1. ES 2 UNDERSTAND CONTRACT LAW Obj. 2.02 Understand terminating, transferring, and breaching a contract.

2. Terminating a contract  A contract is terminated or discharged when it comes to an end.

3. Terminating a Contract  Contracts can be discharged voluntarily in 2 ways..  Discharge by performance  Discharge by agreement  Some are discharged involuntarily……  Discharge by impossibility of performance  Discharge by operation of law

4. Discharge by Performance  Complete  All terms have been carried out properly and completely.  Time (time for completing performance)  Court will honor time request, if it is deemed “of the essence.”  If not mentioned in contract, then a reasonable time will be assumed.  A reasonable time for selling tomatoes is not the same as a reasonable time for selling a house.

5.  Satisfactory  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  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

6.  Tender of Performance  Tender – Offer to Perform (tender- attempt)  Must make tender even if you know the other party will not perform their part of the contact. Discharge by performance

7. Discharge By Agreement  This means that people can end a contract my mutual agreement.  Mutual Release (Rescission)  Each side releases the other side from the contract.  Accord and Satisfaction  Substitute one contract for another.

8. Discharge By Impossibility of Performance (Involuntary)  Death or Disability  Only allowed in Personal service contracts. Only if the personal services of that person are required to fulfill that contract.  What is personal service? Photographer Artist  Any other contract must be completed.

9.  Destruction of subject matter ( If the subject matter that is needed to perform the contract is destroyed through no fault of either party, the contract is destroyed)  If the subject matter is essential to the contract then it will be discharged.  Performance becomes illegal  Any illegal contract is void. Discharge By Impossibility of Performance (Involuntary)

10. Discharge by Operation of Law  Wrongful Alteration  Any altering or changing of a contract will discharge parties to the agreement.  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?

11. Discharge by Operation of Law  Bankruptcy  Debtors can be discharged from contracts after filing for bankruptcy. These obligations still exist but the debtor can not be imprisoned for failure to pay.  Debts for taxes, alimony, child support, and maintenance are not affected by a general discharge of debts in bankruptcy.

12. Transferring a Contract  Assignment  Delegation  Novation

13. Assignment  Legally transferring your RIGHTS in a contract.(unless the contract says you can not)  Assignor – party who transfers the right.  Assignee – party to whom the right is transferred.  No consideration needed.  Best if put it writting  Must not change the obligations in the contract.  Must be a RIGHT not a DUTY.  Assignor is responsible for contract fulfillment.

14. 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.

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

16. Breaching a 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.

17. Remedies for Breach  Acceptance of Breach  Accept the breach of contract and discharge the other party without asking for damages.  Rescission and Restitution  Canceling the contract and returning anything that has been received

18.  Money Damages  Actual – Damages DIRECTLY related to breach.  Compensatory – Award only for injuries suffered nothing more.  Consequential – Damages that DO NOT flow directly from breach.  Incidental – Reasonable expenses that INDIRECTLY from breach of contract.  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.  Speculative – Damages awarded not on fact but on expectations from contract fulfillment. Remedies for Breach

19.  Specific Performance  Ask court to order the other party to do what they agreed to do. Only done when money damages are not sufficient to give relief.  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 Remedies for Breach

20. Injunction  Court order that prevents a party from performing an act.  Temporary or permanent.  Any Violators of an injunction are in contempt of court.