ch 11: breaches and stuff of contracts Flashcards
can a contract be voided bc of a mistake
yes
what type of mistake makes a contract voidable
mistake of fact
mistake of fact must include what
material fact
what is material fact
a fact that a reasonable person would consider important when determining action
unilateral vs bilateral mistake
uni- 1 party
bi-2 parties
unilateral + exeptions
- does not usually give relief unless
- the other party shoulda known abt the mistake
-substansial mathematical error
bilateral contract
-misunderstanding on both parties concerning a basic assumption on which the contract was made.”
-when both parties are mistake abt the same material fact (can be rescinded by either party)
-word/term in the contract may be subject to diff interpretations which does not allow for a meeting of the minds which is why it can be rescinded
jet ski example
elena intends to sell jetski to luke for 5,000 dollars but when sending the email she puts 4,000 and he accepts before he is told abt the mistake- this is binding
mistakes of value
If a mistake concerns the future market value/ quality of the object of the contract,
-contract enforceable. (not able to be rescinded)
violin example
Toby buys a violin for cheap because neither party believes it’s valuable. but it turns out to be rare. Both parties made a mistake of value so→ contract CANNOT be rescinded.
When parties form a contract, their agreement establishes the value of the object of their transaction at the ….
moment
what is fraudulent misrepresentation
when an innocent party is fraudulently induced into a contract which can be avoided since they did not voluntary consent to the terms
T or F- innocent party can either rescind the contract or enforce it and seek damages for
any harm resulting from the fraud
true
what 4 things does fraudulent representation need to consist of
1- misrepresentation of material fact
2- intent to deceive
3- innocent party must justifiably rely on misrepresentation
4- to collect damages party must have been harmed as a result
1- misrepresentation of material fact
- can be thru words or actions
-when a party goes outta there way to conceal a fact
-tom selleck suing bs the guy said he was fit for competitions
2-There must be an intent to deceive
-Scienter (guilty knowledge) -means the misrepresenting party knows they are misrepresenting facts, showing intent to deceive.
- also applies if someone makes a statement they don’t believe is true or recklessly makes a statement without caring if it’s true or false.
-also met if someone claims a statement is based on personal knowledge or investigation when not
- The innocent party must justifiably rely on the misrepresentation.
-the deceived party must have a real reason for relying on the misinterpretation
-must be an imp factor in which induced the party to entering the contract
-however not justified if the party believed extravagant stuff or if they knew the true facts
- To collect damages, a party must have been harmed as a result of the misrepresentation
-since recessions purpose is to return parties back to position they were before the contract- showing injury is necessary and proof is required
undue influence
when a party was entered into a contracted as a result of excessive influence
-ex- old person entered into one by guardian which benefits the guardian
-essential that the party taken advantage of does not exercise free will
duress
the use of threats to force someone to enter a party
- ex blackmail
how to establish duress
-there must be proof that the threatening party is threatening smth they have no right to do and it usally must be wrongful/illegal
Privity of contract
A third party—one who is not a direct party to contract—normally does NOT have rights
exceptions to privity of contract
Transfer the rights or duties arising from the contract to another person through an assignment (of rights) or a delegation (of duties).
- A third party beneficiary contract—a contract in which the parties to the contract intend that the contract benefits a third party.
Privity of contract
A third party—one who is not a direct party to contract—normally does NOT have rights
exceptions to privity of contract
- Transfer the rights or duties arising from the contract to another person through an assignment (of rights) or a delegation (of duties).
- A third party beneficiary contract—a contract in which the parties to the contract intend that the contract benefits a third party.
third party beneficiary
someone who directly benefits from 2 ppls contracts meaning they become and intended beneficiary enabling them to have legal rights and can sue
holly and fox example
Someone borrowed money from another. That person then loaned money to someone else who promised to pay the person the original lender back. They didn’t. The first guy can sue the third because the third is the promisor.
Definition of “Third Party Beneficiary
One for whose benefit a promise is made in a contract but who is not a party to the contract
Incidental Beneficiary
third person who unintentionally benefits from a contract between two other parties. However, because the contract wasn’t made with the intent of benefiting them, they generally have no legal rights to enforce the contract.
what is the most common way to discharge/terminate contractual duties
by performance of the duties
discharge meaning
the end of an obligation when both sides have their duties in the contract, or when something occurs (like an event or a legal rule) that frees them from having to continue.
Definition of “Performance”
fulfillment of duties arising under a contract with another
In most contracts, promises of performance are not expressly conditioned/ qualified but are absolute promises T or F
T
Absolute promises
are commitments in a contract that must be performed and if not then .the parties will be in breach of contract.
Condition
requirement in a contract that depends on something happening in the future. If that thing doesn’t happen, the contract is canceled.
Condition Precedent
Condition that must be fulfilled b4 a party’s performance can be required.
tender
offer to perform by a person who is ready, willing, and able to do so
2 types of performance
-complete
-substansial
complete performance
when parties beformance is as agreed and perfect
Substantial Performance
A party who in good faith performs substantially ALL of the terms of a contract can enforce the contract under the doctrine of substantial performance.
requirements to qualify as substantial performance
1-The party must act in good faith—if they intentionally fail to follow the contract, it’s a breach.
- The work done must be close to what was promised, with only minor differences that can be fixed with money.
3.The result must provide almost the same benefits as originally agreed in the contract.
- If performance IS substantial, the other party’s duty
remains absolute
If performance is NOT substantial
then there is material breach and the other party is entitled to damages
damages
the cost to fix the work and make it match the contract, but only if that cost is reasonable.
if the cost is reasonable
then compliance
If the cost is unreasonable
damages are based on the difference in value between what was done and what would have been done if the contract had been fully completed.
