Chapter 11: Contract Performance, Breach, and Remedies Flashcards
Voluntary Consent
Knowing and voluntary agreement to terms of contract.
- Contract is voidable if there’s a lack of consent.
Parties who demonstrate that they don’t truly _______________ to the terms of a _____________ can either 1) _____________ out the contract or 2) _____________ (cancel) it. Thus in both situations, it is a _______________ contract.
agree; contract; carry; rescind; voidable
In some circumstances, ____________ made in the formation of a _______________, make the contract _______________.
mistakes; contract; voidable
Two types of mistakes that can be made
1) Mistakes of Fact
2) Mistakes of Value or Quality
Mistakes of Fact
- Make contracts voidable
- must invovle a “material fact”: fact that a reasonable person would consider important in determining course of action.
Two forms of Mistake of Fact
1) Unilateral Mistake: mistake made by one party.
2) Bilateral Mistake: mistake made by both parties.
Unilateral Mistake
- Mistake made by one party.
- Mistake doesn’t make grounds for reflief from contract for mistaken party –> contract is still enforceable.
Exceptions to Unilateral Mistake (2)
- Other party should’ve known a mistake was made.
- Mistake was not made out of gross negligence, but due to a substantial mathematical error in addition, subtraction, multiplication, and division.
Bilateral Mistake
- Mistake made by both parties when both parties are mistaken about the same material fact.
- When mistake made about same material fact by both parties, contract can be rescinded. (there was not a “meeting of the minds”).
Mistake of Value
- Mistake in contract concerning market value / quality of an object.
- Generally enforceable
In the case of ___________, when the _______________ party is lured into a contract, they can either ______________ the contract, or _______________ it and seek ____________ for any ______________ resulting from the ____________.
fraud; innocent; rescind; enforce; damages; harm; fraud
What is of Primary importance to a judge regarding contracts?
Intent
Requirements for Fraudulent Misrepresentation (4)
- Misrepresentation of a MATERIAL FACT must occur.
- Must be an intent to decieve
- Innocent party relied on misrepresentation
- Innocent party may seek damages if she was harmed as a result of misrepresentation.
Scienter
Knowledge of Misrepresenting party that material facts are misrepresented with the intent to decieve.
Undue Influence
When one party gretly & unfairly influences another party, overcoming the other party’s free will when entering the contract.
- (lack of voluntary consent makes contract) voidable.
When a contract, arising from a _______________ relationship (i.e. __________-__________, ____________-____________, ____________-______________) enriches the _____________ party, the court will often assume the contract was formed from ____________ ______________.
fiduciary; parent-child; attorney-client; physician-patient; dominant; undue influence.
Duress
The use of threats to force someone to enter into a contract.
The threat made must be about a ____________ or _____________ act rendering a person _____________ of exercising their rights for it to be considered _______________.
worongful; illegal; incapable; duress
Privity of Contract
relationship between promisor and promisee to a contract, (tradtionally the only parties with rights and liabilities).
An exception to Privity of Contract
Transferring rights and responsibilities to from a party to a contract to another (third party) through…
1) Assignment (of responsibilities)
2) Delegation (of duties)
3) Third party beneficiary to contract (other 2 parties intend contract so that third party may benefit from contract.)
Obligee
One who has right to request an act be performed.
Obligor
One tasked w/ duty to perform the act.
Assignment
transfer of contractual rights to a third party.
Assignor
Party assigning rights.
Assignee
Party receiving rights
Assignee (_________ party) only recieves ___________ previously and ______________ had by the Assignor (_____________ party). As a result, the Assignee now has the __________ to request _______________ from the other _____________ party to a contract.
third; rights; originally; original; right; performance; original
Exceptions to Assignment:
- Assignment is _______________ by ______________
- The Contract is for ______________ services.
- The assignment changes the ____________ or ___________ of the obligor.
- The contract prohibits the _______________.
prohibited; statute; personal; risks; duties; assignment
Delegation
transfer of contractual duties to a third party.
Delegator
Party delegating duties.
Delegatee
Person to whom duties are delegated.
Exceptions to Delegation:
- When ____________ ____________ has been placed in the obligor.
- When _____________ of duty depends on the personal __________ of the obligor.
- When performance by a third party ___________ from what the obligee expected.
- When contract prohibits _____________.
special trust; performance; skills; varies; delegation
_______________ and ______________ can only take place ___________ the original contract was made.
Assignment; delegation; AFTER
Third Party Beneficiary
One who benefits from a contract (based on promise from an original party [promisor]), but whose not a party to the contract.
Intended Beneficiary
- A third party, for whose benefit is the basis for a contract being formed.
- Third party may sue for Promisor’s breach in contract.
Incidental Beneficiary
Third person who benefits from a contract, but whose benefit was not the reason a contract was made.
- may not sue to enforce contract.
Discharge
Termination of contractual obligations because.
- Both parties fully performed.
- Agreement of the parties
- Operation of law releases the parties.
Performance
- fulfilling contractual obligations w/ another.
- normal way for contract to be discharged.
Condition
Provision in a contract for occurence / nonoccurence of an event, which creates or terminates obligations.
(i.e. IF x happens, then contract goes into effect and y is expected of the other party. IF x doesn’t happen, then parties to contract are discharged, and y is not expected of the other party.)
Condition Precedent
Condition must be fulfilled, before party’s performance can be required.
