Chapter 11: Contract Performance, Breach, and Remedies ♡

What is the difference between a material breach and an immaterial breach? A material breach is one for which remedies are not spelled out in the contract, while remedies for an immaterial breach are specified. A material breach results in damages to the non-breaching party, while an immaterial breach is minor. A material breach is one that affects more than 50% of the product of the contract. A material breach is one that makes the contract commercially impracticable for the non-breaching party.

A material breach results in damages to the non-breaching party, while an immaterial breach is minor.

What are the conditions that can terminate a contract?

By performance By agreement By operation of law By performance impossible

What are the two sources of contract law?

Common Law and the Uniform Commercial Code (UCC)

What are the types of contract damages you can get?

Compensatory Incidental Consequential Punitive --> Nominal & Liquidated

What are the two types of punitive damages?

Nominal and liquidated

What are statute of frauds?

These are contracts that must be in writing and signed in order to be enforced

What is duress?

Threat of immediate physical harm, or criminal action, not under free will

What are nominal damages?

When legal wrong has occurred, but where there was no actual financial loss as a result of that legal wrong.

What is specific performance?

When you are contracting for a unique good (ex. land) you can call this to make them go along with the contract

What is terminating by performance?

You complete the duty you were assigned to do, so the contract is over

What is the parole evidence rule?

You must get verbal promises put into writing, if not the promise will be barred.

What implied terms do all contracts include? Choose 2 answers. an implied agreement to timeliness an implied covenant of fair dealing an implied covenant of good faith an implied agreement as to who will pay unexpected costs

an implied covenant of fair dealing an implied covenant of good faith

Which of the following is an equitable remedy for breach of contract? an order for specific performance punitive damages when a seller has repeatedly shipped unsafe goods payment of the cost of cover for items not delivered on time compensatory damages for having to hire extra help to correct nonconforming goods

an order of specific performance

What remedies are available after an anticipatory repudiation? Choose 3 answers. cover suspending performance requiring assurance canceling all other contracts with the breaching party

cover suspending performance requiring assurance

Forcing a party to agree to the terms of a contract through the use of threats or blackmail is called: adhesion. duress. undue influence. usury.

duress

What remedies are available in the case of a unilateral mistake in making a contract? Choose 2 answers. rescission reformation punitive damages enforcement

recission reformation

What is undue influence?

A lopsided contract where it is in favor of the more dominant party who has influence over the other party

When there is a unilateral mistake...

The contract is still enforceable - The person will not be able to get it back after realizing the true value

What does contract performance and discharge mean?

Conditions that create, suspend, or terminate a contract - There is no discharge though, if the event is foreseeable and is not dealt with

What falls under UCC Article 2 of statute of frauds

Contracts for goods over $500 need to be in writing to be enforeceable - Anything under doesn't need to be in writing

What are forced majeure clauses?

Escape clauses that are added to contracts to release parties when they can no longer fulfill their obligations, due to some unforseen event

Third party beneficiaries mean that

If the main party dies within the terms of the policy and insurance company does not pay, the third party can sue and get benefits

How does fraud pertain to contracts?

It can be used as a contract defense

What does innocent misrepresentation mean?

It is the same things as fraud, just without the intent

What is the difference between legal remedies and equitable remedies for breach of contract? Equitable remedies are only available in quasi-contract, while legal remedies are available in all other types of contracts. Legal remedies must be applied by the courts, while equitable remedies can be written into the contract. Legal remedies are monetary while equitable remedies are non-monetary. Equitable remedies are monetary, while legal remedies are non-monetary.

Legal remedies are monetary while equitable remedies are non-monetary.

LaVon contracts with Nathan for Nathan to sing at her comedy club every Friday night in July. The first Friday, the crowd loved Nathan. The second Friday, they booed him. The next week, Nathan got a better offer, so he hired his twin brother Ethan to fill in for him at LaVon's club. Can LaVon compel Nathan to perform? Yes, she can compel him under the theory of quasi-contract because LaVon had relied on Nathan's promise and she has printed posters and advertisements. No, she can't compel him because Nathan has gotten a better offer. No, because you cannot compel performance of personal services under specific performance. No, she can't compel him because Ethan is an acceptable substitute for Nathan.

No, because you cannot compel performance of personal services under specific performance.

Who has third party rights?

People who are not parties to a contract, but still have the ability to sue

Korbyn enters into a contract with Peyton to sell Peyton a 1956 roadster. The contract has a condition precedent that the roadster will pass inspection by an independent appraiser, verifying that the roadster contains all original parts and is in good working order. This contract provision means that: Peyton must have the appraisal completed within thirty days of performing the contract and provide the results to Korbyn. Peyton is not required to perform under the contract until the appraisal is complete. if the appraisal is not satisfactory to both parties, the contract price will be adjusted accordingly. Peyton must pay for the roadster at the time of contracting, and Korbyn will then order the appraisal.

Peyton is not required to perform under the contract until the appraisal is complete.

What falls under the common law of statute of frauds?

Sales of land Contracts that cannot be performed within one year Contracts that promise to pay the debt of another Ones that are in consideration of marriage

What is recession?

