Chapter 13; Contract Performance, Breach, and Remedies

liquidated damages

An amount, stipulated in the contract, that the parties to a contract believe to be a reasonable estimation of the damages that will occur in the event of a breach.

Anticipatory repudiation

An assertion or action by a party indicating that he or she will not perform an obligation that the party is contractually obligated to perform at a future time.

Mistakes of Value

if a mistake concerns the future market value or quality of the object of the contract, the mistake is one of value, and the contract normally is enforceable.

Be a mistake of fact -

mistakes of value or quality do not make a contract voidable

Incidental damages

expenses directly incurred because of a breach of contract, such as those incurred to obtain performance from another source.

Commercial Impracticability

A doctrine under which a seller may be excused from performing a contract when (1) a contingency occurs, (2) the contingency's occurrence makes performance impracticable, and (3) the nonoccurrence of the contingency was a basic assumption on which the contract was made.

Duress is both

- a defense to the enforcement of a contract - a ground for the rescission of a contract

Fraudulent Misrepresentation consists of the following elements:

1. A misrepresentation of a material fact must occur. 2. There must be an intent to deceive. 3. The innocent party must justifiably rely on the misrepresentation. 4. To collect damages, innocent party must have been harmed as a result of the misrepresentation.

Mutual rescission requires three elements:

1. an offer 2. an acceptance 3. consideration

Commercial impracticability

A doctrine under which a seller may be excused from performing a contract when (1) a contingency occurs, (2) the contingency's occurrence makes performance impracticable, and (3) the nonoccurrence of the contingency was a basic assumption on which the contract was made.

Settlement Agreement

A compromise that arises out of a genuine dispute over the obligations under an existing contract will be recognized at law

Condition precedent

A condition in a contract that must be met before a party's promise becomes absolute.

Frustration of purpose

A court-created doctrine under which a party to a contract will be relieved of his or her duty to perform when the objective purpose for performance no longer exists (due to reasons beyond that party's control).

reformation

A court-ordered correction of a written contract so that it reflects the true intentions of the parties.

impossibility of performance

A doctrine under which a party to a contract is relieved of his or her duty to perform when performance becomes impossible or totally impracticable (through no fault of either party).

Bilateral mistake

A mistake that occurs when both parties to a contract are mistaken about the same material fact.

Unilateral mistake

A mistake that occurs when one party to a contract is mistaken as to a material fact

Voluntary consent may be lacking because of:

A mistake, misrepresentation, undue influence, duress

Condition

A possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract.

Nominal Damages

A small monetary award (often one dollar) granted to a plaintiff when no actual damage was suffered.

Penalty

A sum inserted into a contract, not as a measure of compensation for its breach but rather as punishment for a default. The agreement as to the amount will not be enforced, and recovery will be limited to actual damages.

mutual rescission

An agreement between the parties to cancel their contract, releasing the parties from further obligations under the contract. The object of the agreement is to restore the parties to the positions they would have occupied had no contract ever been formed.

specific performance

An equitable remedy requiring the breaching party to perform as promised under the contract; usually granted only when money damages would be an inadequate remedy and the subject matter of the contract is unique (for example, real property).

Restitution

An equitable remedy under which a person is restored to his or her original position prior to loss or injury, or placed in the position he or she would have been in had the breach not occurred.

waiver

An intentional, knowing relinquishment of a legal right.

Tender

An unconditional offer to perform an obligation by a person who is ready, willing, and able to do so.

Scienter

Knowledge by the misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive.

Undue Influence

Persuasion that is less than actual force but more than advice and that induces a person to act according to the will or purposes of the dominating party.

Consequential damages

Special damages that compensate for a loss that is not direct or immediate (for example, lost profits). The special damages must have been reasonably foreseeable at the time the breach or injury occurred in order for the plaintiff to collect them.

In their original contract, the parties can agree to reduce this four year period to not less than one year, but they cannot agree to extend it. T/F

TRUE

Breach of contract

The failure, without legal excuse, of a promisor to perform the obligations of a contract.

Performance

The fulfillment of one's duties under a contract—the normal way of discharging one's contractual obligations.

Voluntary Consent

The knowing and voluntary agreement to the terms of a contract. If voluntary consent is lacking, and the contract will be voidable.

discharge in bankruptcy

The release of a debtor from all debts that are provable, except those specifically excepted from discharge by statute.

Novation

The substitution, by agreement, of a new contract for an old one, with the rights under the old one being terminated.

Misrepresentation of a material fact can occur by either:

Words or Actions

Involve some material fact

a fact that a reasonable person would consider important when determining his or her course of action

Discharge

the termination of an obligation occurs when the parties to a contract have fully preformed their contractual obligations.