MT 311 Seminar 6

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 2 Contract Discharge Conditions to Performance: –Condition is a possible future event that may or may not happen. –Triggers or terminates performance. –Condition Precedent: prior to performance. –Condition Subsequent: follows initial performance. –Concurrent: occur simultaneously.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 3 Contract Discharge

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 4 Discharge by Performance Complete vs Substantial Performance. –Complete Performance: perfect performance under the contract. –Substantial Performance: technically a minor breach but as long as in good faith, the non-breaching party remains liable to pay. –Satisfaction Contract: performance is conditioned on reasonable satisfaction.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 5 Discharge by Performance Material Breach of Contract. –When performance is not substantial. –Innocent party is excused from performance and has the right to sue for damages. –A minor breach may be cured. Anticipatory Repudiation. –One party gives notice of refusal to perform. –Innocent party treats AR as material breach.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 6 Discharge by Agreement Discharge By Mutual Rescission: parties must make another agreement. Discharge by Novation: new contract with substitution of a third party for one of the original parties. Accord and Satisfaction: settlement to discharge original contract.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 7 Discharge by Operation of Law Contract Alteration. Statutes of Limitations. Bankruptcy. Impossibility of Performance (Objective). –Party’s incapacitation. –Subject matter is destroyed. –Performance becomes illegal. –Commercially impracticable.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 8 Discharge by Operation of Law Temporary Impossibility. –Suspends performance until the impossibility ceases. Commercial Impracticability. –Performance may be excused when it becomes extremely more difficult or expensive than originally contemplated. –CASE 11.3 Facto v. Pantagis (New Jersey, 2007).

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 9 Types of Damages Compensatory Damages: –Compensates injured party (Plaintiff). –Plaintiff must prove actual damages caused by breach. Amount: Generally: difference between Defendant’s promised performance and actual. Sale of Goods: difference between the contract price and market. Sale of Land/Construction Contracts.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 10 Types of Damages Consequential (Special) Damages –Foreseeable damages that result from breach of contract. –Caused by other than breach of contract. Punitive (Exemplary) Damages. –Deter wrongdoer; set example. Nominal Damages.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 11 Types of Damages Mitigation of Damages. –Injured party has a legal duty to mitigate damages.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 12 Types of Damages Liquidated Damages vs. Penalties. –Liquidated: fixed, certain dollar amount agreed to by parties, paid in the event of breach. LD’s are enforceable. –Penalty: designed to penalize a party. Generally not enforceable.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 13 Equitable Remedies Rescission: cancel or undo a contract. –Available for fraud, mistake, duress and failure of consideration. Restitution: recapture the benefit conferred on the defendant that has unjustly enriched her. –Parties must return goods, property or money.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 14 Equitable Remedies Specific Performance. –Sale of Land. CASE 12.2 Stainbrook v. Low (Indiana, 2006). Reformation: court re-writes the contract to reflect parties’ true intentions.

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 15 Plaintiff must show: –Benefit was conferred on the other party. –Party conferring benefit expected to be paid. –Party seeking recovery did not volunteer. –Retaining benefit without payment would be unjust enrichment. Recovery Based on Quasi Contract

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 16Remedies

Copyright © 2010 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 17 Election of Remedies Nonbreaching party usually has several remedies available. Purpose is to prevent double recovery.