Breach Flashcards
When does a breach occur
If it is found that
- the promisor is under an absolute duty to perform, and
- this absolute duty of performance has not been discharged
Then this failure to perform in accordance with contractual terms will amount to a breach of the contract
But not every breach excuses other party’s performance
Nonbreaching party - willing and able
The non breaching party who sues for breach of contract must show that they are willing and able to perform but for the breaching party’s failure to perform
Common law breach and excuse of performance generally
Once it is determined that there is a breach of contract, the next step in a common law contract situation is to determine whether that breach is material or minor
If no material breach, must perform their duties then sue for the breach
Factors for material or minor breach (6)
In determining whether a breach is material or minor, courts look at
- the amount of benefit received by the non breaching party
- the adequacy of compensation for damages to the injured party
- the extent of part performance by the breaching party
- hardship to the breaching party
- negligent or willful behavior of the breaching party, and
- the likelihood that the breaching party will perform the remainder of the contract
On MBE, will not be asked to make a fact determination about whether a breach is material
Effect of a minor breach
A breach of contract is minor if the obligee gains the substantial benefit of their bargain despite the obligor’s defective performance
A minor breach does not relieve the aggrieved party of their duty of performance under the contract
- merely gives them a right to damages for the minor breach
Effect of a material breach
If the obligee does not receive the substantial benefit of their bargain, the breach is considered material
If breach is material, the non breaching party
- may treat the contract as at an end - any duty of counter performance owed by them will be discharged, and
- will have an immediate right to all remedies for breach of the entire contract
Minor breach plus anticipatory repudiation
If a minor breach is coupled with an anticipatory reputation, the non breaching party may treat it as a material breach
- may sue immediately for total damages and are permanently discharged from any duty of further performance
Continuing on would also be a failure to mitigate damages
Material breach of a divisible contract
In a divisible contract, recovery is available for substantial performance of a divisible part even though there has been a material breach of the entire contract
Failure to perform by the time stated and breach
Failure to perform by the time stated in the contract is generally not a material breach if performance is rendered within a reasonable time
But if timely performance is essential or contract expressly provides that time is of the essence, then failure to perform on time is usually a material breach
- traditionally, any delay with time of essence was material
- modern trend look at all of the circumstances to determine whether it was vitally important and whether parties truly intended it to be so
Merely including a date for performance does not make time of the essence
Perfect tender rule
Article 2 generally does not follow the common law substantial performance doctrine (material or minor breach)
Follows the perfect tender rule - if goods or their delivery fail to conform to the contract in any way, the buyer generally may reject all, accept all, or accept any commercial units and reject the rest
Buyer’s right to reject and acceptance - perfect tender rule
A buyer’s right to reject under the perfect tender doctrine generally is cut off by acceptance
Under article 2, a buyer accepts when:
- after a reasonable opportunity to inspect, they indicate to the seller that the goods conform to requirements or they will keep
- fail to reject within a reasonable time after tender or delivery of the goods or fail to seasonably notify the seller of their rejection, or
- they do any act inconsistent with the seller’s ownership
Buyer’s responsibility for goods after rejection
After rejecting goods in their physical possession, the buyer must not treat the goods as if they own them
Hold goods with reasonable care for a time sufficient to permit seller to take them back
If buyer wrongfully exercises ownership over the rejected goods, seller has an action for conversion
Merchant buyer’s responsibility for goods after rejection
If the seller has no agent or place of business within the market area where the goods are rejected, a merchant buyer has a further obligation to obey any reasonable instructions as to the rejected goods
If seller gives no instructions within a reasonable time, the buyer may
- reship the goods to the seller
- store them for the seller’s account, or
- resell them for the seller’s account in a public sale or a private sale after giving the seller reasonable notice of the intent to resell
If buyer properly resells, they are entitled to recover their expenses and a reasonable commission
If buyer wrongfully exercises ownership over the rejected goods, seller has an action for conversion
Buyers right to revoke acceptance - perfect tender rule
Once goods are accepted, the buyer’s power to reject the goods generally is terminated and the buyer is obligated to pay the price less any damages resulting from the breach
However, under limited situations, a buyer may revoke an acceptance already made
Proper revocation of acceptance has the effect of a rejection
When acceptance may be revoked - perfect tender rule
The buyer may revoke their acceptance if the goods have a defect that substantially impairs their value to the buyer, and
- they accepted the goods on the reasonable belief that the defect would be cured and it has not been, or
- they accepted the goods because of the difficulty of discovering the defects or because of the seller’s assurance that the goods conformed to the contract
