Breach

Liquidated damages will be invalidated if they are unreasonably large or small.

False

Legal consequence of anticipatory breach

Nonbreaching party's obligations are discharged immediately and they have the right to sue when the anticipatory breach occurs.

Elements of intentional interference with contractual relations

1) A valid, enforceable contract between the contracting parties 2) Third-party knowledge of this contract 3) Third-party inducement to breach the contract

Three types of performance

1) Complete performance 2) Substantial performance (minor breach) 3) Inferior performance (material breach)

Compensatory damages; employment contract

1) employee whose employer breaches employment contract can recover lost wages or salary 2) employer whose employee breaches can recover costs to hire a new employee plus any increase in salary paid to replacement

Material breach legal consequence

A breach that occurs when a party renders inferior performance of his or her contractual duties

Minor breach

A breach that occurs when a party renders substantial performance of his of her contractual duties.

Anticipatory breach

A breach that occurs when one contracting party informs the other that he or she will not perform his or her contractual duties when due

Breach of a contract

A contracting party's failure to perform an absolute duty owed under a contract

Injunction

A court order that prohibits a person from doing a certain act. Are available in contract actions only in limited circumstances.

Penalty

A liquidated damages clause is considered a penalty if actual damages are clearly determinable in advance or if the liquidated damages are excessive or unconsciousable. It is unenforceable and nonbreaching party may recover actual damages.

Mitigation of damages

A nonbreaching party's legal duty to avoid or reduce damages caused by a breach of contract

Equitable remedy

A remedy that is available if there has been a breach of contract that cannot be adequately compensated through a legal remedy or to prevent unjust enrichment.

Specific performance

A remedy that orders the breaching party to perform the acts promised in the contract. Specific performance is usually awarded in cases in which the subject matter is unique such as in contracts involving land, heirlooms, and paintings.

Inferior performance

A situation in which a party fails to perform express or implied contractual obligations and impairs or destroys the essence of a contract

Complete performance

A situation in which a party to a contract renders performance exactly as required by the contract. Complete performance discharges the party's obligations under the contract

Intentional interference with contractual relation

A tort that arises when a third party induces a contracting party to breach the contract with another party.

Rescission

An action to rescind a contract. Rescission is available if there has been a material breach of contract, fraud, duress, undue influence, or mistake

Monetary damages and types

An award of money 1) Compensatory 2) Consequential 3) Liquidated 4) Nominal

Compensatory damages

An award of money intended to compensate a nonbreaching party for the loss of the bargain. Compensatory damages place the nonbreaching party in the same position as if the contract had been fully performed by restoring the "benefit of the bargain".

Reformation

An equitable doctrine that permits the court to rewrite a contract to express the parties' true intentions. Usually used to correct clerical errors.

Covenant of good faith and fair dealing

An implied covenant under which the parties to a contract not only are held to the express terms of the contract but are also required to act in "good faith" and deal fairly in all respects in obtaining the objective of the contract.

Issue of writ of attachment

An order of the court that enables a government officer to seize property of the breaching party and sell it at auction to satisfy a judgment.

Issue of writ of garnishment

An order of the court that orders that wages, bank accounts, or other property of the breaching party held by third persons be paid to the nonbreaching party to satisfy a judgment.

Tender of performance

An unconditional an absolute offer by a contracting party to perform his or her obligations under a contract; also known as tender

Disclaimer of consequential damages

Consequential damages are often disclaimed in a sales or license agreement. This means that the breaching party is not responsible to pay consequential damages.

Punitive damages

Damages are recoverable against a defendant for intentional or egregious conduct. They are awarded to punish the defendant, to deter the defendant from similar conduct in the future, and to set an example for others.

Nominal damages

Damages awarded when the nonbreaching party sues the breaching party even though no financial loss has resulted from the breach. Nominal damages are usually $1 or some other small amount

Liquidated damages

Damages that parties to a contract agree in advance should be paid if the contract is breached . Actual damages must be difficult or impracticable to determine and liquidated amount must be reasonable in the circumstances.

