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Definition
Parties perform exactly as agreed or " perfect" all conditions are satisfied.
When 1 party has satisfied all conditions, other party must perform too.
Ex: mechanic inspecting car. |
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Term
| What is substantial performance? |
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Definition
Party in good faith performs substantialy all of the terms, can enforce the contract.
- confers most of the benefits promised; performance must not vary greatly from what was promised.
damages can be awarded.
Not quite complete performance but close 98%.
Ex: building finished but without contracted for security system.
SP has occured, but can sue for damages. |
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Term
| What does substantial performance do? |
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Definition
Entitles other party to damages
Measure of damages is cost to bring object of contract into compliance.
SP- pay full value of money owed, but can sue for the money spent to install a security system by a 3rd party. |
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Term
| What is a material breach of contract? |
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Definition
- a breach of contract is the nonperformance of a contractual duty.
- A material breach occurs when performance is not substantial, and nonbreaching party is excused from performance and entitled to damages.
Not substantial performance- K for a 5 story building, contractor only completes 3 stories- now we have a material breach of the K. It wasnt even close to what we agreed to.
No breaching party has his performance excused; he does not have to perform his end of K and can sue for damages. |
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Term
| In a minor ( non material) breach: |
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Definition
the duty to perform is not excused and the nonbreaching party must resume performance of the contractual obligations undertaken.
Ex: Security system, non breaching party must still perform all terms of K, but can be compensated on the back end, you cant refuse to pay. |
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Term
| What is anticipatory repudiation? |
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Definition
occurs when one party refuses to perform his contractual obligation, before performance is due
- treated as a material breach, and non breaching party may sue for damages immediately, even though performance is not due.
K is agreed upon, before performance takes place one side say's im not going to do my part.
Reasons: NB party should not have to wait to perform when intent to breach is announced.
NB party needs opportunity to replace promise with another promise and incurs cost in doing so. |
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Term
| A notice by the repudiating party may: |
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Definition
restore parties to orginal obligations.
- rational for treating.
- repudiation as a breach
- Anticipatory repudiation and market prices.
NB party has to treat the AR as a breach to break obligations. If NB party doesnt treat it as a breach, then breaching party can withdraw the AR.
Market prices = replacement costs, rush orders. |
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Term
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Definition
If no time is stated in the contract,a reasonable amount of time is implied
- if time is of the esscense it becomes a condition precedent to performance.
- failure to complain may be a waiver. |
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Term
| What is a condition precedent? |
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Definition
must occur before other party's obligations are triggered.
Ex: COD- delivery is condition to trigger obligation to pay
if NB party fails to complain, it may be deemed a waiver of the condition |
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Term
| What is a discharge by recission? |
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Definition
( discharge by agreement )
mutual recession: for executory contract, parties must make a new contract, oral or written. Under UCC, contracts must be in writing.
- If one party has performed agreement to rescing must have additional consideration. |
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Term
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Definition
Neither side has fully performed and both agree to call off original K.
UCC governs sale of goods.
Additional consideration can be adittional money to let you out of a K, you have to give me something. |
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Term
| What is Discharge by novation? |
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Definition
Parties agree to substitute a third party for an original party.
requirements: previous valid obligation, agreement by all parties, extinguishment of all old obligations, and new valid contract.
Ex: you sign a lease with an apt complex.
owner of complex sells to a property mgmt group
you no longer owe rent to original party
you now have a K with PM group |
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Term
| What is a discharge by settlement agreement, and accord and satisfaction? |
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Definition
settlement agreement- Original parties agree to make a new K which supercedes the old one.
Accord and satisfaction- you K to sell me 50 IPads a 100 dollars each. I dont pay you 5000 in cash but offer you by car instead. |
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Term
| What is discharge by operation of law? |
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Definition
alteration of the contract: Innocent party is discharged after material alteration
- statute of limitations
- bankruptcy: generally bars enforcement of non exempt transactions |
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Term
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Definition
you agree to sell me IPads for 100 each, you change the K to reflect 200/unit.
Im discharged from my obligations; i can walk away and owe you nothing. |
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Term
| What is statute of limitations? |
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Definition
| Have a time limit to sue for breach. Court judgements generally have a limit of 10-20 years to enforce. |
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Term
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Definition
| settlement for debtors assets. creditors usually get a % of debt owed and the outstanding obligation is discharged. |
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Term
| What is objective impossibility? |
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Definition
the supervening event was NOT foreseeable.
