Methods to Terminate a Contract

Discharge by Performance Contract Completion –All terms of the contract have been carried out properly and completely. Time –The terms of the contract are discharged if the contract is not complete within a reasonable amount of time. –Court will honor time request, if it is deemed “of the essence.” –If not mentioned in contract, then a reasonable time will be assumed.

Satisfactory Completion –Law requires that services be completed in a satisfactory manner. –Reasonable person test Would a reasonable consider the work to done in satisfactory manner? Substantial Completion –Slightly less than full performance Must meet the following rules: –Acted in Good Faith –Completed Major Components of Contract –Only Minor Details Incomplete. Discharge by Performance

Tender of Performance –Tender: Offer to Perform –Must make tender even if you know the other party will not perform their part of the contact. Discharge by Performance

Discharge By Agreement Mutual Release –Each side releases the other side from the contract. –Example: Jack and Jill both agree to end their agreement. Accord and Satisfaction –Substitute one contract for another. –Example: Agreeing to settle a dispute for a lesser amount that the original contract suggests.

Discharge By Impossibility of Performance Death or Illness in a Personal Service Contract –Only allowed in Personal service contracts. –What is personal service? PhotographerArtist –Any other contract must be completed. Example: Picasso dies before completed a portrait of Galeo.

Destruction of the Exact Subject Matter –If the subject matter is essential to the contract then it will be discharged. –Example: Gina drops the birthday cake as she walks it out to her customer. Illegality –Any illegal contract is void. –Example: Gambling debts Discharge By Impossibility of Performance

Discharge by Operation of Law Wrongful Alteration –Any altering or changing of a contract will discharge parties to the agreement. –Example: Changing the terms of an agreement without getting prior approval from all parties. Statute of Limitations –Individual states have a time limit on lawsuits to be filed. –What is the only crime/tort that doesn’t have a time limit? Murder

Bankruptcy –Debtors can be discharged from contracts after filing for bankruptcy. –Example: After filing for bankruptcy, Pedro no longer had to pay his car loan. Discharge by Operation of Law

Transferring or Breaching Contracts and Remedies

Assignment Legally transferring your RIGHTS in a contract. –Assignor: party who transfers the right. –Assignee: party to whom the right is transferred. No consideration is needed to assign someone the rights to a contract. Must not change the obligations in the contract. Must be a RIGHT not a DUTY. Assignor is responsible for contract fulfillment.

Delegation Transfer a duty. Delegating party is still responsible for the contract being fulfilled. Contracts that CANNOT be delegated: –Promise to perform service personally. –Exercise of personal skill or judgment. –Contract prohibiting delegation.

Novation Replacing a party to a contract with a new one. The other terms to the contract remain the same.

Third Parties Privity of Contract –Determines who can sue who over a breach of contract. Third-Party Beneficiary –A person who is not a party to a contract but benefits from it. –Has the right to sue over breach of contract.

Breach of Contract Wrongful failure to perform one or more promises in a contract. Anticipatory Breach –Notified that a party to the contract will not fulfill their part of the contract prior to the required time of fulfillment. –Lawsuit may be filed early in this case. Exception to the rules: Refusal to pay money owed at a future date.

Contract Remedies & Damages Acceptance of Breach –Accept the breach of contract and discharge the other party without asking for damages. Why willingly accept a breach of contract? –Must show damages in order to win monetary damages. –Not worth the party’s time to file lawsuit.

Actual: Damages DIRECTLY related to breach. Incidental: Reasonable expenses that INDIRECTLY from breach of contract. Compensatory: Award only for injuries suffered nothing more. Consequential: Damages that DO NOT flow directly from breach. Money Damages

Speculative: Damages awarded not on fact but on expectations from contract fulfillment. Liquidated: Anticipated damages agreed prior to contract being signed. Nominal: Award to proved legal injury but no actual damages caused. Punitive: Damages in excess of losses suffered in order to punish party for breach.

Ask court to order the other party to do what they agreed to do. –Subject matter must be unique in nature. –Which of the following is unique? Real Estate Stocks of General Electric ’65 Ford Mustang with 44,000 miles A brand new Ford F-150 Dozen Eggs Answers: Real Estate and Mustang are unique. Specific Damages

Injunction Court order that prevents a party from performing an act. Temporary or Permanent. Violators are in contempt of court.

Minimizing Damages Injured party must try to reduce the damages by all means possible (mitigation of damages). What could you do to mitigate damages if a tenant breaks the lease and moves out early? Possible answers: Advertise for rent sign in yard, put sign up at local university, and place an advertisement in the local newspaper.

The End