Contract Breach

Question 1

What is a contract condition?

Answer 1

An essential term of the contract. Breaching a condition allows the non-breaching party to discharge the contract and sue for damages or force the other party to perform

Question 2

What is a contract warranty?

Answer 2

A non-essential term of the contract. A breach of a warranty still makes both parties bound by the contract but the non-offending party can sue for damages if they have suffered a loss

Question 3

What is the difference between a minor and major breach?

Answer 3

A minor breach is the breach of a non-essential term of a contract or a minor breach of an essential term of the contract.

A major breach is a breach of the whole contract or an essential term so the contract’s purpose is defeated

Question 4

What is the effect of a contract breach?

Answer 4

The non-offending party is not held to their promise. The offending party must choose to treat the contract as discharged and communicate to the other party

Question 5

When can a contract not be breached?

Answer 5

If the innocent party decides to proceed with the contract and accept benefits from it. If the innocent party already received benefit without knowledge of the breach. The parties can sue for damages but they must still uphold their responsibilities

Question 6

What are the ways in which breach can occur?

Answer 6

Express repudiation, impossibility, failure to perform

Question 7

What is express repudiation?

Answer 7

One party communicates to the other by words or conduct that it does not intend to perform

Question 8

What happens when a party chooses to employ express repudiation?

Answer 8

If the repudiation is a major breach, the innocent party can consider the contract at an end and can sue for damages but if it is a minor term they cannot treat it as discharged. The innocent party must inform the repudiating party that they are treating the contract as terminated

Question 9

What is impossibility?

Answer 9

An intentional or negligent act that destroys a promisor’s ability to perform and amounts to a breach of contract

Question 10

What is failure to perform

Answer 10

When one party is not able to perform their end of the contract. Usually only becomes apparent at the time for performance.

Question 11

What are some important considerations for failure to perform?

Answer 11

If the failure amounts to making the performance more onerous, it may not amount to contract discharge. Must consider if future performance will be equally defective or if the deficiency is relative to the whole performance

Question 12

What is the doctrine of substantial performance?

Answer 12

A promisor is entitled to enforce a contract when it has substantially performed even if their performance doesn’t comply in a minor way with the contract

Question 13

What is an exemption clause?

Answer 13

A clause in a contract that exempts a party from liability for failing to perform all or some of their contractual duties

Question 14

What is the 3 step test to determine whether or not to enforce the exemption clause from the Tercon Contractors case?

Answer 14

1. Determine whether or not the clause applies to the facts of the case (any ambiguity is interpreted against the drawing party)
2. Determine if the contract is unconscionable (must be both inequality and an unfair outcome during bargaining)
3. Determine if the injured party can identify a consideration of public policy sufficient to overrise public interest in freedom of contract

Question 15

What are the purposes of damages?

Answer 15

To compensate the injured party for their loss, not to punish the other party. Also awarded to compensate for non-economic injury

Question 16

What are the prerequisites to receive damages from a breach of contract?

Answer 16

1. Damages must have flowed naturally from breach of contract. Must have been foreseeable by the parties as a consequence of failure to perform based on knowledge at the time of contract formation
2. A party suffering a loss is expected to mitigate losses as much as possible. They cannot sue for damages they could have reasonably avoided

Question 17

How are the amount of damages decided?

Answer 17

If there is a term in the contract, parties agree to the amount of damages to be awarded. The court will hold to this amount as long as it was a genuine attempt to estimate loss

Question 18

What are some challenges in measuring damages?

Answer 18

Pain, suffering, and humiliation are hard to compensate for. However, hurt feelings are not enough to get recompense, there must be conduct that is unfair, misleading, or very insensitive.

Question 19

What are the different types of damages?

Answer 19

Expectation damages, consequential damages, general damages, reliance damages, and punitive damages

Question 20

What are expectation damages?

Answer 20

The typical remedy for breach of contract which is the difference between the current position of the plaintiff and their expected position after contract completion

Question 21

What are consequential damages?

Answer 21

Secondary losses that were foreseeable at the time of contracting like when a seller becomes liable for a buyer’s lost sales when they fail to perform

Question 22

What are general damages?

Answer 22

An estimated amount for intangible injury

Question 23

What are reliance damages?

Answer 23

An alternative to expectation damages to put a party back into pre-contract position by compensating for wasted time, effort, and expenses

Question 24

What are punitive damages?

Answer 24

Additional damages awarded by the courts for the purpose of punishment. Rarely used in cases of reprehensible misconduct

Question 25

What is equitable remedy?

Answer 25

When no amount of money will fulfill the purpose of the contract so the courts enforce payment in methods other than cash

Question 26

What are the prerequisites to receive an equitable remedy?

Answer 26

1. Plaintiff comes to court not having acted unethically
2. The plaintiff must not delay in bringing the action to court
3. The court will not intervene if the remedy would negatively affect an innocent purchaser
4. The plaintiff must have paid meaningful consideration for the defendant’s promise
5. The plaintiff must be a party against whom the remedy would be awarded if he were the defendant instead

Question 27

What is specific performance?

Answer 27

A court order to require a defendant to do a specified act rarely used for acts of service and for the sale of goods

Question 28

What is an injunction?

Answer 28

When the court restrains a party from acting in a certain way. This requires a clause in the contract which is a promise to not do something. They may also impose an injunction to prevent immediate, irreparable harm being done

Question 29

What is recission?

Answer 29

Returning a party to their pre-contract condition

Question 30

What is quantum meruit?

Answer 30

When valuable benefit is conferred at the request of the promisee and the contract is breached, the non-breaching party deserves payment for the benefit they gave

Question 31

What takes precedence? Cost of performance or economic loss?

Answer 31

Economic loss takes precedence as the contract principle states there must be a loss involved

Question 32

How can a contract breach judgement be enforced?

Answer 32

An execution order which gives the sheriff authority to seize and sell goods and arrange for the sale of debtor’s lands.
A garnishee order which is placed against a debtor’s wages to have the debtor’s employer retain a portion of the wages for the creditor