- death or incapacitation in personal contract prior to performance.
- destruction of the subject matter, or
- change in law renders performance illegal.
OI = no one can do it
SI = I cant do it
1) K with whitney houston to perform a concert.
2) you have a K to rent at wrightsville beach, hurricane destroys house.
3) Have a K to sell you a bar where smoking is a material part of the bargain; NC leglislature outlaws smoking in public places. K is impossible to perform
- zoning changes. |
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Term
| What are two other types of impossibility or impracticability of performance |
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Definition
- temporary impossibility
- commercial impractiability.
- performance becomes extremely difficult or costly, and must have not been known by parties when contract made.
TI - Hurricane damages house in wrightsville. K is for a fully functional house, seller must restore house to original condition.
TI- delivery date on specific date, ice storm shuts down roads.
CI- you have a market and a K for oranges. flash freeze wipes out 75% of the orange crop, tripling prices. |
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Term
| What is frustration of purpose? |
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Definition
supervening event make it impossible to attain purpose both parties had in mind.
event must not have been reasonably foreseeable, and decreases value of what a party recieves under contract.
Ex: you have a K with a builder to install a sun room onto your house in new orleans at the end of september. Katrina hits wipes out the house.
Not an increase in cost like commercially impractical
We can each still perform out of obligations under the K, there just seems no point in doing it now |
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Term
| What are all the ways to discharge a contract: |
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Definition
1.) By performance ( complete, substanstial)
2.) By agreement ( mutual recission, novation, settlement agreement, accord and satisfaction)
3.) failure of a condition
4) Operation of law ( material alteration, statutues of limitations, bankruptcy, impossibility of performance)
5) by breach ( material or anticipatory repudiation) |
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Term
| What are the most common remedies for a breach of contract? |
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Definition
damages
recission and restitution
specific performance
reformation |
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Term
| What are compensatory damages? |
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Definition
compensates non breaching party for loss of the bargain
- out of pocket costs directly arising from breach
- standard measure; difference between value of promised performance and value of actual performance
If you K to paint house, i can cancel the K. You can recover OOP for paint, etc.
Ex: breaking lease:LL rents to someone else for less money, thats the difference between value of promised performance and actual performance. |
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Term
| What are incidental damages? |
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Definition
| expenses cause directly by breach of contract. ( cost associated to find another painting job) |
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Term
| What is the measurement of damages? |
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Definition
- sale of goods; difference between contract and market price.
- Sale of land -specific performance
- construction contracts |
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Term
| what is an example on sale of goods and sale on land? |
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Definition
SOG- K to sell 100 IPads at 200 each, other party breaches, you sell phones for 100 and can recover the difference, 10k
SOL- since land is unique, the remedy is for specific performance, ie making the seller sell parcel in question, if already sold, then cash. |
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Term
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Definition
varies greatly for construction contracts.
- costs are generally material and labor
- Contractor breaches K for 100, you have to spend 120 with a new contractor, breaching party is on the hook for 20. |
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Term
| What are consequential or special damages? |
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Definition
Foreseeable losses. Breaching party is aware or should be aware, cause the injury party additional loss.
Ex: You have a K with a supplier to bring you 100 IPads, that you're planning on selling to another buyer. Supplier fails to deliver and knew ( or should have known) you were going to flip them for a profit. Supplier is responsible for lost profits.
Ex; CPA example |
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Term
| What are punitive damages? |
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Definition
Punish or deter future conduct
- generally not available for mere breach of contract. Usually tot ( fraud ) is also involved.
Punitive damages are sending a message to others not to do the same thing |
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Term
| What are nominal damages? |
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Definition
| no financial loss, just symbolic victory. |
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Term
| What is the mitigation of damages? |
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Definition
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 nature of the contract.
Ex: Tenant breaks a lease; rather than sit back and do nothing the LL is obligated to find someone to take over the lease to mitigate or reduce the damages.
Claim against breaching tenant is reduced by the amount new tenant is paying in rent. |
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Term
| What are liquidated damages? |
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Definition
Specific amount agreed to be paid as damages in the event of future breach.
