Chapter 20

What constitutes a Breach of Contract?

* The question of remedies does not become important until it is first determined that a contract has been violated or breached.

Breach - failure to act or perform in the manner called for in a contract.

Anticipatory breach – Promisor’s repudiation of the contract prior to the time that performance is required when such repudiation is accepted by the promisee as a breach of the contract.

Anticipatory repudiation - repudiation made in advance of the time for the performance of the contract obligations.

* To constitute such repudiation, there must be a clear, absolute, unequivocal refusal to perform the contract according to its terms.

* When they say they’re not gonna do what they were gonna do and they’re not gonna get it done on the day they said. *

* A refusal to perform a contract that is made before performance is required unless the other party to the contract does an act or makes a concession that is not required by the contract is an anticipatory repudiation of the contract.

* A party making an anticipatory repudiation may retract or take back the repudiation if the other party has not changed position in reliance on the repudiation.

* However, if the other party has changed position, the party making the anticipatory repudiation cannot retract it.

Anticipatory repudiation by conduct:

* The anticipatory repudiation may be expressed by conduct that makes it impossible for the repudiating party to perform subsequently.

Waiver of Breach:

* The breach of a contract may have no importance because the other party to the contract waives the breach.

Waiver – release or relinquishment of a known right or objection.

Existence of waiver * A party may express or declare that the breach of a contract is waived.

Scope of the waiver * The waiver of a breach of contract extends only to the matter waived. It does not show any intent to ignore other provisions of the contract.

Antimodification clause * Modern contracts commonly specify that the terms of a contract shall not be deemed modified by waiver to any breaches. This means that the original contract remains agreed to. Either party may therefore return to, and insist on, compliance with the original contract.

Reservation of rights- assertion by a party to a contract that even though a tendered performance is accepted, the right to damages for nonconformity to the contract is reserved.

Remedy- action or procedure that is followed in order to enforce a right or to obtain damages for injury to a right.

* PG 439 FIGURE 20-1 * Specific Performance – action brought to compel the adverse party to perform a contract on the theory that merely suing for damages for its breach will not be an adequate remedy.

Monetary Damages:

Compensatory damages- sum of money that will compensate an injured plaintiff for actual loss.

* Have two branches: direct damages and consequential (special) damages

Nominal damages- nominal sum awarded the plaintiff in order to establish that legal rights have been violated although the plaintiff in fact has no sustained any actual loss or damages.

Punitive damages(exemplary) – damages, in excess of actual loss, imposed for the purpose of punishing or making an example of the defendant.

Direct damages(general damages)- losses that are caused by breach of a contract.

Consequential damages (special damages)- damages the buyer experiences as a result of the seller’s breach with respect to a third party

Effect of failure to mitigate: damages: The effect of the requirement of mitigating damages is to limit recovery by the nonbreaching party to the damages that would have been sustained has this party mitigated the damagers where it was possible to do so.

*Mitigate to reduce

* When one party commits a material breach of the contract, the other party may rescind the contract; if the party in default objects, the aggrieved party may bring as action for recission

Injunction- court order to refrain from doing or to do a specific act. Statute use in labor disputes has been greatly restricted.

Liquidated damages- Provision stipulating the amount of damages to be paid in the event of default or breach of contract.

Valid- Legal

Liquidated damages clause- specification of exact compensation in case of a breach of contract.

** to be valid, a liquidated damages clause must satisfy two requirements: (1) the situation must be one in which it is difficult or impossible to determine tha actual damages (2) the amount specified must not be excessive when compared with the probable damages that would be sustained.

The validity of a liquidated damages clause is determined on the basis of the facts existing when the clause was agreed to.

--Attorney’s fees are a very significant factor in contract litigation. --

Limitation of liability clauses:
Exculpatory clause- provision in a contract stating that one of the parties shall not be liable for damages in case of breach; also called a limitation-of-liability clause.

Limitation-of-liability-clause- provision in a contract stating that one of the parties shall not be liable for damages in case of a breach; also called an exculpatory clause

Escheat- transfer to the state of the title to a decedent’s property when the owner’s of the property dies intestate and is not survived by anyone capable of taking the property as heir.

Chapter 23

Article 2- section of Uniform Commercial Code (UCC) that governs contracts for the sales of goods.

Goods- anything movable at the time it is identified as the subject of a transaction.

Bailment not a sale because only possession is transferred to a bailee

Bailee- person who accepts possession of a property.

Gift- title to an owner’s personal property voluntarily transferred by a party not receiving anything in exchange.

Merchant- seller who deals in specific goods classified by the UCC.

Offer - expression of an offeror’s willingness to enter into a contractual agreement.

Firm offer- offer stated to be held open for a specified time, under the UCC, with respect to the merchants.

Acceptance- unqualified assent to the act or proposal of another; as the acceptance of an offer to make a contract.

Mailbox rule- timing for acceptance tied to proper acceptance

Mirror image rule- common law contract rule on acceptance that requires language to be absolutely the same as the offer, unequivocal and unconditional.

Battle of the forms- merchants’ exchanges of invoices and purchase orders with differing boilerplate terms

Leases are not sales because they are possession only