Terminates the contract and returns the party to the position they were in prior to the contract

What are incidental damages?

expenses that are caused directly by a breach of contract

What does delegation mean?

Delegating duties to someone else for personal use - If hiring for a specific skill ability, then this does not apply

What is the most common way that duties under a contract are discharged? breach frustration of purpose by proving undue influence by performance

by performance

The three types of third party rights are:

Assignments, delegation, and third party beneficiaries

What does assignment mean?

Assigning away the right to someone of the contract

When there is a mutual mistake...

Both parties made a mistake, they were both not agreeing on the same thing - There is no contract anymore, because there never was - There was no meeting of the minds

Where is the parole evidence rule found?

In the UCC Article 2-202

What is terminating by performance impossible

The performance to complete the contract is now literally impossible

What are punitive damages?

Their purpose is to punish - Are usually not allowed with contracts though

What does election of remedies mean?

You cannot get double recovery, (double damages) you have to choose what type of remedy you want

What is terminating by agreement?

Both parties agree that the contract is over

What are liquidated damages?

Damages that are spelled out in the contract and are violated

What are consequential damages?

Damages that compensate for a loss of profit - They need to be foreseeable

What is terminating by operation of law?

If you have a contract for something that is illegal to do

What are compensatory damages?

Their purpose is to make whole again

What are the three equitable remedies?

specific performance, restitution, rescission

Jordynne was the manager of Pets-R-Us, a pet store in Southern Valley Mall. Pets-R-Us had a one-year lease, and rent payments were $2,000.00 per month. Five months into the lease, Jordynne found a better site for the pet store. She notified Southern's manager, vacated the mall, and moved her store to its new location. After two months, Southern was able to re-lease the premises to another retail store, but at a reduced rent of $1,800.00 per month. If Southern successfully sues Pets-R-Us, Southern will likely receive: $4,000.00 in damages. nothing, because Southern was successful in obtaining a new tenant for the property. $5,000.00 in damages. $14,000.00 in damages.

$5,000.00 in damages.

What rights does a third-party beneficiary to a contract hold in regard to that contract? The third party has no rights because the third party does not have privity of contract. If the third party is an intended beneficiary of the contract, the third party has the right to sue either the promisor or the promisee. If the third party is an incidental beneficiary, the third party has the right to become an intended beneficiary. The third party has all the rights of the primary parties to the contract.

If the third party is an intended beneficiary of the contract, the third party has the right to sue either the promisor or the promisee.

What are the five elements of fraud?

Intent- did they do it on purpose misrepresentation material fact- was it about something important justifiable reliance damages

Elvis agrees to provide guitar lessons to Angela's niece for three months for $600. Angela decides her niece really is not interested in guitar lessons, and assigns her rights under the contract to Jose, so Jose can use the lessons for his daughter. When Jose contacts Elvis to set up the first guitar lesson for his daughter: Jose cannot enforce the contract against Elvis, because contracts are not assignable unless they contain a clause making them assignable. Elvis will be obligated to provide guitar lessons to both Jose's daughter and Angela's daughter. Jose cannot enforce the contract against Elvis because the contract is for personal services. Elvis will be obligated to provide guitar lessons to Jose's daughter because this is a valid assignment.

Jose cannot enforce the contract against Elvis because the contract is for personal services.

Selma wants to buy Matilda's house. Selma has been admiring the house for a long time and has asked Matilda repeatedly to sell the house to her, but Matilda has always refused. Finally, Selma tells Matilda that if Matilda does not sell Selma the house, Selma will kill Matilda's daughter. Afraid for her daughter's life, Matilda signs the contract to sell the house to Selma. If Matilda later tries to rescind the contract: Matilda may rescind the contract on the grounds of undue influence. Matilda may rescind the contract on the grounds that she signed the contract under duress. Matilda may not rescind the contract because it has all the elements of a valid contract. Matilda may rescind the contract on the grounds of unconscionability.

Matilda may rescind the contract on the grounds that she signed the contract under duress.

What is the result of a contract in which both parties are wrong about a material fact of the contract? The contract is voidable. The contract is enforceable by both parties as both parties assumed the risk in making the contract. The contract must be nullified and renegotiated. The contract is void.

The contract is voidable

What does the non-breaching party have to do in terms of damages?

The non-breaching party has a duty to mitigate, lessen damages

Shania offers to sell her lakefront property to Tonya for $150,000, and Tonya agrees to buy it. Tonya and Shania both sign the real estate contract, but, before they close the deal, Shania learns that a new resort is being opened on the lake. The opening of the resort will drive property prices up in the area, so Shania believes she can sell her property to someone else and get a better price on the deal. Shania tells Tonya that she has decided not to sell the property to Tonya. If Tonya sues to enforce the contract, a court will likely: award monetary damages to Tonya. grant specific performance by requiring Shania to find a comparable piece of land for Tonya at a comparable price. not enforce the contract, because people are free to choose to whom they sell their property. require Shania to go through with the sale.

require Shania to go through with the sale.