IE" For every day late in deivery, you owe me 100 dollars. Conan had 33 million in liquidated damages when NBC breached their K with him. |
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Term
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Definition
| designed to penalize, usually not enforceable. If you fail to show up and mow my lawn, you owe me 500 dollars. |
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Term
| What two questions do the courts ask when it comes to enforceability? |
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Definition
When a contract was entered into, was it apparent damages would be difficult to estimate in the event of a breach?
Was the amount set as damages a reasonable estimate and not excessive?
Sometimes there is difficulty in estimating value - because technology evolves so rapidly, hard to say what the resale value on old technology is. |
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Term
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Definition
Sometimes damages are inadequate remedy
court can create equitable remedies: recission and restitutio.
In this case damages mean $ |
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Term
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Definition
Remedy wherby a contract is canceled and the parties are restored to the original positions that they occupied prior to the transactions.
Ex: I sell you a painting for 1 milion we both think is Picasso. Its not, we rescind the K by giving the painting back to me and I give you the 1 milion back. |
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Term
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Definition
Both parties must return goods, property, or money previously not conveyed.
- Recission does not always call for restitution. Restitution is called for in some cases not involving recission.
Restitution is returning of goods; if goods cannot be returned, then FMV is paid.
If K is executory, then its just canceled. doesnt always call for restitution.
Restitution may be applicable in cases not involving recission such as criminal cases. ie if someone breaks into your house, court can make them pay restitution. |
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Term
| What is specific performance? |
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Definition
- equitable remedy calling for the performance of the act promised in the contract.
- provides remedy in cases involving subject matter ( sale of land , contracts for personal services)
SOL- since a parcel of land is unique, courts can force a sale.
Personal services - K for a specific singer to perform, not going to cut it to have a sub. |
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Term
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Definition
- 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.
- used when fraud or mutual mistakes occurs.
reformation - its a do over
ex: you sign a lease for an apt at 1300 hilsborough street. problem - the apt is actually at 3100 hillsborough street. |
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Term
| How do Oral contracts and CNTC fit into reformation? |
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Definition
Oral K - written version differs from the oral agreement
CNTC - if its valid except for the geographical or time component, courts will reform restraints and make them reasonable |
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Term
| What is the election of remedies? |
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Definition
- Purpose of the doctrine: to prevent double recovery. Nonbreaching party chooses which remedy to pursue
- UCC rejects election of remedies
- Pleading in the alternative
- Ex: sale of land breach - dont get money and a specific performance
pleasing in the alternative = ignore |
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Term
| What is a waiver of breach? |
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Definition
Occurs when nonbreaching party acccepts defective performance of contract
- Consequences:
Party waiving in the breach cannot take later action on that particular issue; contract continues.
Ex: Keg party - K calls for 10 kegs of bud light, distributor brings 10 kegs of natty light.
You accept, by doing so you've waived right to sue for delivery of noncomforming goods.
You still have the ability to sue for the difference in price between, bud and natty. |
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Term
| What are reasons for waiving a breach? |
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Definition
| time, necessity, minor breach, good business. |
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Term
| What is a waiver of breach and subsequent notices? |
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Definition
generally, a single waiver will not waive subsequent, additional, or future breaches, especially when unrelated to the initial breach.
Ex: Contractor is building office park; parking lot is to be finished on may 1 and isn't completed until may 15. You waive the right to sue that breach. You still have the right to sue for other breaches, like electical system not being up to code. |
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Term
| What are some key facts about waiver of breach and subsequent notices? |
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Definition
- waiver extended to subsequent breaches when similiar defective performances would be acceptable.
- non waiving party remains liable for damages, but contract continue.
Ex: you have a bar, instead of bringing a case of grey goose, distributor brings a case of smirnoff, you waive breach and accept.
K continues, although breaching party is still liable for damages. |
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Term
| What are contract provisions, limiting remedies? |
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Definition
Excupatory and limitation of liability clauses.
UCC allows sales contracts to limit remedies
enforceability of limitation of liability clauses; depends on type of breach excused by provision.
Exculpatory - no damages can be recovered
Limitation- cap on damages
generally has to be an honest mistake - no limitation for fraud or criminal conduct. |
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