Chapter 16 Remedies for Breach of Traditional and

Chapter 16 Remedies for Breach of Traditional and EContracts 25 -1

Performance and Breach § Three types of performance § Complete performance (strict performance) § Substantial performance (minor breach) § Inferior performance (material breach) Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -2

Performance and Breach § Complete Performance § Strict performance § Contract is executed § Contractual obligations are discharged § Tender of performance also discharges contractual obligations Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -3

Performance and Breach § Substantial Performance § Minor breach of contract § Performance deviates slightly from complete performance § Nonbreaching party may recover damages Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -4

Performance and Breach § Inferior Performance § Material breach of contractual obligations § Nonbreaching party excused from any further performance § Nonbreaching party is permitted to: § Rescind contract and seek restitution, or § Sue to enforce contract and seek damages Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -5

Case 16. 1: Breach of Contract § Case § Turner Broadcasting System, Inc. v. Mc. David § 693 S. E. 2 d 873, Web 2010 Ga. App. Lexis 317 (2010) § Court of Appeals of Georgia § Issue § Is there an enforceable contract between Mc. David and Turner? Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -6

Performance and Breach § Anticipatory Breach § Party repudiates – indicates that he or she will not perform duties § Nonbreaching party is immediately discharged § Nonbreaching party may sue immediately Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -7

Monetary Damages § Available to nonbreaching party upon: § Minor breach § Material breach § Types § Compensatory damages § Consequential damages § Liquidated damages § Nominal damages Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -8

Compensatory Damages § Purposes § To compensate the nonbreaching party for the loss of the bargain § To place the nonbreaching party in the position it would have had if contract had been fully performed § Restore benefit of the bargain Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -9

Compensatory Damages § Amount awarded depends on: § Type of contract § Party that breached the contract § Contracts where compensatory damages are applied: § Sale of goods § Construction contracts § Employment contracts Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -10

Consequential Damages § Foreseeable damages that arise from circumstances outside the contract § Can be disclaimed in a sales or license agreement § The breaching party is not responsible to pay disclaimed consequential damages Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -11

Nominal Damages § Damages awarded when no financial loss has resulted from the breach § Usually awarded in a small amount, such as $1 § Cases involving nominal damages are usually brought on principle § Disfavored by most courts Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -12

Mitigation of Damages § Nonbreaching party has a duty to avoid or reduce damages caused by a breach of contract § Extent of mitigation depends on the type contract § If an employer breaches an employment contract, the employee: § Must try to mitigate damages § Should try to find substitute employment § Can accept only comparable employment Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -13

Liquidated Damages § Parties agree in advance that certain damages will be available if contract is breached § To be lawful: § Actual damages must be difficult or impracticable to determine § Liquidated amount must be reasonable in the circumstances § Considered a penalty if actual damages can be determined Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -14

Rescission and Restitution § Rescission: An action to undo a contract § Available if there has been § A material breach of contract § Fraud § Duress § Undue influence § Mistake Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -15

Rescission and Restitution § Restitution: The return of goods or property received from the other party to rescind a contract § If the actual goods or property are not available, a cash equivalent must be made Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -16

Enforcement of Remedies § Writ of Attachment: An order of the court that enables a government officer to seize property of the breaching party and sell it at auction to satisfy a judgment § Writ of Garnishment: An order of the court that orders that wages, bank accounts, or other property of the breaching party held by third persons be paid to the nonbreaching party to satisfy a judgment Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -17

Equitable Remedies § Equitable remedies are available if the legal remedy is inadequate § Also available to prevent unjust enrichment § Types § Specific performance § Reformation § Injunction Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -18

Equitable Remedies Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -19

Case 16. 2: Specific Performance § Case § Alba v. Kaufmann § 27 A. D. 3 d 816, 810 N. Y. S. 2 d 539, Web 2006 N. Y. App. Div. Lexis 2321 (2006) § Supreme Court of New York, Appellate Division § Issue § Is an order of specific performance of the real estate contract warranted in this case? Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -20

Torts Associated With Contracts § Intentional Interference with Contractual Relations § Arises when a third party induces contracting party to breach the contract § Elements: § Valid, enforceable contract between the contracting parties § Third-party knowledge of this contract § Third-party inducement to breach the contract Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -21

Torts Associated With Contracts § Breach of Implied Covenant of Good Faith and Fair Dealing § Parties held to express terms of the contract § Also required to act in good faith, deal fairly in all respects § A breach of this implied covenant is a tort for which tort damages are recoverable Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall. 16 -22