(i.e. Life insurance expects people seeking insurance to meet requirements BEFORE insurance company can grant person insurance.)
Tender
Offer to perform by someone who is ready, willing, capable to do so.
Performance based on Satisfaction: When the ___________-____________ of a contract is _______________, such that the _______________ on which the contract is formed is based on _____________ taste , the obligation is _________________, and full performance is based on the _______________ of the specified party in the contract (applies to things like art, tailored suits, portraits etc…).
subject-matter; personal; product; individual; conditional; satisfaction
Types of Performance
1) Full Performance
2) Substantial Performance
Full Performance
When parties performance is perfect, and there’s no question as to whether the contract has been performed.
Substantial Performance (3)
Parties performance can be considered substantial if performance…
1) was done in good faith.
2) doesn’t vary from what was originally promised.
3) has same benefit promised in contract.
Breach of Contract
Failure of Promisor to fulfill obligations of contract, without legal excuse.
Types of Breach
1) Material
2) Minor
Material Breach
- When performance wasn’t even substantial.
- Non-breaching party may be excused from their contractual obligations.
Minor Breach
- Non-breaching is temporarly excused from contractual obligations until breach is remedied.
(Contract is not rescinded).
Anticipatory Repudiation (Performance)
Declaration made when a party to a contract refuses to perform contractual obligation at a future time, BEFORE either party has a duty to perform.
Reasonable Time (Performance)
Implied time of performance of duty, when no express time is stated in contract.
Mutual Recission (Agreement)
- Must include offer, acceptance, and consideration
- Parties make a second agreement (contract), promising to not perform obligations of first contract AS consideration for the second contract.
Novation (4) (Agreement)
Parties to a contract agree to substitute one of the existing original parties with a third party such that…
1) There is a previous valid obligation.
2) Parties agree to new contract.
3) Previous obligations are extinguished (old parties discharged)
4) There is a new valid contract
Accord and Satisfaction (Agreement)
Agreement of parties to accept performance even if it different from what was originally promised.
Accord
it IS the agreement;
Agreement for one party to perform, and the other to accept performance even if performance is different from what was originally promised.
Satisfaction
it IS the performance;
Performance (usually payment) of one party, that takes place after accord.
Liquidated Debt
Debt that is due and determined in amount.
Unliquidated Debt
Debt that is undetermined in amount.
Release (Agreement)
Contract wherein one party waivers right to pursue legal claims against another party.
Material Alteration of Contract: The law allows ________________ parties to a contract to be _________________ from all _____________ if another party _____________ the written contract w/o the _______________ party’s ______________ of it.
innocent; discharged; obligation; altered; innocent; knowlege
Impossibility of Performance
party to a contract is discharged due to unforeseen events, that happened at the time the contract was signed, that has rendered performance impossible
Objective v. Subjective Impossibility
Objective: “It can’t be done [by anyone].”
Subjective: “It can’t be done by me.”
Commercial Impracticability
party to contract is discharged because ability to perform has become too costly / difficult to perform based on events unforeseen by either party.
Frustration of Purpose
Contract is discharged due to interrupting events [unforseeable by both parties] that make it impossible to attain the purposes both parties had in mind when making the contract.
In the context of ______________ law, _________________ compensate the ______________________ party for the loss of a ________________. Courts believe it to be their responsibility to place the ________________ party (aka ______________ party) in the __________________ they would’ve been in had the _______________ been fully _________________.
contract; damages; non-breaching; bargain; non-breaching; innocent; position; contract; performed
Types of Damages
- Compensatory
- Consequential
- Punitive
- Nominal
Compensatory Damages
Damages to compensate non-breaching party for loss of bargain.
Goal of Compensatory Damages
Restore what non-breaching party lost as a DIRECT result of loss of bargain.
“To make the person whole.”
Consequential Damages
Foreseeable damages that result from party’s breach to contract, but caused by special circumstances beyond contract itself.
Punitive Damages
- Not generally awarded in contract law.
Damages awarded to punish wrongdoer, and deter similar conduct in future.
Nominal Damages
Damages imposed when non-breaching party didn’t face actual loss or injury, only a technical injury.
Mitigation of Damages
Plaintiff (innocent party) is required to do whatever is necessary to minimize damages caused by defendant.
Liquidated Damages
Dollar amount to be paid [by breaching party] in the future event, that a contract is breached.
Penalty
Specifies dollar amount to be paid in the event that a contract is breached.
Liquidated Damages v. Penalty
Liquidated Damages: Meant to restore what non-breaching party lost as direct result of breach / to make whole.
Penalty: Meant to penalize breaching party for their wrongful act.
Waiver
Intentional and knowing relinquishment / surrender of legal rights.
Recission (Remedy)
unmaking of a contract, meant to return parties to where they would be had the contract never been formed.
Restitution (Remedy)
returning goods, property, funds, meant to return parties to the original position they would be in had breach never occurred.
Specific Performance (Remedy)
Requires breaching party to perform promised act.
Specific performance in many cases is a better ____________ than payment of ______________ _______________ because the ______________ originally promised may be of ______________ value than _______________ _____________ to substitute it. Also it prevents the non-breaching party from having to arrange a new ______________ for collecting ______________.
remedy; monetary damages; performance; more; monetary damages; contract; damages.
Reformation (Remedy)
- Agreement expressed in a contract is written incorrectly.
- Court correct writing in contract to reflect true intention of each party.
