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Performing Contracts and Breach. What happens if a party does not perform to the satisfaction of another party to whom performance was owed?. OBE 118, Section 3 Fall 2004 Professor McKinsey. A Valid Enforceable Contract. Mutual Agreement Consideration Capacity Legality

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Performing Contracts and Breach

What happens if a party does not perform to the satisfaction of another party to whom performance was owed?

OBE 118, Section 3

Fall 2004

Professor McKinsey


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A Valid Enforceable Contract

Mutual Agreement

Consideration

Capacity

Legality

Genuineness of Assent

Writing


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Performance

Each enforceable promise in a valid enforceable contract creates a duty that must be discharged by performance, breach, agreement, or law.

Duty

Two types of promises:

Absolute Promises

Conditioned Promises


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Discharge by Performance

  • Sometimes contract requires _______________.

Checklist for Substantial Performance

1. Exact performance called for not a material term.

_________________________ is usually enough.

2. Performance close to complete.

3. Substantially the same benefits created.


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Whose Satisfaction?

  • Performance of contracts dealing with mechanical fitness or utility must only be satisfactory to a reasonable person.

Performance of personal contracts can be specified to be to the satisfaction of a party.


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Discharge by Breach

Material breach occurs when performance is not substantial or when strict performance was called for and performance is not exact.

A material breach discharges the other party’s duty.

  • Anticipatory repudiation discharges the other party’s duty

Party rejects, refuses, or denies performance and other party treats it as a breach.


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Discharge by Agreement

Mutual Rescission –

Novation -

Parties can agree to discharge one or more duties.

Compromise -

Accord and Satisfaction –


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Discharge by Operation of Law

Statute of Limitations

Bankruptcy

Impossibility

The law can also discharge a duty by:


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Impossibility

Death or disablement

Objective impossibility may discharge a duty

Party to a personal contract dies or becomes disabled

Destruction of Subject Matter

Must be the specific subject matter

Intervening Illegality


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Breach of Contract

  • Material Breach

  • Anticipatory Repudiation

  • Other party can stop performance and seek remedies (Damages)

  • Minor Breach? (less than perfect performance?)


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Contract Remedies

  • Damages for breach:

    • Compensatory – usually the expectation interest, the direct damages

    • Consequential – indirect damages that were foreseeable by breaching party

    • Incidental – small costs caused by the breach


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Contract Remedies

  • Equitable Remedies

    • Reliance interest – through promissory estoppel, no contract required

    • Restitution- “make whole again”, where one party is would get a benefit they do not deserve.

    • Specific Performance – where $ will not do justice, real property or unique personal property

    • Injunction – Stop the party from doing something

    • Reformation – rewrite the contract

    • Rescission – undue or cancel the contract as if it never happened (usually includes restitution above)