Breach Flashcards
Breach - ______ or _______ failure to _____ all or part of what is promised in a contract
unjustified or unexcused failure to preform all or part of what is promised in a contract
Distinction between total and partial breach significant in two ways. Why?
- It determines the ____ of the breach on the ________ ________ of the non breaching party and affects the measurement of that party’s ______.
- After a total breach, injured party may recover _____ and maybe ______ damages that flow from contract. Partial is only ____ damages.
- It determines the effect of the breach on the performance obligations of the non breaching party and affects the measurement of that party’s damages.
- After a total breach, injured party may recover actual and maybe future damages that flow from contract. Partial is only actual damages.
Total breach - ____ or _____ the non-breaching ____ from his duties under the contract therefore justified in refusing obligations and able to make _______ contracts
relieves or discharges the non-breaching party from his duties under the contract therefore justified in refusing obligations and able to make alternative contracts (as with Spindler justified in selling stocks to another party).
◊ Remember - all total breaches are material
Can pursue relief necessary to compensate him for loss of his bargain
Under what circumstances can a repudiating party retract her repudiation?
The majority view is that the repudiation is retractable __ ____ before the time the party is supposed to perform, unless:
The innocent party has notified the wrongdoer that the repudiation is accepted; or
The innocent party has _____ _______ in detrimental reliance on the repudiation.
The majority view is that the repudiation is retractable any time before the time the party is supposed to perform, unless:
The innocent party has notified the wrongdoer that the repudiation is accepted; or
The innocent party has changed position in detrimental reliance on the repudiation.
NOTE: The retraction can be by words or actions. For example, let’s say that Lincoln agrees to sell Fort Sumter to Davis. Two months before the transaction is set to take place, Lincoln sells Fort Sumter to Victoria. A month later, Lincoln buys it back from Victoria; therefore, he owns it when he’s supposed to sell it to Davis. The repudiation would be retracted by action.
NOTE: The same rule applies to reinstating a contract after a prospective inability to perform.
What are your options when the other party in a contract is prospectively unable to perform
It depends on whether or not there’s a reasonable chance the other party can or will still perform. If not, you can sue immediately. If so, you’d have to wait until the time for performance is due; if it’s not forthcoming, you’d sue for breach then.
If you don’t or can’t sue immediately, that raises the question of whether the other party can reinstate the contract. The rule is that reinstatement is possible AS LONG AS THE INNOCENT PARTY (YOU) HASN’T DETRIMENTALLY RELIED ON THE INABILITY IN THE MEANTIME.
The Ring-Around-The-Collar Shirt Store contracts to buy 1,000 shirts from the Triangle Shirt Company, delivery April 25. On April 15, arsonists set fire to Triangle, destroying it. In a jurisdiction where such a claim can be pursued immediately, may Ring sue Triangle due to a prospective inability to perform?
No, because prospective inability requires that the inability be the result of the party’s own actions. Here, arsonists set fire to Triangle. As a result, Triangle’s duty to perform will be excused due to impossibility.
Julius is holding a stag party for his buddy Mark and hires Cleo to perform cartwheels at the bash. The party is set for October 15, with Cleo to be paid $250 after her performance. She calls Julius on September 15 and announces she has retired and will not perform at his party. Must Julius wait until October 15 to file suit for breach of contract?
No, due to Cleo’s anticipatory repudiation—her advance, unequivocal refusal to perform her contractual duties.
N.B.: Julius must immediately try to mitigate his damages (i.e., by seeking another performer).
If a party renders “substantial performance” under a contract, the other party has to perform under the contract as well. So it’s pretty important to figure out what constitutes “substantial performance.” How do you go about it?
The Rest. 2d §275 looks to these six criteria, to be taken together (paying particular attention to the factors most critical to each case):
To what extent has the injured party received benefits?
Can the injured party adequately be compensated in damages?
Is the breaching party “close” to full performance?
Will the breaching party face great hardship if termination is permitted?
How willful is the breach?
