Breach of Contract

When is a statement or act considered a repudiation?

1. A statement by obligor to obligee indicating that the obligor will commit a breach that could give the obligee a claim for damages for total breach or indicate a material and total breach. 2. A voluntary affirmative act which renders the obligor unable or apparently unable to perform without such notice.

What are the two measures of damages for substantial performance?

1. The usual measure of damages is the cost to correct the defect in performance. 2. The alternative measure of damages is where the breach is not willful and where remedying the defect in performance is grossly out of proportion to the harm caused by the breach (economic waste). The court may limit the damages to the amount by which the defective work had reduced the market value of the product of the performance.

What are the different degrees of breach?

1. Total and Material 2. Material but not Total 3. Not Material (substantial performance)

What is a promisee allowed to do in the event of a total and material breach?

1. Withhold performance - because it is typically a failure of a condition. 2. Terminate the contract - end the transaction and enter into a new agreement with a third party. 3. Make Claim on the Breaching Party - file suit for full compensation of the loss of her bargain.

How do courts determine if a breach is material?

A breach is material if the failure in performance is so central to the contract that it substantially impairs its value and deeply disappoints the reasonable expectations of the promisee.

When might a party limit damages by claiming the contract was divisible?

A party in breach may seek to limit damages by arguing that the contract is divisible into self-contained units, and the breach must be limited to the units that were not performed. Most contracts are not divisible because. Even where the parties contemplate the exchange of more than one performance, each performance being related to the other a single exchange whose whole is greater than the sum of its parts.

Can a party retract its repudiation?

Anticipatory repudiation may be retracted if there is no detrimental reliance on the repudiation.

When does a breach of contract occur?

Any time a party's performance falls short of that promised by the terms of the contract.

What are the rights to cure before and after the due date under the UCC?

Before the due date the buyer must allow a good-faith seller to cure if: 1. There is still time left before the due date, and 2. The buyer is seasonably notified of intention to cure. After the due date the buyer must (upon seasonable notice) allow a good-faith seller reasonable time to cure (even if the due date has arrived) if the seller: 1. Had a reasonable ground to believe buyer would accept. 2. Delay will not disappoint buyer's reasonable expectations.

What does the Restatement saying regarding materiality?

In determining whether a failure to render or to offer performance is material, the following circumstances are significant: 1. The extent to which the injured party will be deprived of the benefit which he reasonably expected. → The more deprived the non-breaching party is deprived of the benefit, the more likely it is material. 2. The extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprive. → If it will be difficult to fully compensate the non-breaching party (or prove money lost), then the more likely the breach is material. 3. The extent to which the party failing to perform or to offer to perform will suffer forfeiture. → If the breaching party would be forced to forfeit significant benefits already conferred on the non-breaching party, then the less likely the breach is to be material - so less likely material that if breach occurs it is late in the process. 4. Likelihood that party failing to perform or to offer to perform will cure failure, taking account of all the circumstances including any reasonable assurances. → If likely to cure, then less likely to be material (or at least total). 5. The extent to which the behavior of the party failing to perform or to offer to preform comports with standards of good faith and fair dealing. → If not good faith or fair dealing, the more likely to be material.

What is non-material breach? (aka Substantial Performance?

Partial performance resulting in a non-material breach. Performance is substantially in compliance with the contract and, consequently, the breach is not so severe as to totally undermine the promisee's reasonable expectations.

What happens when a breach results in substantial performance?

The disappointed party: 1. Must perform, 2. May not terminate the contract, 3. May claim compensation for any loss suffered.

What is the Perfect Tender Rule?

The tender of delivery fail in any respect to conform to the contract, the buyer may: 1. Reject the whole; or 2. Accept the whole; or 3. Accept any commercial unit or units and reject the rest.

When can failed assurance result in an inability to preform?

Under the Restatement, where reasonable grounds arise to believe that a party will not perform but there has been no repudiation by words or conduct, the other party may demand adequate assurance of due performance and may suspend any performance until he receives such assurance. Under the UCC, when there is failure to satisfy a reasonable demand for assurance the failur may be treated as a repudiation.

How do breach and substantial performance operate under the UCC?

Under the common law we look to significance to determine whether there was substantial performance, but the UCC adopts a bright-line standard known as the "Perfect Tender" rule.

What is cure?

When a breach would be material if it was left alone, but it is not yet total breach because there remains the possibility of cure. A breach is only total if there is no possibility or intent of timely cure. Where the material breach is not-yet-total and there is opportunity to cure, the disappointed party may suspend performance, but must await imminent cure (may not terminate). If a material breach is not cured in time, then it becomes material and total breach.

What is anticipatory repudiation?

When a party has not breached a contract because the made it clear by words or conduct that she will not perform when the time for performance falls due.

How does a court determine whether a contract is divisible?

Whether a contract can be divided depends on: 1. Purpose of the parties, 2. Whether contract breaks performances into distinct parts, 3. Separate payments or prices identified with specified performances, 4. Separate performance schedules, 5. Whether completed performances have separate, identifiable economic worth.