25-1 Chapter 16 Remedies for Breach of Traditional and E- Contracts

Performance and Breach  Three types of performance  Complete performance (strict performance)  Substantial performance (minor breach)  Inferior performance (material breach) 16-2 Copyright © 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 16-3 Copyright © 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 16-4 Copyright © 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 16-5 Copyright © 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? 16-6 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

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 16-7 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Monetary Damages  Available to nonbreaching party upon:  Minor breach  Material breach  Types  Compensatory damages  Consequential damages  Liquidated damages  Nominal damages 16-8 Copyright © 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 16-9 Copyright © 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 Copyright © 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 Copyright © 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 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

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 Copyright © 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 Copyright © 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 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

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 Copyright © 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 Copyright © 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 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Equitable Remedies Copyright © 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? Copyright © 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 Copyright © 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 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

16-23 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.