Chapter 8

discharge of contract

A. Complete performance occurs when both parties have fully performed their obligations and are discharged. What happens when either party renders less that complete performance 1. Substantial performance. If one party performance is less than complete, but not so lacking as to render the performance a material breach. The non breaching party must still perform less compensation for the minor breach. 2. Material Breach. If one party fails to perform that party commits a material breach. Such breach discharges the other party from its obligations and provides grounds to sue for damages. 3. Anticipatory Repudiation. If party A knows ahead of time (before performance is due) that party B will breach the contract, A may commit an anticipatory repudiation. Such repudiation is treated as a material breach. 4. Mutual Rescission occurs when both parties agree to terminate the contract. A mutual rescission is itself a contract (with a valid offer, acceptance, and consideration). 5. Novation. If party A prefers to retain the original contract, a third party may be substituted for one of the original parties, B. The third party will assume B's rights and responsibilities. All parties must agree to the substitution and if so, B is discahrged. 6. Accord and Satisfaction. An accord is formed when the creditor accepts the debtor's offer to settle the dispute for an amount less than amount due. Such satisfaction discharges the debt. B. Change of Circumstances and Law. Impossibility, impracticability, frustration or changes in law may discharge the contractual obligations of both parties

third-party beneficiaries

At times, one who is not a party to a contract may enforce a contract. A third-party beneficiary cannot sue to enforce the contract unless the contracting parties intended to benefit the third party.

duty of good faith and fair dealing

Every contract contains an implied covenant of good faith and fair dealing in its performance. The implied covenant imposes a duty on each party to refrain from any action that will deprive the other party of the benefits of the agreement.

remedies

If one party breaches, the other party is entitled to monetary damages or specific performance. Damages give the plaintiff the benefit of the bargain or put the plaintiff in the position the party would have been, had the contract been performed. A. Expectation Damages. 1. Compensatory Damages give the plaintiff the benefit of the bargain, putting plaintiff in the cash position she would have been had the contract been fulfilled. 2. Consequential Damages. Compensate plaintiff for losses that occur as a result of the breach. Consequential damages must be reasonably foreseeable (by the breaching party) and certain. 3. Incidental Damages are those less and relative minor damages incurred by a non-breaching party, e.g., charges, expenses, commissions, costs of transportation, etc. 4. Mitigation of Damages. When party A breaches a contract, party B has a duty to mitigate (or lessen) the amount of damages that flow from the breach. B. Liquidated Damages are agreed to in advance and stated in the contract 1. Penalty issue C. Specific Performance - forces the party that breached a contract to honor it. 1. Generally for contracts involving a) Real estate b) Unique or rare goods D. Injunctive Relief