Chapter 19- Breach of Contract and Remedies

specific performance

action brought to compel the adverse party to perform a contract on the theory that merely suing for damages for its breach will not be an adequate remedy

remedy

action or procedure that is followed in order to enforce a right or to obtain damages for injury to a right

reservation of rights

assertion by a party to a contract that even though a tendered performance (ex: defective product) is accepted, the right to damages for nonconformity to the contract is reserved

reformation of contract by a court

at times a written contract does not correctly state the agreement already made by the parties; each party may seek to have a court reform/correct the writing to state the agreement actually made

action for specific performance

compels the other party to carry out the terms of a contract

anticipatory repudiation by conduct

conduct that makes it impossible for the repudiating party to perform subsequently

limitation of remedies

contract of the parties may limit the remedies of the aggrieved parties

consequential (special) damages

damages the buyer experiences as a result of the seller's breach with respect to a third party; may be recovered only if it was reasonably foreseeable to the defendant that the loss could be sustained by the nonbreaching party if the contract were broken

punitive damages

damages, in excess of those required to compensate the plaintiff for the wrong done, that are imposed in order to punish the defendant because of the particularly wanton or willful character of wrongdoing; also called exemplary damages; not ordinarily rewarded for contract actions

breach

failure to act or perform in a manner called for in a contract

content and construction

if an exculpatory clause or a limitation-of-liability clause limits liability for damages caused only by negligent conduct, liability is neither excluded nor limited if the conduct alleged is found to be grossly negligent, willful, or wanton.

liquidated damages - invalid clauses

if the liquidated damages clause calls for the payment of a sum that is clearly unreasonably large and unrelated to the possible actual damages that might be sustained, the clause will be held to be void as a penalty.

remedies upon anticipatory repudiation

individual may (1) do nothing beyond stating that performance at the proper time will be required, (2) regard the contract as having been definitively broken and bring a lawsuit against the repudiating party without waiting to see whether there will be proper performance when the performance date arrives, or (3) regard the repudiation as an offer to cancel the contract; offer can be accepted or rejected but if accepted, there is a discharge of the original contract by the subsequent cancellation agreement of the parties

liquidated damages - effect

injured party is not required to make any proof as to damages sustained, and the defendant is not permitted to show that the damages were not as great as the liquidated sum

effects of failure to mitigate damages

limit recovery by nonbreaching party to the damages that would have been sustained had this party mitigated damages where it was possible to do so

direct (general) damages

losses that are caused by breach of contract; incidental damages, extra expenditures made by injured party to rectify the breach or mitigate damages

antimodification clause

modern contracts often specify that breach waivers do not modify the contract; original contract remains as agreed to

nominal damages

nominal sum awarded the plaintiff in order to establish that legal rights have been violated although the plaintiff in fact has not sustained any actual loss or damages.

injunction

order of a court of equity to refrain from doing (negative injunction) or to do (affirmative or mandatory injunction) a specified act

existence of waiver

party may express or declare that the breach of a contract is waived; party allowing the other party to continue performance without objecting that the performance is not satisfactory waives the right to raise that objection when sued for payment by the performing party

anticipatory breach

promisor's repudiation of the contract prior to the time that performance is required when such repudiation is accepted by the promisee as a breach of the contract

limitation of liability clause

provision in a contract stating that one of the parties is not liable for damages in case of breach; also called exculpatory clause; when a monetary limit to damages for breach of contract is set forth in the contract

exculpatory clause

provision in a contract stating that one of the parties shall not be liable for damages in case of breach; also called a limitation-of-liability clause

liquidated damages

provision stipulating the amount of damages to be paid in the event of default or breach of contract

releases

release forms signed by participants in athletic and sporting events declaring that the sponsor, proprietor, or operator of the event shall not be liable for injuries sustained by participants because of its negligence are generally binding

waiver

release or relinquishment of a known right or objection; erases breach and contract continues as though the breach had not existed

anticipatory repudiation

repudiation made in advance of the time for performance of the contract obligations; clear, absolute, unequivocal refusal to perform the contract according to its terms

liquidated damages clause

specification of exact compensation in case of a breach of contract

compensatory damages

sum of money that will compensate an injured plaintiff for actual loss; direct damages and consequential (special) damages

mitigation of damages

the injured party's legal duty to avoid or reduce damages caused by a breach of contract; damages must not be permitted to increase if an increase can be prevented by reasonable efforts

attorneys' fees

the so-called American rule states that each party is responsible for its own attorneys' fees in the absence of an express contractual or statutory provision to the contrary; even in the event of a valid contractual provision for attorneys' fees, a trial court has the discretion to exercise its equitable control to allow only such sum as is reasonable, or the court may properly disallow attorneys' fees altogether on the basis that such recovery would be inequitable

scope of waiver

the waiver of a breach of contract extends only to the matter waived; it does not show any intent to ignore other provisions of the contract.

action for an injunction

when a breach of contract consists of doing an act prohibited by the contract, a possible remedy is an injunction against doing the act

rescission

when one party commits a material breach of the contract, the other party may rescind the contract; if the party in default objects, the aggrieved party may bring an action for rescission

validity of exculpatory clause

when the language of the contract and the intent of the parties are clearly exculpatory, the contract will be upheld

remedies in general and the measure of damages

1. courts provide quasi-contractual remedies when a contract is unenforceable; measure of damages is based on the reasonable value of services peformed 2. monetary damages/specific performance; injured party will be given the benefit of the bargain by the court

liquidated damages - validity

1. situation must be one in which it is difficult or impossible to determine actual damages 2. amount specified must not be excessive when compared to probable damages that would be sustained