Performance, Discharge, and, Remedies

“If you can’t give me your word of honor, will you give me

your promise?” Samuel Goldwyn,

Hollywood producer

“Everyone complains of his memory, none of his judgment.”

Francois, duc de la Rochefoucauld, French writer

Discharge: Party is discharged when it has no more duties under a contract

Most contracts are discharged by full performance

Sometimes the parties discharge a contract by agreement

Rescind: Terminate contract by mutual agreement

Strict performance: Requires one party to perform its obligations precisely, with no deviation from the contract terms

Substantial performance: Occurs when one party fulfills enough of its contract obligations to warrant payment◦ A party that fails to perform substantially:

Receives nothing on the contract and will only recover the value of the work, if any

Parties to a contract must carry out their obligations in good faith

The difficulty is applying this general rule to:◦ Wide variety of problems that may arise

Generally make contract dates strictly enforceable

Merely including a date for performance does not make time of the essence

When one party breaches a contract, the other party is discharged

Material breach◦ Generally courts will discharge only if a party

committed a material breach Statute of limitations: Will limit the time

within which the injured party may file suit

True impossibility◦ Something has happened making it utterly

impossible to fulfill the promise Generally limited to:

Destruction of the subject matter Death of the promisor in a personal service contract Illegality of the contract

Commercial impracticability ◦ Some event has occurred that neither party

anticipated, making the contract extra-ordinarily difficult and unfair to one party

Frustration of purpose◦ Some event has occurred that neither party

anticipated and the contract now has no value for one party

A remedy is the method a court uses to compensate an injured party

Interest: A legal right in something

Expectation interest◦ Designed to put the injured party in the position

she would have been in had both sides fully performed their obligations Direct damages: Flow directly from the contract Consequential damages: Resulting from the

unique circumstances of this injured party Incidental damages: Minor costs that the injured

party suffers when responding to the breach

Reliance interest◦ Puts the injured party in the position he would

have been in had the parties never entered into a contract

Restitution interest◦ Designed to return to the injured party a benefit

that he has conferred on the other party

Equitable interest◦ When money is not sufficient to help the injured

party: Court may order a transfer of property or may issue

an injunction to prevent a particular action from continuing

◦ Specific performance: Forces both parties to complete the deal

◦ Injunction: Court order that requires someone to do something or to refrain from doing something Preliminary injunction Permanent injunction

Mitigation of damages◦ A party may not recover for damages that could

be avoided with reasonable efforts Mitigate: To keep damages as low as possible

Liquidated damages: Clause stating in advance how much a party must pay it if it breaches◦ A court will generally enforce a liquidated

damages clause if : At the time of creating the contract it was very

difficult to estimate actual damages Liquidated amount is reasonable