1. Chapter 12 Performance of Contracts and Remedies for Breach
PowerPoint Slides to accompany The Legal Environment of Business and Online Commerce 5E, by Henry R. Cheeseman
Chapter 12
Performance of Contracts
and Remedies for Breach
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2. Genuineness of Assent
The requirement that a party’s assent to a contract be genuine
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3. 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.
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4. 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
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5. Duress
Occurs where one party threatens to do a wrongful act unless the other party enters into a contract
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6. 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.
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7. 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.
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8. Statute of Frauds
State statute that requires certain types of contracts to be in writing to be enforceable.
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9. 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
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10. 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
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11. Other Interests in Real Property
Mortgages
Leases
Life estates
Easements
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12. Agents’ Contracts
Agents’ contracts to sell real property must be in writing in some states.
This is sometimes called the equal dignity rule.
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13. Formality of the Writing
In general, any writing is sufficient.
Required signature
The contract must be signed by person against whom enforcement is sought.
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14. 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
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15. 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
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16. 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.
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17. 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.
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18. Discharge of Contracts
By agreement
Mutual rescission
Substituted contract
Novation
Accord and satisfaction
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19. Discharge of Contracts
Impossibility of performance
Death or incapacity of promissor in a personal service contract
Destruction of the subject matter
Supervening illegality
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20. Discharge of Contracts
Commercial impracticability
An unforeseeable event makes performance impractical.
This defense is not recognized by all states.
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21. 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.
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22. Types of Performance Complete performance Results in executed contract
Tender of performance discharges a party’s obligation.
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23. 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.
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24. 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.
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25. 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.
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26. Types of Monetary Damages
Consequential
Compensates a nonbreaching party for foreseeable special damages that result from the breach.
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27. Types of Monetary Damages
Liquidated
Agreement by the parties in advance that sets the amounts of damages recoverable in case of breach
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28. Mitigation of Damages
A nonbreaching party is under a legal duty to avoid or reduce damages caused by a breach of contract.
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29. 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.
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30. 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
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31. Intentional Interference With Contractual Relations
An enforceable contract exists between two parties.
A third party knows of the contract and induces one of the parties to the contract to breach it.
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