Business Law II Topics

Business Law II Essential Question - Students will be able to determine the proper monetary or equitable remedy given various contract breach scenarios. OR... What will the defendant have to pay? Essential Question - Students will be able to determine the proper monetary or equitable remedy given various contract breach scenarios. OR... What will the defendant have to pay?

Performance and Breach  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 – If a contracting party fails to perform an absolute duty owed under a contract.

Types of Performance Complete Performance Substantial Performance Inferior Performance

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.

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.

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.

Types of Monetary Damages Compensatory Damages Consequential Damages Liquidated Damages Nominal Damages

Compensatory Damages  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.”

Compensatory Damages (continued)  The amount of that will be awarded for breach of contract depends on: The type of contract involved, and The type of contract involved, and Which party breached the contract. Which party breached the contract.  Special types of contracts: Sale of Goods Sale of Goods Construction Contracts Construction Contracts Employment contracts Employment contracts

Consequential Damages  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. The breaching party must know or have reason to know that the breach will cause special damages to the other party.

Liquidated Damages  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 actual damages must be difficult or impracticable to determine, and The liquidated amount must be reasonable in the circumstances. The liquidated amount must be reasonable in the circumstances.

Liquidated Damages (continued)  Many businesses include liquidated damages in their commercial contracts, which help to: Provide certainty, Provide certainty, Avoid lawsuits, and Avoid lawsuits, and Provide an incentive to enter into contracts. Provide an incentive to enter into contracts.

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.”

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.

Enforcement of Remedies  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

Enforcement of Remedies (continued) Writ of Attachment  Orders the sheriff to Seize property in the possession of the breaching party that he or she owns, and 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. 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 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. 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. 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. 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.

Rescission and Restitution Rescission  An action to undo the contract.  Available if there has been: A material breach of contract A material breach of contract Fraud Fraud Undue influence Undue influence Mistake MistakeRescission  An action to undo the contract.  Available if there has been: A material breach of contract A material breach of contract Fraud Fraud Undue influence Undue influence Mistake 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 made. Restitution  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.

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.

Types of Equitable Remedies (1 of 2) Type of Equitable Remedy Description Specific Performance Court orders the breaching party to perform the acts promised in the contract. The subject matter of the contract must be unique. Reformation Court rewrites a contract to express the parties’ true intentions. Usually used to correct clerical errors.

Types of Equitable Remedies (2 of 2) Type of Equitable Remedy Description Quasi Contract Permits the recovery of damages for breach of an implied-in-law contract where no actual contract exists between the parties. Only the reasonable value of the services or materials may be recovered. Injunction Court order that prohibits a party from doing a certain act. Available in contract actions only in limited circumstances.

Finally... Punitive Damages  Damages that are awarded to: Punish the defendant Punish the defendant Deter the defendant from similar conduct in the future Deter the defendant from similar conduct in the future Set an example for others Set an example for others  Generally, punitive damages are not recoverable for breach of contract.