Ch.14 Breach of Contract and Remedies

Question 1

The Nature of Breach of Contract

Answer 1

Express or implied refusal to carry out a promise made under contract
- When refusal occurs, creates new rights due to breach of contract:
– Damages - compensation for injury suffered
– Rescission - order requiring performance
– Both

Question 2

Repudiation

Answer 2

refusal to perform a contract

• Can be express or implied
• Anticipatory breach - an advance determination that a party will not perform when the time for performance arrives
• If repudiated promise represents important condition, then other party can end agreement
• Entitles injured party to a release from his or her promise of performance
• If partial performance can only rescind if repudiation goes to root of contract

Question 3

Anticipatory breach

Answer 3

an advance determination that a party will not perform when the time for performance arrives

Question 4

Doctrine of substantial performance

Answer 4

where a party that has committed a breach has largely performed

• Injured party cannot unfairly avoid their own performance
• Injured party is entitled to deduction in price or damages
• Prevents injured party from taking advantage of party who commits breach after fulfilling most of contract

Question 5

Implied Repudiation

Answer 5

Ascertained from actions of party or implied statements made

• Not expressly repudiated but through statements or conduct
• Performance over a period of time which is inadequate may be implied repudiation
• Inferring repudiation can be a risky exercise

Question 6

Exemption Clauses

Answer 6

Requires buyer to perform, even if seller may avoid performance via exemption clause

Consulted strictly against the party who inserted them

Depending on construction of contract and wording of exemption clause
- Allows parties to avoid exemption clauses
- Courts may not allow use of clause to avoid liability

Question 7

Warranty

Answer 7

in the sale of goods, a minor term in a contract

• The breach of which allows injured party damages but not rescission of agreement
• Collateral to the object of the agreement
• Breach of warranty does not permit injured party to end contract
  Injured party can sue for damages

Question 8

Concept of Compensation for Loss

Answer 8

Breach of contract gives right of injured party to sue for compensation for the loss suffered

• Loss or injury must be proven
• Courts attempt to place injured party in same position they would have been in had contract been performed
• Can take form of:
  – Monetary damages
  – Specific performance
  – Quantum meruit - a quasi-contract remedy

Question 9

General damages

Answer 9

restitution for losses that can be naturally expected to flow from a breach of contract

• Put party into position they would have been had the contract been performed
• Represents compensation for losses
• Losses must flow naturally from the breach cannot be too remote

Question 10

Special damages

Answer 10

specific damages that do not otherwise flow normally or naturally from a specific breach of contract

Question 11

Punitive damages

Answer 11

damages awarded by a court to punish a wrongdoer

• When defendant’s actions were deceitful, malicious or offensive
• Not normally awarded for ordinary breach of contract

Question 12

Reasonable foreseeability

Answer 12

What is the extent of liability that flows from the breach of a contract

Necessary to draw line that will end liability of a party in event of breach of contract

Damages cannot be too remote

Question 13

Mitigate

Answer 13

obligation of an injured party to reduce the loss flowing from a breach of contract

• Cannot remain inactive and must take steps to mitigate losses
  – Example: find a new buyer, find a new seller
• If party fails to take steps to reduce losses, then defendant may reduce liability owed

Question 14

Liquidated Damages

Answer 14

bona fide estimate of the monetary damages that would flow from the breach of a contract and agreed to as a term of the contract

• Genuine attempt by the parties to estimate damages in case of a breach
• Usually a clause in contract that allows seller to retain a deposit in event buyer refuses to complete the contract

Question 15

Penalty vs. liquidated damages clauses:

Answer 15

If amount is unreasonable in relation to damage suffered, treated as a penalty rather than liquidated damages

Penalty clauses are unenforceable as they are akin to punitive damages
- Not allowed for ordinary breaches of contract

Must be some relation between amount estimated and actual loss

Difference between part-payment and deposits

Question 16

Specific performance

Answer 16

equitable remedy of the court granted when damages would be inadequate

• Requires the defendant to carry out the agreement according to its terms
• Discretionary remedy
• Failure to comply constitutes contempt of court - courts have power to find or imprison wrongdoer
• Generally available for land sale contracts

Question 17

Injunction

Answer 17

equitable remedy of the court that orders the person or persons named therein to refrain from doing certain acts

• Court order to party to refrain party from doing something they agreed not to do
• Reverse of decree of specific performance
• Discretionary remedy
• Generally available to enforcement of “promises to forbear” in contracts

Question 18

Quantum Meruit

Answer 18

“as much as he has earned”

• Quasi-contractual remedy that permits person to recover reasonable price for services and/or materials requested
• No price established when request is made
• Available if contract has been partly performed
• Courts concerned with compensation for the work performed

Question 19

Judgement debtor

Answer 19

Judgement debtor
Losing party in a court action

• Getting a judgement of the court for damages is not a guarantee of actual payment
  – “You cannot get blood from a stone”

Question 20

Writ

Answer 20

court order in formal written form, incorporating an instruction for enforcement

Carried out by court officer or sheriff

Question 21

Writ of seizure and sale

Answer 21

Against debtor’s land and personal property

Question 22

Writ of sequestration

Answer 22

Seize and maintain income-producing property of debtor, with income used to pay off debt

Question 23

Writ of possession

Answer 23

Voluntary or forced removal of existing occupants of land or building

Question 24

Writ of delivery

Answer 24

Recover possession of personal property that a person refuses to return to rightful owner

Question 25

Notice of garnishment

Answer 25

Recover money owed to debtor by someone else

Usually attached to garnishment of wages of debtor’s bank deposit

Question 26

Examination in aid of execution

Answer 26

Judgement debtors examined under oath as to property and financial prospects