Factors Affecting Contracts Ending a Contract Contract Law Factors Affecting Contracts Ending a Contract

Mistake Error that destroys consensus - fundamental mistake about subject matter of contract Shared - common to both parties - contract void - court may correct written error that does not reflect understanding of parties – rectification

Mistake/2 Misunderstanding differing interpretations Both interpretations reasonable – void Both interpretations unreasonable – void One interpretation reasonable, one not Court will enforce the reasonable interpration of the contract

Mistake/3 One-sided Mistake Non Est Factum (It is not my act) - when one party misleads themselves Caveat emptor Non Est Factum (It is not my act) mistake goes to the nature of the document usually involves misrepresentation

Rules of Interpretation Reasonable person test Literal or liberal meanings imposed on written terms Courts or statutes may imply terms Parol Evidence Rule Outside evidence will not change clear wording

Misrepresentation False Statement of fact Statement of opinion of professional That persuades someone to enter into a contract. Silence is not misrepresentation when there is no duty to disclose

Innocent Misrepresentation The person making it honestly believes it to be true. Remedies are limited to rescission Rescission puts both parties back into original positions Not available if impossible to restore Not where a third party is involved

Fraudulent Misrepresentation Intentionally or recklessly misrepresenting Can sue for damages in addition to rescission An innocent misrepresentation becomes fraudulent if not corrected when discovered \

Negligent Misrepresentation Carelessly misrepresenting Should have known what they were saying was false Rescission and damages availabe

Duress and Undue Influence threat makes contract voidable Monetary, physical, embarrassment Undue Influence If person in position of trust abuses that relationship to induce a contract presumed in certain relationships Voidable

Duress and Undue Influence/2 Unconscionable Transactions Where a person takes advantage of another’s vulnerability Naivety, age, financial situation, stress voidable

Privity of Contract Contract can only affect parties to it Exceptions: Original party can enforce contract when benefits bestowed on outsider Novation - a new party is substituted for an original party to the contract Contractual Rights run with land Contracts created through agents

Assignment The benefits (chose in action) received under a contract can be assigned or transferred to another Qualifications for statutory assignment absolute and unconditional must be in writing and complete must give proper notice

Assignment/2 Some things cannot be assigned: the right to sue (champerty) when contract involves the personal performance of a particular skill

Assignment/3 Assignee is in the same position as original contractor Subsequent claims do not affect assignee Contractual rights assigned automatically in case of death or bankruptcy

The End of the Contractual Relationship Principal methods of discharging a contract Performance Agreement Breach Frustration

Performance Contractual obligations are discharged when each party satisfactorily performs its part of the bargain.

Performance/2 Substantial performance all or most of contractual obligations are fulfilled contract discharged some contracts must be performed exactly

Tender of Performance When one party is ready, willing, and able and attempts to perform but performance is refused by other party. may be vicarious person who attempted performance may sue other for damages Payment must be in legal tender Delivery at reasonable time and place

Breach A contract is breached when there is: improper or incomplete performance or refusal to perform Conditions - terms essential to substantial performance where breached, victim relieved of obligations Warranties - minor terms of contract where breached, performance still required

Fundamental Breach The failures to perform are so basic they leave one party without any benefit in the contract. Courts will not give effect to some exemption clauses unless specific Repudiation (anticipatory breach) One party indicates that they do not intend to follow through with their end of the deal Can be expressed or implied from conduct Victim may choose to end or insist on performance - bound by choice

Discharge by Agreement Contracts can be modified or ended by agreement Bilateral or unilateral discharge all rules of contract formation apply Accord and satisfaction - parties agree to end contract based on some other consideration

Contractual Terms Contract can specify conditions under which obligations begin or end Conditions precedent—contract is binding only if some pre-existing condition is met Conditions subsequent—the contract ends when some event or condition takes place

Frustration Outside, unforeseen event which Statutory modifications Makes performance impossible Changes the nature of the contract Statutory modifications “Let the loss fall where it lies.” Allows courts to split deposit to pay costs incurred

Self-Induced Frustration When one party is responsible for an act that frustrates a contract, it is treated as a breach. If the obligations of the contract can be fulfilled in some other way, performance is required.

Remedies for Breach of Contract Rescission - returning parties to original position Rectification - court corrects wording of a document Provided in Contract liquidated damages, deposits, down payments victim must mitigate losses

Damages Court tries to put victim of breach in the position they would have been in if the contract had been properly performed Limitations Remoteness - breaching party must compensate for damages likely to be the result of the breach Mitigation - victims must make an effort to keep their losses as low as possible

Equitable Remedies Specific performance Injunction Accounting An order to go through with the deal Injunction An order to stop breaching the agreement Accounting Court may order breaching party to disclose and pay profits Quantum meruit court orders payment for part performance