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Performing Contracts and Breach

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

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  1. 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

  2. A Valid Enforceable Contract Mutual Agreement Consideration Capacity Legality Genuineness of Assent Writing

  3. 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

  4. 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.

  5. 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.

  6. 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.

  7. Discharge by Agreement Mutual Rescission – Novation - Parties can agree to discharge one or more duties. Compromise - Accord and Satisfaction –

  8. Discharge by Operation of Law Statute of Limitations Bankruptcy Impossibility The law can also discharge a duty by:

  9. 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

  10. Breach of Contract • Material Breach • Anticipatory Repudiation • Other party can stop performance and seek remedies (Damages) • Minor Breach? (less than perfect performance?)

  11. 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

  12. 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)

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