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Slides developed by Les Wiletzky Wiletzky and Associates Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. PowerPoint Slides to Accompany.

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Presentation on theme: "Slides developed by Les Wiletzky Wiletzky and Associates Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. PowerPoint Slides to Accompany."— Presentation transcript:

1 Slides developed by Les Wiletzky Wiletzky and Associates Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. PowerPoint Slides to Accompany CONTEMPORARY BUSINESS AND ONLINE COMMERCE LAW 5 th Edition by Henry R. Cheeseman Chapter 13 Remedies for Breach of Traditional and Online Contracts

2 13 - 2Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Performance and Breach discharged absolute duty 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 – Breach of contract – If a contracting party fails to perform an absolute duty owed under a contract

3 13 - 3Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Types of Performance Complete Substantial Inferior There are three levels of performance of a contract:

4 13 - 4Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. 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.

5 13 - 5Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Remedy Where There Has Been Substantial Performance (Minor Breach) CONTRACT Party A Breaches the Contract (Substantial Performance) Party B may: 1. Recover damages Contracting Party A (Breaching Party) Contracting Party B (Nonbreaching Party)

6 13 - 6Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Remedies Where There Has Been Incomplete Performance (Material Breach) CONTRACT Party A Breaches the Contract (Incomplete Performance) Party B may: 1. Recover damages or 2. Rescind the contract Contracting Party A (Breaching Party) Contracting Party B (Nonbreaching Party)

7 13 - 7Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Anticipatory Breach 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 This gives an immediate cause of action to the nonbreaching party to sue for breach of contract anticipatory repudiation This is also called anticipatory repudiation

8 13 - 8Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Monetary Damages monetary damages A non-breaching party may recover monetary damages from a breaching party Monetary damages are available whether the breach was minor or material: Compensatory damages Consequential damages Liquidated damages Nominal damages

9 13 - 9Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Compensatory Damages (1 of 2) 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”

10 13 - 10Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Compensatory Damages (2 of 2) The amount of that will be awarded for breach of contract depends on: The type of contract involved, and Which party breached the contract Special types of contracts: Sale of Goods Construction Contracts Employment contracts

11 13 - 11Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Consequential Damages Foreseeable Foreseeable damages that arise from circumstances outside the contract To be liable for these damages, The breaching party must know or have reason to know that the breach will cause special damages to the other party

12 13 - 12Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Liquidated Damages (1 of 2) Damages to which parties to a contract agree in advance if the contract is breached To be lawful, The actual damages must be difficult or impracticable to determine, and The liquidated amount must be reasonable in the circumstances

13 13 - 13Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Liquidated Damages (2 of 2) Many businesses include liquidated damages in their commercial contracts, which help to: Provide certainty, Avoid lawsuits, and Provide an incentive to enter into contracts

14 13 - 14Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Nominal Damages Damages awarded when the non- breaching 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”

15 13 - 15Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Mitigation of Damages 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

16 13 - 16Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Enforcement of Remedies (1 of 2) judgment If the breaching party refuses to pay the court ordered judgment, the court may issue: Writ of Attachment Writ of Attachment Writ of Garnishment Writ of Garnishment

17 13 - 17Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Enforcement of Remedies (2 of 2) Writ of Attachment Orders the sheriff to: 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 Writ of Attachment Orders the sheriff to: 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 Writ of Garnishment Orders that: Wages, bank accounts, or other property of the breaching party that is in the hands of third parties be paid over to the non- breaching party to satisfy the judgment Writ of Garnishment Orders that: Wages, bank accounts, or other property of the breaching party that is in the hands of third parties be paid over to the non- breaching party to satisfy the judgment

18 13 - 18Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Rescission and Restitution Rescission An action to undo the contract Available if there has been: A material breach of contract Fraud Undue influence MistakeRescission An action to undo the contract Available if there has been: A material breach of contract Fraud Undue influence MistakeRestitution Returning of goods or property received from the other party to rescind a contract If the actual goods or property is not available, a cash equivalent must be madeRestitution Returning of goods or property received from the other party to rescind a contract If the actual goods or property is not available, a cash equivalent must be made

19 13 - 19Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Equitable Remedies 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

20 13 - 20Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Types of Equitable Remedies (1 of 2) Type of Equitable Remedy Description Specific PerformanceCourt orders the breaching party to perform the acts promised in the contract. The subject matter of the contract must be unique. ReformationCourt rewrites a contract to express the parties’ true intentions. Usually used to correct clerical errors.

21 13 - 21Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Types of Equitable Remedies (2 of 2) Type of Equitable Remedy Description InjunctionCourt order that prohibits a party from doing a certain act. Available in contract actions only in limited circumstances.

22 13 - 22Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Torts Associated With Contracts The recovery for breach of contract usually is limited to contract damages The major torts associated with contracts are: Intentional Interference with Contractual Relations Breach of the Implied Covenant of Good Faith and Fair Dealing

23 13 - 23Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Tort Damages: Compensatory Damages These include compensation for personal injury, pain and suffering, emotional distress, and other injuries caused by the defendant’s tortious conduct

24 13 - 24Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Tort Damages: Punitive Damages Damages that are awarded to: Punish the defendant Deter the defendant from similar conduct in the future Set an example for others These are recoverable against a defendant for intentional or egregious conduct

25 13 - 25Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Intentional Interference with Contractual Relations 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: A valid, enforceable contract between the contracting parties Third-party knowledge of this contract Third-party inducement to breach the contract

26 13 - 26Copyright © 2006 by Pearson Prentice-Hall. All rights reserved. Breach of the Implied Covenant of Good Faith and Fair Dealing Under this covenant: The parties to a contract are held to the express terms of the contract; and 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


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