Compensatory damages; sale of a good

Difference between the contract price and the market price of the goods at the time and place the goods were to be delivered

A breach of a contract cannot occur until the time for performance of the duty in question.

False

A liquidated damages provision will be validated if it is considered to be a penalty.

False

If Julia agrees to construct a platinum sailboat with green emeralds all around the bow of the boat and Ted decides to halt construction in the middle of the project, Julia may seek reformation of her contract with Ted to show she really intended to have him put rubies along the bow instead.

False

Intentional interference with contractual relations requires a showing of bad faith before liability can be imposed.

False

Lost profits can be recovered as consequential damages only if they are related to an existing established business.

False

Mitigation of damages is no longer necessary in the area of employment law.

False

Only those consequential damages that are unforeseeable can be collected.

False

Punitive damages are always available for breach of contract.

False

Reformation permits the court to order the breaching party to perform the acts promised in the contract.

False

Rescission and restitution are designed to give the parties the benefit of the bargain.

False

Specific performance is the most common remedy for a breach of contract.

False

Specific performance is the primary remedy used to make a party live up to his/her obligations under a personal services contract.

False

Tender of performance is another term for completion of performance.

False

The downfall of using equitable remedies is that they do not prevent unjust enrichment.

False

When an employer breaches an employment contract, if the employer offers substitute employment to the employee, the doctrine of mitigation places a duty on the employee to accept the work so long as the employee is capable of doing the work.

False

Consequential damages

Foreseeable damages that arise from circumstances outside a contract. To be liable for these damages, the breaching party must know or have reason to know that the breach will cause special damages to the other party

Material breach legal consequence

Nonbreaching party can rescind the contract and seek restitution of any compensation paid under the contract to the breaching party. Nonbreaching party discharged from further performance OR they can sue the breaching party to recover damages

Minor breach rights

Nonbreaching party can sue to recover damages by 1) deducting cost to repair the defect from the contract price and remitting the balance to the breaching party or (2) sue the breaching party to recover the cost to re[air the defect if the breaching party has already been paid

Substantial performance

Performance by a contracting party that deviates only slightly from complete performance.

Restitution

The return of goods or property received from the other party to rescind a contract. If the actual goods or property are not available, a cash equivalent must be made.

A buyer can generally recover the additional cost of acquiring substitute goods if the seller breaches by not delivering the goods.

True

A contractor is generally entitled to recover any lost profits on a contract breached by the client.

True

A material breach allows the other party to rescind a contract.

True

Cases involving nominal damages are generally brought on "principle."

True

Equitable remedies are available if there has been a breach of contract that cannot be adequately compensated by a legal remedy.

True

If an employee breaches an employment contract, the employer can recover the costs incurred to replace the employee, plus any increase in salary paid to the new employee in excess of what would have been paid to the old employee.

True

Many states have held that there is an implied covenant of good faith and fair dealing in certain contracts.

True

Specific performance is usually available for the buyer in contracts for the sale of land.

True

Substantial performance constitutes a minor breach of the contract.

True

The UCC governs damages for a breach of a sales contract involving goods.

True

The general standard to obtain an injunction is that the party seeking the injunction would suffer irreparable injury without the injunction.

True

The primary goal of compensatory damages is to compensate a nonbreaching party for the loss of the bargain.

True

When one party materially breaches a contract, the other nonbreaching party is discharged from any further performance.

True

When performance is tendered, this will discharge a party's contractual obligations.

True

When rescinding a contract, the parties must make restitution of the consideration they received under the contract.

True

When there is an anticipatory breach, the nonbreaching party's obligations under the contract are discharged immediately.

True

When there is substantial performance of a contract with a minor breach, the other nonbreaching party may sue to recover the cost to repair the defect.

True

Compensatory damages; construction contract

Vary with the stage of completion of the project when the breach occurs. (1) contractor may recover what they would have made if owner breaches before construction begins (2) builder breaches before or during, owner can recover increased cost above contract price that they have to pay to have work completed by another contractor