Performance of Traditional and E-Contracts Chapter 10 Performance of Traditional and E-Contracts Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Genuineness of Assent The requirement that a party’s assent to a contract be genuine Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Mistakes Mutual mistakes Unilateral mistakes Mutual mistakes of a past or existing material fact Mutual mistake of value Unilateral mistakes Mistaken party can generally not rescind. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Misrepresentation Intentional misrepresentation (fraud) Material misrepresentation of a fact Intent to deceive Justifiable reliance by the innocent party The innocent party was injured Innocent misrepresentation Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Duress Occurs where one party threatens to do a wrongful act unless the other party enters into a contract Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Undue Influence Undue influence occurs when one person takes advantage of another’s mental, emotional, or physical weakness and unduly persuades that person to enter a contract. A contract entered into under undue influence is voidable by the innocent party. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Proving Undue Influence A fiduciary or confidential relationship must have existed between the parties. The dominant party must have unduly used his or her influence to persuade the servient party to enter into a contract. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Statute of Frauds State statute that requires certain types of contracts to be in writing to be enforceable. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Contracts Generally Required to Be in Writing Contracts involving interests in land Contracts that by their own terms cannot possibly be performed within 1 year Guaranty contracts in which a person promises to answer for the debt or duty of another Contracts for the sale of goods worth $500 or more Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Contracts Involving Interests in Land Real property The land itself as well as buildings, trees, soil, minerals, timber, plants, crops, and other things permanently affixed to the land Fixtures Personal property that is permanently affixed to the real property, such as built-in cabinets in a house Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Other Interests in Real Property Mortgages Leases Life estates Easements Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Agents’ Contracts Agents’ contracts to sell real property must be in writing in some states. This is sometimes called the equal dignity rule. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Formality of the Writing In general, any writing is sufficient. Required signature The contract must be signed by person against whom enforcement is sought. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Parol Evidence Rule Parol evidence is any oral or written words outside the four corners of the written contract. If a written contract is a complete and final statement of the parties’ agreement, any prior or contemporaneous oral or written statements that alter, contradict, or are in addition to the terms of the written contract are inadmissible in court regarding a dispute over the contract. Merger or integration clause Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Third Party Rights Assignment—the transfer of contractual rights by the obligee to another party Assignor—the obligee who transfers the right Assignee—the party to whom the right has been transferred Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Beneficiaries Intended beneficiary A third party who is not a party to contract but who was intended to benefit under the contract can enforce the contract against the obligor. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Promises of Performance Covenant Unconditional or unqualified promise Conditional promises Condition precedent - requires the occurrence or nonoccurence of an event before performance is due. Condition subsequent – the occurrence or nonoccurence of an event excuses performance. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Discharge of Performance By agreement Mutual rescission Novation Accord and satisfaction Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Discharge of Contracts Impossibility of performance Death or incapacity of promissor in a personal service contract Destruction of the subject matter Supervening illegality Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Discharge of Contracts Commercial impracticability An unforeseeable event makes performance impractical. This defense is not recognized by all states. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Unconscionable Contracts A contract may be found to be unconscionable if the following elements are present: Severely unequal bargaining power Dominant party unreasonably used superior power to obtain unfair terms. Adhering party had no reasonable alternative. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Types of Performance Complete performance Results in executed contract Tender of performance discharges a party’s obligation. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Types of Performance Substantial performance Results in a minor breach Non-breaching party’s options Ask the breaching party to elevate performance. Deduct the cost of repair from the final payment. Sue for the cost of repair if the final payment has already been made. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Types of Performance Inferior performance Results in a material breach Non-breaching party’s options Rescind the contract and seek restitution. Affirm the contract and sue for damages. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Types of Monetary Damages Compensatory Compensates a nonbreaching party for the loss of the bargain. The goal is to place the nonbreaching party in the same position as if the contract had been fully performed. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Types of Monetary Damages Consequential Compensates a nonbreaching party for foreseeable special damages that result from the breach. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Types of Monetary Damages Liquidated Agreement by the parties in advance that sets the amounts of damages recoverable in case of breach Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Mitigation of Damages A nonbreaching party is under a legal duty to avoid or reduce damages caused by a breach of contract. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Equitable Remedies Specific performance Court orders the breaching party to perform the acts promised in the contract. Subject matter of the contract must be unique. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Equitable Remedies Reformation Injunction Court rewrites a contract to express the parties’ true intentions; usually used to correct clerical errors. Injunction Court order that prohibits a party from doing a certain act Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.