Chapter 11

Duress is both a defense to the enforcement of a contract and a ground for the rescission of a contract. T/F

TRUE

An otherwise valid contract may be unenforceable if the parties have not genuinely agreed to its terms. T/F

True

requirements for a 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.

Mitigation of damages? Liquidated damages? Penalty?

Mitigation of damages: A rule requiring a plaintiff to have done whatever was reasonable to minimize the damages caused by the defendant. 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. Penalty: A sum inserted into a contract, not as a measure of compensation for its breach but rather as punishment for a default.

Mutual Rescission? Novation? Accord?

Mutual rescission An agreement between the parties to cancel their contract, releasing the parties from further obligations under the contract. The object of this new agreement is to restore the parties to the positions they would have occupied had not contract ever been formed. Novation: The substitution, by agreement, of a new contract for an old one, with the rights under the old one being terminated. Typically, there is a substitution of a new person who is responsible for the contract and the removal of an original party's rights and duties under the contract. Accord: An agreement to replace unperformed obligations with substitute obligations (e.g. substitute transfer of a car instead of payment of cash).

In most contracts, promises of performance are not expressly conditioned or qualified; instead, they are absolute promises. T/F

TRUE

Tender? Breach of Contract? Anticipatory Repudiation?

Tender: An unconditional offer to perform an obligation by a person who is ready, willing, and able to do so. Breach of Contract: The failure, without legal excuse, of a promisor to perform the obligations of a contract. 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.

Generally a party who demonstrates that he or she did not truly agree to the terms of a contract does NOT have one of the following choices: a. Sue under the statute of limitations. b. Carry out the contract. c. Rescind (cancel) the contract.

a. Sue under the statute of limitations.

The two basic types of performance are: a. complete and substantial. b. remote and local. c. future and past.

a. complete and substantial.

In the case of a material breach of contract, a. the parties must cancel the contract and create a new one. b. the breaching party has a cause of action to sue for damages resulting from the breach. c. the nonbreaching party has the right to sue for damages resulting from the breach

c. the nonbreaching party has the right to sue for damages resulting from the breach

Bilateral Mistake? Unilateral Mistake?

Bilateral Mistake: A mistake made by both parties. If both parties are mistaken about a material fact, such as the identity of the subject matter, either party can avoid the contract. If the mistake relates to the value or quality of the subject matter, either party can enforce the contract. Unilateral Mistake: A mistake made by only one of the parties. Generally, the mistaken party is bound by the contract, unless the other party knows or should have known of the mistake, or the mistake is an inadvertent mathematical error in addition, subtraction, or the like that is committed without gross negligence.

Compensatory damages? Incidental damages? Consequential damages? Nominal damages?

Compensatory damages: A money award equivalent to the actual value of injuries or damages sustained by the aggrieved party. Incidental damages: Expenses that are caused directly by a breach of contract, such as those incurred to obtain performance from another source. Consequential damages: Special damages that compensate for a loss that is not direct or immediate (for example, lost profits). The special damages must have been reasonably foreseeable at the time the breach or injury occurred in order for the plaintiff to collect them. Nominal damages: A small monetary award (often one dollar) granted to a plaintiff when no actual damage was suffered or when the plaintiff is unable to show such loss with sufficient certainty.

Discharge? Performance? Condition?

Discharge: A termination of an obligation. In contract law, discharge occurs when the parties have fully performed their contractual obligations or when events, conduct of the parties, or operation of the law releases the parties from performance. Performance: In contract law, the fulfillment of one's duties arising under a contract with another. 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.

Contracts for the sale of goods usually qualify for specific performance. T/F

FALSE Specific performance will not be granted unless the parties legal remedies (monetary damages) is inadequate. Therefore, contracts for the sale of goods rarely qualify for specific performance because the legal remedy is ordinarily adequate in such situations given that substantially identical goods can be bought or sold in the market. See Equitable Remedies.

When you take out a mortgage loan to buy a house, the financial institution from which you obtained the mortgage will always be the place to where you send your mortgage checks. T/F?

FALSE. Financial institutions, including banks, often assign to a third party their rights to collect mortgage payments. Following the assignment, the homebuyers are notified that they must make their future payments not to the original financial institution that loaned them the funds, but to a third party. See Third Party Rights.

Impossibility of performance? Commercial Impracticality? Frustration of purpose?

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). Commercial Impracticability: A doctrine under which a seller may be excused from performing a contract when (1) a contingency occurs, (2) the contingency's occurrence makes performance impracticable, and (3) the nonoccurrence of the contingency was a basic assumption on which the contract was made. 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).

The Three Legal Requirements for Mutual Rescission to Take Place?

Offer Acceptance Consideration

Restitution? Specific performance? Reformation?

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. Specific performance: An equitable remedy requiring the breaching party to perform as promised under the contract. Reformation: A court-ordered correction of a written contract so that it reflect the true intentions of the parties.

Look at question 7 Chp 11.1

dank

Two Possible Contract Provisions that Limit Remedies.?

exculpatory clauses limitation of liability clauses