Remedies for Breach of Traditional and Online Contracts

Performance and Breach n n If a contractual duty has not been discharged or excused, the contracting party owes an absolute duty (covenant) to perform the duty. Breach of contract occurs when a contracting party fails to perform an absolute duty owed under a contract. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. 16 -reserved 2 All rights

Types of Performance Complete Performance Substantial Performance Inferior Performance Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. 16 -reserved 3 All rights

Complete Performance n n n Most contracts are discharged by strict performance. A fully performed contract is an executed contract. Tender of performance discharges contractual obligations. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. 16 -reserved 4 All rights

Substantial Performance n This occurs when there is a minor breach of contract. n n Performance deviates slightly from complete performance. Nonbreaching party may recover damages. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. 16 -reserved 5 All rights

Inferior Performance n n n This is a material breach of contractual obligations. Nonbreaching party may rescind contract and seek restitution. Nonbreaching party is excused from any further performance. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. 16 -reserved 6 All rights

Summary: Types of Performance Type of Performance Legal Consequence Complete Performance The contract is discharged. Substantial Performance (minor breach) The non-breaching party may recover damages caused by the breach. Inferior Performance (material breach) The non-breaching party may either: (1) Rescind the contract and recover restitution, or (2) Affirm the contract and recover damages. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. 16 -reserved 7 All rights

Anticipatory Breach n n A breach that occurs when one contracting party informs the other that he or she will not perform his or her contractual duties when due. Also called anticipatory repudiation. Nonbreaching party’s duties are immediately discharged. Nonbreaching party may sue repudiating party at time of breach. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. 16 -reserved 8 All rights

Monetary Damages n n A non-breaching party may recover monetary damages from a breaching party. Monetary damages are available whether the breach was minor or material. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. 16 -reserved 9 All rights

Types of Monetary Damages § Compensatory Damages § Consequential Damages § Nominal Damages § Liquidated Damages Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 10 All 16 rights reserved

Compensatory Damages n n Award of money intended to compensate a non-breaching party for the loss of the bargain. They place the non-breaching party in the same position as if the contract had been fully performed by restoring the “benefit of the bargain. ” Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 11 All 16 rights reserved

Compensatory Damages n The amount of that will be awarded for breach of contract depends on: n n n (continued) The type of contract involved, and Which party breached the contract. Special types of contracts: n n n Sale of Goods Construction Contracts Employment contracts Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 12 All 16 rights reserved

Mitigation of Damages n n A non-breaching party is under a legal duty to avoid or reduce damages caused by a breach of contract. The extent of mitigation depends on the type contract involved. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 13 All 16 rights reserved

Consequential Damages n n Foreseeable damages that arise from circumstances outside the contract. To be liable for these damages, n The breaching party must know or have reason to know that the breach will cause special damages to the other party. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 14 All 16 rights reserved

Liquidated Damages n n Damages to which parties to a contract agree in advance if the contract is breached. To be lawful, n n The actual damages must be difficult or impracticable to determine, and The liquidated amount must be reasonable in the circumstances. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 15 All 16 rights reserved

Nominal Damages n n n Damages awarded when the nonbreaching party sues the breaching party even though 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. ” Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 16 All 16 rights reserved

Enforcement of Remedies n If the breaching party refuses to pay the court ordered judgment, the court may issue: n Writ of Attachment n Writ of Garnishment Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 17 All 16 rights reserved

Enforcement of Remedies (continued) n Writ of Attachment Orders the sheriff to n n Seize property in the possession of the breaching party that he or she owns, and To sell the property at auction to satisfy the judgment. Reed/Cheeseman: Contract Law for Paralegals n Writ of Garnishment Orders that n Wages, bank accounts, or other property of the breaching party that is in the hands of third parties be paid over to the nonbreaching party to satisfy the judgment. © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 18 All 16 rights reserved

Rescission and Restitution Rescission n An action to undo the contract. n Available if there has been: n A material breach of contract n Fraud n Undue influence n Mistake Reed/Cheeseman: Contract Law for Paralegals Restitution n Returning of goods or property received from the other party to rescind a contract. n If the actual goods or property is not available, a cash equivalent must be made. © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 19 All 16 rights reserved

Equitable Remedies n n Equitable remedies are available if there has been a breach of contract that cannot be adequately compensated by a legal remedy. They are also available to prevent unjust enrichment. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 20 All 16 rights reserved

Specific Performance n n n Court orders the breaching party to perform the acts promised in the contract. The subject matter of the contract must be unique. Specific performance of personal contracts are usually not granted because it will be difficult to monitor performance. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 21 All 16 rights reserved

Reformation n n Court rewrites a contract to express the parties’ true intentions. Usually used to correct clerical errors. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 22 All 16 rights reserved

Injunction n n Court order that prohibits a party from doing a certain act. Available in contract actions only in limited circumstances. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 23 All 16 rights reserved

Torts Associated With Contracts n n Intentional Interference with Contractual Relations Breach of the Implied Covenant of Good Faith and Fair Dealing Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 24 All 16 rights reserved

Intentional Interference with Contractual Relations n n A tort that arises when a third party induces a contracting party to breach the contract with another party. The following elements must be shown: n A valid, enforceable contract between the contracting parties. n Third-party knowledge of this contract. n Third-party inducement to breach the contract. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 25 All 16 rights reserved

Breach of the Implied Covenant of Good Faith and Fair Dealing n n Under this covenant: n The parties to a contract are held to the express terms of the contract, and n They are also required to act in good faith and deal fairly in all respects in obtaining the contract. A breach of this implied covenant is a tort for which tort damages are recoverable. Reed/Cheeseman: Contract Law for Paralegals © 2009 Pearson Education, Upper Saddle River, NJ 07458. - 26 All 16 rights reserved