How great is the certainty of completion?
Mnemonic: REACH CurFeW (Received benefits; Adequately Compensated; Hardship; Certainty of completion; Full performance; Willful).
N.B.: Regardless of these criteria, if the breach is considered willful (knowing or in bad faith), most courts would decide there is no substantial performance! However, if the willfulness concerns a trivial condition, courts will ignore it. Rest. 2d, §§237, Comment d; 241.
If a party substantially performs under a contract, is she entitled to any payment at all?
Yes. She’ll be entitled to the contract price less the amount necessary to complete anything left undone and correct any defects.
RELATED ISSUE: If a party doesn’t substantially perform, she may still have a right to recover something. However, her recovery won’t be under the contract; it will be in “quasi-contract”—that is, she’ll recover for the value of her performance that the other party retained (from the other party’s perspective). And note that if her breach was willful, many courts won’t allow her to recover anything.
Angie Joliett takes her “Golden Goddess” evening gown to the Jenny’s Dry cleaners on Tuesday. She tells the manager, “If the dress isn’t ready by Thursday, it’s curtains!” Angie intends to wear the gown at the premier of her new movie, “Ashes in the Wind” on Thursday evening, a very important engagement. On the dry cleaning slip Angie writes, “Time is of the essence,” and takes her copy. When Angie returns on Thursday, the dress is not ready. Is the dry cleaner’s breach major (discharging Scarlett’s duty to pay) or minor?
It’s probably major, because courts of law view time delays where the parties expressly provide that “time is of the essence” as major breaches, forgiving the other party’s duty of performance. At equity, the general rule is the same, but equity courts will also take into account whether or not any damage was caused by the delay, whether the breach was willful, and whether denying payment would result in outright forfeiture.
Note that the parties need not expressly provide that “time is of the essence,” where the purpose of the contract and positions of the parties indicate that it is (although such a breach generally will be considered minor, meriting only damages and not excuse of performance).
On September 1, Team and Legs form a contract under which Legs will play basketball for Team during the months January through April of the following year, and Team will pay Legs a salary of $1 million monthly, on the 30th day of each such month. On September 15, Legs announces to Team that he will not, under any condition, play for Team, and that he will not report to work in January.
Team takes no action in response. On January 1, Legs does report for play as required by his contract, announcing that he has changed his mind and that he will honor it after all. Team Owner advises Legs that he is not welcome to play, that he will not be paid a salary — that he is “fired.” Which party has an action against which party?
a. Team has an action against Legs for total breach, arising from the anticipatory repudiation Legs made on September 15.
b. Legs has an action against Team arising from Team Owner’s declaration, on January 1, that Legs was “fired.”
c. Each party has an action against the other because each has manifested an intention not to honor the relevant contractual obligations.
d. Neither party has an action against the other because each has behaved improperly as to the other.
b. Legs has an action against Team arising from Team Owner’s declaration, on January 1, that Legs was “fired.”
Rationale for Correct Answer
If Party 1 commits an anticipatory repudiation, Party 2 may consider that he has committed a total breach. Without waiting for the day on which performance is due, Party 2 may announce that the contract is terminated, engage a substitute if he wishes and, in any case, initiate suit against Party 1 for total breach. If, however, Party 2 does nothing at all in reliance on the breach, then at any time up to the moment performance is due, Party 1 may retract his repudiation and reaffirm the contract. Party 2 is obliged, then, to honor it.
Legs commits an anticipatory repudiation on September 15, but Team takes no action in reliance on it. It does not hire another player to take Legs’s place. Neither does it initiate suit or advise Legs that it is terminating the contract. When Legs reports for duty on January 1, he reaffirms his contract. When Team Owner then “fires” him, Team commits an anticipatory breach by announcing (implicitly) that it will not pay his salary when due. Because Legs reaffirms the contract, Team has no action against him. Because Team then commits its own anticipatory breach, Legs has an action against Team. For those reasons, surprisingly, B is right.