Jacob & Youngs v. Kent, Kent
Kent hired J&Y’s to install plumbing, he specified a certain brand in the contract. J&Y used a comparable brand. Kent refused to pay, and the court sided with J&Y (construction company) because the method that they used was not greatly far off from the original promised method. Therefore they substantially performed the contract.
t or f
a nonbreaching party is excused from the performance of contractual duties.
t
Breach of contract
not doing what you promised in a contract.
material breach
when the performance is not at least substantial, meaning it’s a major failure. If this happens, the other party doesn’t have to fulfill their part of the contract and can sue for damages caused by the breach.
A minor breach
means the nonbreaching party might pause their duties until the issue is fixed, but they still need to perform their obligations. Once the minor breach is resolved, they must continue fulfilling the contract.
ANY contract can be discharged by agreement
of both of the parties
Rescission
process by which a contract is canceled/ terminated, and the parties are returned to the positions they occupied before forming it.
Mutual Rescission:
agreement btw the parties to cancel their contract, releasing them from further contractual obligations.
for mutal recission what must occur
a new agreement w new offer acceptance and consideration
Agreements to rescind most executory contracts
are still enforceable whether in writing
Uniform Commercial Code (UCC)- rescind a sales contract
agreements to rescind a sales contract must be in writing if the original contract requires written rescission.
Release
contract in which one party forfeits the right to pursue a legal claim against the other party.
Discharge by Operation of Law
contractual duties may be discharged by operation of law.
include material alteration of the contract, an applicable statute of limitations, bankruptcy, impossibility or impracticabil
Material Alteration of the Contract
To prevent changes to written contracts, the law allows an innocent party to be released from the contract if the other party makes a significant alteration without permission and the unware party discoveres it
- Statutes of Limitations
set a time limit for when a party can sue for a specific reason. After this period ends, they can no longer file a lawsuit.
Bankruptcy
. Bankruptcy: attempts to allocate a debtor’s assets to creditors in a fair and equitable fashion.
Once the assets have been allocated, the debtor receives a discharge in bankruptcy
i. Ordinarily PREVENTS the creditors from enforcing most of the debtor’s contracts.
Impossibility of Performance:
After a contract has been made, supervening events may make performance impossible in an objective sense
-applies only if the event could not have been forseen
objective impossibility
literally cannot be done
subjective impossibility
-impossible for them not anyone to perfrom
-“i simply cant do it”
-results in a breach of contract
When Performance Is Impossible (3)
-when one of the parties dies or becomes incapacitated
-when the specific subject matter is destroyed
-when law redners performance illegal
Temporary Impossibility
If Temporary Impossibility arises, once the temporary event ends, the parties ordinarily must perform the contract as originally planned.
Commercial Impracticability
Courts may also excuse parties from their performance when it becomes SIGNIFICANTLY difficult or expensive than the parties originally contemplated at the time the contract was formed.
- The added burden of performing not only must be EXTREME but also must NOT have been known or reasonably foreseeable by the parties when the contract was made. - Usually involves an event that increases the cost or difficulty of performance
Frustration of Purpose
A contract will be discharged if supervening (following) circumstances make it impossible to attain the purpose both parties had in mind when they made the contract.
-Must NOT have been reasonably foreseeable
damages of a breached contract
Courts say that innocent parties are to be placed in the position they would have occupied HAD the contract been fully performed.
4 types of damages
-compensatory
-consequential
-punitive
-nominal
Compensatory
Compensatory
Damages that compensate the nonbreaching party for loss of bargain
Compensate only the damages proven to be caused by the loss of the bargain
-college example
consequential damages
Foreseeable losses happening bc of a breach of contract
Ex- a seller fails to deliver goods knowing the buyer plans to resell them immediately which can let the reseller receive lost profits as consequential damages
punitive damages
Not generally awarded as the focus is on the compensating the party for loss not punish the wrongdoer
However if breach involves a tort- punitive and reg damages may be allowed
Nominal
When there is no actual fnan loss from a breach but it is still recognized
Damages usually small like $1 - just to show principle
Standard measure
For compensatory damages to cover the diff btw the value of promised and actual performance
incidental damages
Expenses that are caused directly by a breach of contract
ex-If a supplier fails to deliver goods, and the buyer has to pay extra to get the goods from another supplier
Sale of goods
Difference btw contract price and market price at term of the breach
Sellers breach
when seller breaches real estate contract the remedy=specific performance in which buyer is awarded the property
what if specific performance isnt possible
the diff is btw the contract and market price of the land
Buyers breach
also the diff btw contract price and market price
Minority rule-
if the seller’s breach is unintentional, the buyer can only recover their down payment and any expenses, returning the buyer to their pre-sale position instead of giving them the benefit of the bargain.
Rescission
Canceling the contract and returning both parties to their original positions.
duty to mitigate
it is the innocent parties duty to mitigate or limit the damages and without doing this the court may reduce their damages they can earn
what happens if damages and money are not enough to fix the breach of the contract
nonbreaching party can go to court for equitable remedy which include
-rescission
-restitution
-specific performance
-refromation
Waiver of breach
When nonbreaching party decides to accept not good performance instead of demanding full performance
Means they give up the right to demand perfect performance
Restitution
Recovering any benefits conferred to the other party under the contract.
Reformation
Changing the contract to reflect what the parties actually intended.
when is refromation used
-cases of fraud or mutual mistakes, such as clerical errors.
-incorrect written statements, ex they agreed orally but it was written down wrong
Covenant not to compete -written non-compete agreement is deemed too restrictive (in terms of time or area), courts may reform the terms to make them reasonable instead of voiding the entire contract.
