LGS Test 2 Chapter 13
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.
complete performance
no breach- contract is discharged
when a party takes specific action to conceal a fact that is material to the contract...
misrepresentation occurs
what types of mistakes do not affect the enforceability of contracts?
mistakes of value
a breach of contract entitles the nonbreaching party to sue for...
monetary damages
how to measure compensatory damages for construction contracts if both parties fall short
fair balance of awarding damages
(remedies available to nonbreaching parties) damages
-compensatory -consequential -punitive (rare) -nominal -liquidated
scienter exists if a party...
-knows that a fact is not as stated; makes a statement that she/he believes is not true; -makes a statement recklessly, without regard to whether it is true or false; or
(contract discharge) by operation of law
-material alteration -statutes of limitations -bankruptcy -impossibility of impracticability of performance -frustration of purpose
(contract discharge) by agreement
-mutual rescission -novation -settlement agreement -accord and satisfaction
the requirements of novation
1. a previous valid obligation 2. an agreement by all parties to a new contract 3. the extinguishing of the old obligation (discharge of the prior party) 4. a new contract that is valid
what are the two reasons that an anticipatory repudiation is treated as a present material breach?
1. the nonbreaching party should not be required to remain ready and willing to perform if the contract has already been repudiated 2. the nonbreaching party should have the opportunity to seek a similar contract elsewhere
limitations period for oral contracts
2-3 years
limitations period for sales contracts
4
limitations period for written contracts
4-5 years
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).
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).
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.
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.
incidental damages
Expenses that are caused directly by a breach of contract, such as those incurred to obtain performance from another source.
mistake 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.
(contract discharge) by failure of a condition
If performance is conditional, duty to perform does not become absolute until that condition occurs
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.
how to measure compensatory damages for construction contracts if the contractor breaches
measure of damages is cost of completion
consequential damages
Special damages that compensate for a loss that is not direct or immediate (for example, lost profits).
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.
novation
The substitution, by agreement, of a new contract for an old one, with the rights under the old one being terminated.
discharge
The termination of an obligation, such as occurs when the parties to a contract have fully performed their contractual obligations.
duress
Unlawful pressure brought to bear on a person, causing the person to perform an act that he or she would not otherwise perform.
to recover damages caused by frauds
proof of harm is required
condition precedent
a condition in a contract that must be met before a party's promise becomes absolute
duress is both
a defense to the enforcement of a contract and a group for the rescission of a contract
commercial impracticability
a doctrine under which a seller may be excused from performing a contract
what elements does fraudulent misrepresentation consists of
a misrepresentation of material fact, an intent to deceive, reliance upon misrepresentation, and the party who relied upon misrepresentation must have been harmed as a result
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
what are some reasons that voluntary consent can be lacking
a mistake, misrepresentation, undue influence, or duress
what are the 3 basic types of situations that may qualify as grounds for the discharge of contractual obligations based on impossibility of performance
a party dies, subject matter of contract is destroyed, or change in law renders performance as illegal
substantial performance
a party who is in good faith performs substantially all of the terms of a contract can enforce the contract against the other party under the doctrine of substantial performance
example of a tender:
a seller who places goods at the disposal of a buyer has tendered delivery and demand payment
the condition precedes the...
absolute duty to perform
in most contracts, promises of performance are not expressly conditioned or qualified. they are
absolute promises
frustration of purpose typically involves
an event that decreases the value of what a party receives under the contract
Commercial Impracticability usually involves
an event that increases the cost or difficulty of performance
to make a contract voidable, a mistake must
be a mistake of fact
what are the two forms of mistakes of fact
bilateral and unilateral
bilateral mistake...
both parties mistaken
what are the 4 broad categories of damages awarded by courts
compensatory, consequential, punitive, and nominal
(contract discharge) by performance
complete and substantial
what are the two basic types of performance
complete and substantial
3 parts of performance tendered
complete, substantial, absolute
where are liquidated damages often occuring
construction, sales, and contracts with entertainers/professional athletes
material breach
contract is discharged, no further duty to perform, party can sue immediately for breach
compensatory damages
damages that compensate the non breaching party for the loss of the bargain
remedies available to nonbreaching parties
damages, rescission and restitution, specific performance, and reformation
how to measure compensatory damages for sale of goods
difference between contract price and market price
substantial performance
duty to perform continues, party can now recover damages
how to measure compensatory damages for construction contracts if the owner breaches after construction has been completed
entire contract price plus interest
how to measure compensatory damages for sale of goods if the seller has not yet produced the goods
equal lost profits on the sale
when an anticipatory repudiation occurs
it is treated as a material breach of the contract, and the nonbreaching party is permitted to bring an action for damages immediately
voluntary consent
knowing and voluntary agreement to the terms of a contract
under what circumstances will contractual duties be discharged
material alteration, running of statute of limitations, bankruptcy, and the impossibility of performance
(contract discharge) by breach
material breach, anticipatory repudiation, waiver of breach
what 3 elements does mutual rescission require?
offer, acceptance, consideration
unilateral mistake...
one party mistaken
When a waiver of a breach of contract occurs, the:
party waiving the breach can not take any later action
what are the basic requirements for a performance to classify as substantial
performed in good faith, performance not vary greatly from performance promised, and must create substantially the same benefits as those promised
how to measure compensatory damages for construction contracts if the owner breaches during performance
profits plus the costs incurred in partially constructing the building
the innocent party in a case involving issues with voluntary consent can either
rescind the contract and be restored to original position, OR can enforce the contract and seek damages for any harms
how to measure compensatory damages for sale of land
specific performance - buyer is awarded parcel of property for which they bargained for
when both parties are mistaken about the same material
the contract can be rescinded by either party
When an innocent party is fraudulently induced to enter into a contract,
the contract normally can be avoided because that party has not voluntarily consented to its terms.
if voluntary concent is lacking
the contract will be voidable
how to measure compensatory damages for construction contracts if the owner breaches
the contractor can only recover the profits that would have been made on the contract
how to measure compensatory damages for sale of goods when the buyer is the party in breach
the difference between the contract price and the market price of the land
equation for the standard measure of compensatory damages is
the difference between the value of the breaching party 's promised performance under the contract AND the value of his or her actual performance
reliance is mot justified if...
the innocent party knows the facts OR relies on obvious extravagant statements
in contract law, damages compensate the nonbreaching party for...
the loss of the bargain
if the condition is not satisfied,
the obligations of the parties are discharged
a contract with voluntary mistake is enforceable unless
the other party knew/should have know.n a mistake was made OR mistake was due to substantial mathematical error, made inadvertently, and without gross negligence
if one partys performance is substantial,
the other party's duty to perform remains absolute
if the other party refuses to perform....
the party making the tender can sue for a breach of contract
once performance has been tendered....
the party making the tender has done everything possible to carry out the terms of the contract
discharge in bankruptcy
the release of a debtor from all debts that are provable
to establish duress,
there must be proof of a threat to do something that the threatening party has no right to do
what is the object of the agreement
to restore the parties to the positions they would have occupied had no contract ever been formed.
when can a commercial impracticability apply
when a contingency occurs, the occurrence made performance impracticable, and the nonoccurence was the basis upon which a contract was made
when does reformation occur
when a court alters the terms of a contract to prevent undue hardships or burdens
complete performance
when a party performs as exactly as agreed
misrepresentation of a material fact can occur by either
words or actions
Generally, for Duress to occur, the threatened act must be ________ or _______.
wrongful or illegal