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Chapter 16Remedies for Breach ofTraditional and E-Contracts
Performance and Breach
Three types of performance Complete performance (strict performance) Substantial performance (minor breach) Inferior performance (material breach)
16-2Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
Performance and Breach
Complete Performance Strict performance
Contract is executed Contractual obligations are discharged
Tender of performance also discharges contractual obligations
16-3Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
Performance and Breach
Substantial Performance Minor breach of contract Performance deviates slightly from complete
performance Nonbreaching party may recover damages
16-4Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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
16-5Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
Case 16.1: Breach of Contract
Case Turner Broadcasting System, Inc. v. McDavid 693 S.E.2d 873, Web 2010 Ga. App. Lexis 317 (2010) Court of Appeals of Georgia
Issue Is there an enforceable contract between McDavid
and Turner?
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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
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Monetary Damages
Available to nonbreaching party upon: Minor breach Material breach
Types Compensatory damages Consequential damages Liquidated damages Nominal damages
16-8Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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
16-9Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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
16-10Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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
16-11Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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
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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
16-13Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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
16-14Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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
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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
16-16Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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
16-17Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
Equitable Remedies
Equitable remedies are available if the legal remedy is inadequate
Also available to prevent unjust enrichment Types
Specific performance Reformation Injunction
16-18Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
Equitable Remedies
16-19Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
Case 16.2: Specific Performance
Case Alba v. Kaufmann 27 A.D.3d 816, 810 N.Y.S.2d 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?
16-20Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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
16-21Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
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
16-22Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
16-23Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.